During both days (June\n16-17, 2022) of the Baku Fintex Summit, its participants \u2013 representatives of\nbanks, financial and government structures, as well as fintech companies \u2013 not\nonly drew a line under the obvious successes of digitalization in Azerbaijan,\nbut also outlined the circles of its near development \u2013 urban mobility,\nsecurity, and corporate social responsibility.<\/p>\n\n\n\n
In 2022, the event,\nconsidered one of the most important events for the field of finance and\nbanking in the entire region, focused on banking and the financial ecosystem.\nThe Fintex Summit was supported by the Azerbaijan Banks Association, the\nCentral Bank of Azerbaijan, the Ministry of Digital Development and Transport,\nand other organizations. The global company Visa has become a key sponsor of\nthe event. The media partners of the event were the magazine “PLUS”\nand the portal PLUSworld.ru. Special attention was paid to innovative\nsolutions, fintech, and security.<\/p>\n\n\n\n
Cristina Doros<\/strong>, Vice President and Regional Manager for\nAzerbaijan and Central Asia at Visa, noted in her opening speech that the\ncompany is doing everything possible in the country to “break down\nbarriers between fintechs, banks and other financial institutions.”<\/p>\n\n\n\n “Small and large\nbusinesses are experiencing various waves of economic shock,” she\naddressed the summit participants. “Banks and financial institutions have\nto overcome barriers to expand and accelerate their technologies, and it’s time\nfor Visa to introduce new solutions to help and support businesses, financial\norganizations and fintech companies.” As Cristina Doros pointed out, Visa\nhas many improvements to help the financial ecosystem, including the\nimplementation of tokens (VTS), Apple Pay, solutions for SME Visa Tap to Phone,\nand etc.<\/p>\n\n\n\n After the welcome speeches\npanel discussions started.<\/p>\n\n\n\n Intelligent data. Neobanks<\/p>\n\n\n\n Sergei Yevtushenko<\/strong>, Deputy Director of the DIS Group Consulting\ndivision (offices in Russia and Kazakhstan), said that three trends are\nindisputably dominant globally in Intelligent Data: self-confident business\nleadership, artificial intelligence, and machine learning.<\/p>\n\n\n\n “The chief data\nofficer must adapt to the current changes in priorities and lead the team and\nthe organization to a data-based future,” S. Yevtushenko advised the\nsummit audience.<\/p>\n\n\n\n Evgeny Lisnyak<\/strong>, responsible at Visa for the development of\nstrategic and venture partnerships in Ukraine, Georgia, Central Asia, and the\nCaucasus, focused on the financial ecosystem of the state and said that certain\nconditions must appear in order to achieve success in this area, primarily\nregulatory and external. According to the speaker, Azerbaijan has something to\nboast about: the country’s Central Bank not only supports digitalization but\nalso presented a digital payments strategy for 2022\u20132023. In the same year, the\nregulator signed a cooperation agreement with Visa to promote digitalization.<\/p>\n\n\n\n According to E.\nLisnyak, the COVID-19 pandemic has contributed to the development of the\ncountry’s online payment system at a faster pace: “Embedded finance is\nbecoming ubiquitous. Banking is becoming available everywhere.” He also\nsaid that he considers the Azerbaijani railways “an icon of rapid\ndigitalization” (as it is known, its passengers are able to pay for travel\nby cards).<\/p>\n\n\n\n E. Lisnyak disclosed statistics about the extent of digitalization of republican citizens’ financial behavior in\nthe end of his speech. In 2021 alone, 11.5 million cards were issued, and 65%\nof them were contactless. Simultaneously, their number has increased by 20%\n(contactless – by twice). 17% of non-bank citizens are ready to order a card in\nthe next 6 months.<\/p>\n\n\n\n “Metaverse unites\ndifferent digital worlds and promotes further innovations in the field of\npayments. We see a lot of potential in this, and we need to keep a watchful eye\non it. Perhaps it will be the next big thing,” concluded E. Lisnyak.<\/p>\n\n\n\n From the financial\necosystem to digital neobanks<\/p>\n\n\n\n As a phenomenon,\nneobanks appeared just 10 years ago, but they began to scale only in recent\nyears,” Benjamin Wellstein<\/strong>,\npartner of the landing and banking practice of Simon-Kucher & Partners,\nsaid in his speech. And even despite this progress, the digitalization of\nbanking is noticeably lame.<\/p>\n\n\n\n “In recent years,\nwe have seen a rapid leap in the opening of new neobanks,” commented B.\nWellstein. “Often they open under new names and are subsidiaries of the\nmain bank.” The speaker cited a couple of exemplary neobanks: Emirates\nLifestyle, created for the digital generation, and Bankcolombia, where 82% of\ncustomers are men and women aged 18\u201335.