People in the Czech Republic first logged into internet banking 23 years ago

It was the year 1998, when Expandia Banka, which later became part of Raiffeisenbank, launched the first online banking system in Central Europe. Back then, it was a groundbreaking change that caused both excitement and distrust. ARBES Technologies developed this banking system and it is used to this day. “The distrust of people back than was prominent. But that’s only natural. Even today, we’re concerned about new things, which we later accept as a matter of course,” says Ondřej Brojír, a core banking system specialist.

Most of us have an app in our phones today, which enables us to check the balance on our account or make an online payment. But it was only a little over twenty years ago that you launched the first Czech banking system in Central Europe. What memories do you have of that at ARBES Technologies?

It was revolutionary even though from today’s viewpoint, it seems that having internet banking is pretty common. I wasn’t working at the company back then yet, having only started working there many years later, but I remember the publicity surrounding it back then very well. Remember, this was at a time when mobile phones were only just starting out. The ones with buttons. Launching the first internet banking system at Expandia Banka was an event. It was one of the first large projects for our company since its founding in 1991. The system that we created was built on a high-tech solution. None of the other banks at the time had anything like it. It was a success and our small company suddenly grew. It really was a significant milestone both for internet banking and for us as an IT company.

How hard was it back then to convince people to trust internet banking?

I only know if from the perspective of my own parents and I recall that there was distrust, which was at times significant. But it’s only natural and happens with every revolutionary change. We encounter it even today, for example in relation to the PSD2 EU regulation, the Payment Services Directive, which significantly affected the way payments are made online as well as how information in payment transactions is provided. All of us in Europe today have much higher expectations in terms of API verification – interface for various applications. The security risk resonates especially with the older generation and that is why they choose trusted methods – even though I think even this is changing lately.

The foundation of everything is a so-called core banking system. Does it still have something to offer in today’s digital era?

It certainly does. It is precisely this core banking system, which we took as a foundation from 23 years ago and we use its basic principles to this day. When Raiffeisenbank bought eBanka (formerly Expandia Banka) in 2006, they kept our core banking system and it is still used as a transaction system for some of the clients today. Even after all these years, our product is of such a quality that it is able to stand up to today’s competing core banking systems.

How is that possible?

It was built very well. It brought a top-quality foundation, which we can use today for other implementations. It was possible to run it on a standard internet browser, which was not the standard in the 1990s and it’s something that is not possible with some core banking systems even today.

You called the product that we’re talking about simply – an Online Banking System. What specifically could it and can it do?

We now call it OBS for short. It’s a simple name but comes from its time when it really was a revolutionary thing. Core banking systems are an integral part of every banking and non-banking financial institution today – they couldn’t exist without them. Large banks usually have several such systems for various areas such as deposits, mortgages, consumer loans, payment transactions. OBS offers everything in one system, be it applications, contracts, products, various accounts, mortgages, term deposits and others. Everything is comprised in one system, which is running constantly where balances change second to second online. That’s the life cycle of core banking systems.

What does your core banking system do differently?

There are several things. First I’d like to highlight its flexibility. The implementation of change requests is much faster in our system than in other competing systems. The openness of our system is also important, which has changed significantly over the last few years. Integration used to be difficult and was based on an exchange of files. Our core banking system is now opened, so it allows for integration of any system during communication via open API, both synchronously as well as asynchronously. Our client connects to any system, be it an internet portal or mobile banking. Optimization is key for a load in the upper hundreds of thousands of clients.

How big is the demand for digital services now?

It’s big. But it must be said that a core banking system is a product for the long haul. When banks implement a new core banking system, it’s a decision for twenty years into the future. In capital markets, which is a specialty of the second division at ARBES Technologies, the demand is currently very high. We especially see requests for digitalization and optimization of processes. We see an effort to minimize manual work and errors.

What trends and requests do you deal with in banking?

We implemented immediate payments for Creditas bank two years ago. It became the third bank in the Czech Republic after Ceska Sporitelna and Airbank to offer this service. Now, thanks to our digital platform and our core banking system, it is able to receive and send a transaction, which reaches the other party within 3 seconds. We see the future in the transfer from monolith systems to microservices architecture and event-base communication. It is also more and more important to be able to set up a product quickly in terms of parametrization and to shorten the time management required when implementing a core banking system from the current 12 months to just a few months.

Security goes hand in hand with internet banking. How has your solution adapted to the current challenges in this area?

In terms of core banking systems and technologies in banking in general, errors in our products can impact the reputation of our clients. This is one of the reasons why we have to be a step ahead in terms of security and to never underestimate anything. Apart from the fact that clients go through regular penetration tests, which are used to process findings, as minor as they may seem, we monitor potential threats very carefully and predict them so that we can react to them on time.

How do you think internet banking will transform? What will we see in the next five or ten years?

I’ve actually already touched on this earlier. I see a significant change in the transfer from monolith to microservices architecture. We have now closed off OBS and have optimized the core system in terms of performance. We would like to build additional modules separately based on microservices architecture including the option for mutual integration and the option to connect to a cloud. Concurrently, we’re building the ARBES Digital Platform with a unified interface to front ends (mobile, portal, internet banking) and connected to event-driven architecture. We at ARBES are not the first to begin with that approach. We want to have the initial phase ready in terms of the capital markets division by the end of this year. A similar such phase for the core banking system goes hand in hand with that. It will also be important to have the option of simple parameterization management. We have an advantage in Central Europe because we know the regulatory area. I believe that in the next ten years, the speed of regulatory will be similar and we can help our clients significantly with that. It also has a lot to do with requests for reporting for the Czech National Bank or other Czech and European regulators. Knowledge of the market rules is therefore a must.

How do you think banking of the future will look?

I think the decisive thing will be for people to get used to PSD2. Even though it has already been a few years since the European directive came into effect, its use is certainly beyond expectations. I see other initiatives, e.g. that a banking identity, meaning client verification after entry into internet banking, allows the client access to some systems of state administration. This can also be a way for banking to help with digitalization of state administration and the addition of other functionalities related to that into internet banking.

Ondřej Brojír,
Core banking system specialist