<\/p>\n\n\n\n The focus is on the\ntoken<\/p>\n\n\n\n Alexander Stelmakh<\/strong>, Senior Director and Head of Visa’s Digital\nSolutions Department in Ukraine, Georgia, CIS countries, and South-Eastern\nEurope, focused his speech on new opportunities for the digital user experience\nof Azerbaijani residents.<\/p>\n\n\n\n “According to\ndata from the local Central Bank, the number of eCommerce payments climbed by\nmore than half in 2021 when it comes to the Azerbaijani economy. This is a huge\nleap. And in 2022, we also expect serious growth in it. Everything that has a\ndigital basis is accelerating,” A. Stelmakh noted, and added that the Visa\npayment system is always ready to provide the possibility of such payments.<\/p>\n\n\n\n Next, the speaker paid\nspecial attention to tokenization, a technology that replaces confidential\ncustomer data with a 16-digit number, which makes payment secure. A. Stelmakh\nsaid that at the moment 193 countries have given permission to tokenization,\nand this number is growing. In addition, more than 2 billion tokens have been\nissued.<\/p>\n\n\n\n “Tokenization\nallows a completely new payment experience via your phone, watch, and,\npossibly, your car in the future. It makes it possible to make simple and safe\npurchases in eCommerce,” added A. Stelmakh. “In 2021, we successfully\nlaunched Apple Pay in Azerbaijan, and now we see the growth of transactions\nusing this technology. But still, if we speak about eCommerce tokenization,\nAzerbaijan is taking the first steps, so a breakthrough should be expected\nhere.”<\/p>\n\n\n\n Proactive Regulator<\/p>\n\n\n\n The future of payments\nin Azerbaijan was the subject of the speech of Rashad Gasimov<\/strong>, Senior Specialist of the National Payment Systems\nDevelopment Department of the Department of Payment Systems and Settlements of\nthe Central Bank of Azerbaijan. The representative of the regulator said that\nin 2021, compared to the 2020 fiscal year, 20% more bank cards were issued\n(11.5 million and 9.6 million, respectively); the number of POS terminals\nincreased by 7% (61 thousand and 57 thousand devices), and the number of\ncontactless POS terminal devices by 28% (44 thousand and 34 thousand).<\/p>\n\n\n\n This evolution has led\nto the fact that digital banking is becoming increasingly popular in\nAzerbaijan: according to the regulator, in 2021 it accounted for 73% of client\ntransfers.<\/p>\n\n\n\n In order to promote\nfurther growth of the country’s financial sector, the Central Bank of Azerbaijan\nplans to implement a five-point strategy by 2023:<\/p>\n\n\n\n Eventually, the\necosystem of digital payments in the country will develop only with the\nproactive position of all its participants, thinks R.Gasimov. At the same time,\nnot only the Central Bank, banks, and AzerPost, but also fintechs, global\npayment organizations, and processing centers are considered important elements\nof this formation.<\/p>\n\n\n\n According to the\ngeneral opinion of the speakers and participants of the event, there are all\nthe necessary prerequisites for the further digitalization of Azerbaijan: the\nassistance of the Azerbaijani government, the readiness of banks, and global\npayment partners such as Visa.<\/p>\n\n\n\n Payment security and\nSocial Engineering<\/p>\n\n\n\n The second day of the\nFintex Summit began with the topic of security. First, the speakers discussed\nwhat mandatory actions should be taken by the players in the financial sector\nof Azerbaijan in order to guarantee its security and effectively combat fraud.<\/p>\n\n\n\n “It’s no secret\nthat the pandemic has caused a sudden acceleration in the e-Commerce and mobile\ncommerce segments,” Charles Lobo<\/strong>,\nSenior Vice President and Director of Risk Management (Visa, CEMEA)”, said\nfrom the stage. “We have witnessed the acceleration of digitalization at\nall levels at a speed unthinkable for eCommerce. While the volume of payments\nconsistently showed a growth trajectory, the percentage of fraud remained\nextremely small.”<\/p>\n\n\n\n Lobo shared with the\nparticipants five trends in post-pandemic risk management and payment security\n(from the point of view of emitents):<\/p>\n\n\n\n 1. The volume of ecommerce\npayments is growing rapidly, and the level of fraud remains at a low level<\/p>\n\n\n\n 2. The level of\ntokenization has increased by 100%, so customers have gained a secure and\nseamless payment experience. “It has proven its advantages in the security\nsector by devaluing sensitive information. This means that sensitive data such\nas card number, CVV, etc. has lost its appeal to cybercriminals. Because during\ntokenization, your card number is simply replaced with a token,” the\nexpert noted.<\/p>\n\n\n\n 3. The 3-D Secure\nplatform has grown by 85%. Coincidently, the level of fraud has fallen by 3\ntimes against the background of the general CNP (Card-Not-Present transactions).<\/p>\n\n\n\n 4. Contactless payments\ncontinue to grow at a rate of +20% per year and now dominate F2F payments\n(face-to-face) with a level of fraud close to zero<\/p>\n\n\n\n 5. Social engineering\n(SI) remains a challenge for many global and local markets. “SI is the\ndominant approach where fraudsters deliberately attack consumers. Visa has\ninvested heavily in educating and informing consumers, as well as working with\npartners from banks, credit institutions, and the government to raise awareness\nof attacks based on social engineering.” commented the speaker.<\/p>\n\n\n\n The next speaker, German Pozankov<\/strong>, Managing Director of Trendmicro\nin the CIS and Mongolia, also focused on digital security.<\/p>\n\n\n\n In response to the\ntopic of what the fundamental issue with managing digital security is, Pozankov\nstated that “digitalization… enables enterprises to offer new services\nand be more competitive and effective. Also, digital transformation brings with\nit the complexity of infrastructure: cloud technologies are inevitably being\nimplemented, the number of employees who work remotely or hybrid is growing…\nThis complexity in terms of organization and infrastructure is reflected in the\nfact that the lives of “security guards” in the company are becoming\nmore complicated. There are an increasing number of points that attackers can\nuse in their activities \u2014 what we call the “attack surface” is\ngrowing.<\/p>\n\n\n\n At the conclusion of\nhis speech, G. Pozankov listed five negative consequences of cybersecurity\nviolations for any financial market player: 1) outflow of clients, 2) loss of\nintellectual property, 3) disruption of critical infrastructure, 4) expenses\nfor external consultants, and 5) losses.<\/p>\n\n\n\n The topic of the next\npanel on the second day of the Fintex Summit was socially responsible banking.<\/p>\n\n\n\n Daniel Buzas<\/strong>, European Regional Coordinator of the UN Environment Programme Finance\nInitiative, said that he considers Azerbaijan a key country in the region whose\nfinancial sector needs to be instilled with sustainable development models and\ninvolved in climate protection.<\/p>\n\n\n\n Co-founder and CEO of CEO\nClimate Risk Services Gerhard Mulder<\/strong>\nendorsed Azerbaijan’s strategy for addressing global warming, including from a\nbusiness perspective. “The problem is that it is very difficult to\naccurately predict the extent of the impact of climate change. It will\ndefinitely cover the financial and economic system, but all this is difficult\nto predict.” G. Mulder is sure that it is possible to understand the\nextent of the impact of global warming on the banking sector through scenario\nanalysis and risk mapping, although “not everything can be\ncalculated.”<\/p>\n\n\n\n Key growth drivers<\/p>\n\n\n\n The forum’s last panel\ndiscussion focused on the factors that have fueled the development of digital\npayments and their potential in Azerbaijan.<\/p>\n\n\n\n Edgar Abdullayev<\/strong>, Executive director of United Payment,\nconfirmed the existence of a steady trend in the country: the growth of\neCommerce volumes and, accordingly, financial transactions. An additional\nimpulse was given by the COVID-19 epidemic, thanks to which online\n“blossomed” and remote communication channels became popular.<\/p>\n\n\n\n Meanwhile, Nurlan Hadjiev<\/strong>, Visa country manager in\nAzerbaijan, highlighted the transport sector as the one where digital payment\ncan become an everyday reality. According to the company, 27% of consumers in\nbig cities are ready to use public transport more often if it is easier to pay\nfor it.<\/p>\n\n\n\n The transport industry\nhas been singled out by Nurlan Hadjiev, Visa country manager in Azerbaijan, as\nthe one where digital payment can become commonplace.<\/p>\n\n\n\n “Visa admits that\ncities are increasingly gravitating towards inclusivity, connectivity, and\nsustainability, and we actively support them in moving towards these\ngoals,” Hadjiev said. “We help cities and transport operators meet\nchallenges and improve urban mobility through simple, convenient, and secure\ndigital payment solutions.” The speaker noted that Visa was previously a\npayment partner for two major infrastructure projects in Azerbaijan \u2014 land\ntransport in Sumgait (2020) and the Azerbaijan Railways (2021).<\/p>\n\n\n\n According to N.\nHadjiev, everyone has benefited from the implementation of digital payments.\nThe city authorities found fiscal transparency attractive; transport companies\nreceived more passenger traffic and the possibility of planning; and consumers\ngained an alternative, fast, and safe payment option without physical contact.<\/p>\n\n\n\n “The ultimate goal of urban mobility is the transformation of transport solutions into a single ecosystem (Mobility as a Service),” N. Hadjiev concluded.<\/p>\n\n\n\n