Business interview with the CEO of Bank of Georgia Archil Gachechiladze.
ARCHIL GACHECHILADZE: The CEO of Bank of Georgia since January 2019. Prior to that, he held numerous significant positions in the private sector. In 2017-2018, he was the CEO of Georgia Global Utilities, while chairing the GWP supervisory board at the same time. Archil Gachechiladze has been involved with Bank of Georgia for many years. In 2016- 2017, he was the bank’s Deputy CEO for Corporate & Investment Banking Services; in 2015-2016, he was the Financial Director of the BGEO Group; while from 2009-2015, he held the position of Deputy CEO for Investment Management & Corporate Banking Services at Bank of Georgia. Earlier, between 2000-2008, Mr. Gachechiladze held various positions at several Georgian, American and British organizations – such as Lehman Brothers Private Equity, Salford Equity Partners, EBRD, KPMG Barents and The World Bank. Archil Gachechiladze holds an MBA degree from Cornell University (Ithaca, NY), Johnson Graduate School of Management, as well as a Bachelor of Arts diploma from the Ivane Javakhishvili Tbilisi State University.
Archil Gachechiladze assures me that his ambition is not to make a personal mark on Georgia’s systemically most important bank. Instead, he continuously emphasizes the importance of working as a team and further improving the system. “The bank must operate effectively regardless of whether it is Archil Gachechiladze or someone else at the helm,” says the CEO of Bank of Georgia; adding that the bank is already making great strides in this regard.
Nevertheless, I get the impression that Mr. Gachechiladze has a clear trademark style of his own, and it is associated with two of the most important terms in today’s reality – innovation and a modern vision.
In September, Archil Gachechiladze and Bank of Georgia will announce a renewed mission statement. “We help people to maximize their potential,” states the CEO.
One trend undeniably stands out in every public opinion poll conducted in recent years, and that is the challenge presented by poverty and unemployment levels in Georgia. “Poverty is our strongest enemy today,” states Mr. Gachechiladze.
The CEO’s words are backed up by statistics. Recent data shows that 20% of the country’s population lives below the poverty line. Moreover, most working taxpayers also earn a low income. According to the Georgian Revenue Service, only 1.13 million people in Georgia have a declared salary, of which 191,000 (16%) have an average monthly salary of less than 100GEL. Only 0.57% of the population has a monthly income of over 5,000GEL, and only 0.21% of Georgians have an annual income of more than 100,000GEL (8,333GEL per month). Furthermore, although official statistics show that 1.69 million people in Georgia are in employment, only 1.13 million of these have any registered income.
We are forced to conclude that a middle class is virtually nonexistent in Georgia. Data from developed countries shows that the middle class usually forms the largest group of taxpayers. In contrast to this, the poor make up the majority of Georgian society, which is more typical for a developing country.
Additionally, people tend to believe that success in Georgia can be achieved not through knowledge and hard work, but instead through nepotism and luck. According to Archil Gachechiladze, “lack of hope is another fierce enemy of ours.”
While the CEO does not wish to reveal all, he has already identified three main corporate social responsibility components for Bank of Georgia, and knows exactly which tools to use to ensure that his organization contributes towards maximizing on the country’s potential.
One of these main areas is education: “We are trying to fund programs that are broad in scale. They apply both to university students and school pupils. We want to create digital resources that will enhance young people’s knowledge and skills, allowing them to see their own potential.”
The second component is employment: “In this case, our main challenge is to help people to start believing in themselves. Then we can start thinking about providing them with the necessary resources to ensure that their path to employment is as simple and as short as possible.”
The third area is business support: “This does not mean providing credit support alone. We are talking about professional advice, training and other forms of aid that ensure that a business can go to the next level,” explains Archil Gachechiladze.
The CEO of Bank of Georgia believes that if his bank can successfully and effectively implement its vision, Georgia will be able to fulfil its potential sooner, or at least come close to doing so. “We must fight poverty not only by issuing funds, but foremost of all by creating opportunities. For me, inclusivity means nothing other than creating equal opportunities. Everything else, such as distribution of funds and higher taxes for the rich, is counterproductive,” explains Archil Gachechiladze, whilst revealing a conservative standpoint.
Equal opportunities in the 21st Century are hard to imagine without equal access to innovation. It would be fair to say that this particularly applies to the banking sector. Banking, before and after the internet, are two completely different worlds. If a bank cannot come to terms with this, then it is doomed to fail.
Based on this, innovation is another recurring term during the interview with Archil Gachechiladze. According to him, the Georgian banking sector is quite well-developed in this regard, which is largely due to the competition in the industry. Mr. Gachechiladze firmly believes that constant competition breeds innovation. “The basis for the rapid development of the banking sector in Georgia was competition and the innovation that was first introduced on our market was by Bank of Georgia. Without us, our main competitors would not be as strong as they are, and vice versa.”
The Forbes Georgia rankings reflect the dominance of the two largest banks (Bank of Georgia and TBC) on the market. However, this does not imply a lack of competition in other segments. For example, the small and medium-scale business segment has several successful players, while the retail service sector is served by a third large bank and its numerous branches. “The competition is fierce, but we have managed to increase the loyalty of our customers through innovation and improved service,” states Archil Gachechiladze.
Innovation combined with information obtained from the original source can turn into a powerful tool. When it comes to taking rapid steps towards development, the CEO of Bank of Georgia is guided by the principle that “it is not necessary to reinvent the wheel.”
Indeed, even on a global scale, the largest banks do not differ from each other significantly. They are currently faced with the same challenges, brought about by the increase in the speed of data collection and its exchange. To achieve their common goals, it does not matter whether the banks in question are in Georgia, the EU or the United States – development and modernization have a common trajectory.
One of the main challenges facing the banking sector across the world today is to create a comfortable service environment for the customer. Modern-day banking services must be tailored to the customer’s busy schedule, rather than the other way around. This is easier said than done. A bank must carefully study the customer’s goals before proceeding to create tailor-made services that will help customers achieve said objectives whilst also saving them time. Comfortable service is not just an ideal, but a crucial component of success.
The CEO of Bank of Georgia agrees that the banking sector is undergoing significant changes. “In the past, people would choose an apartment for themselves, then browse through various mortgage offers and wait two or three weeks for a reply regarding the approval of their loan application. Today the customer expects a far better service from us. Data processing and integration will become significantly easier with the help of various brokerage firms, as customers will automatically have access to the apartments that they can afford. Around 80% of the process must be digitalized, leaving only the handshake.”
As for the relatively minor solutions, Mr. Gachechiladze believes that any transaction can be fully completed in 3-10 minutes. “These are some of the innovations that are being planned and implemented. In this regard, we can confidently say that we are ahead of our competitors. However, we are not going to slow down.”
The other global challenge facing the leading banks is ensuring the relevance of services, which is only possible through proper communication with customers. Simple communication is no longer enough. Personalized communication that is relevant to its specific context is required. Customers expect their bank to perceive them as individuals, know about their needs and be able to predict their future requirements. This is a difficult undertaking, as it requires banking activities to be conducted in real time, while the main and largely automated banking services must also be supplemented with personalized and targeted advice, whenever required by the customer.
Bank of Georgia has more than 2 million customers. Therefore, Archil Gachechiladze found a technological solution to this task, in the shape of Medallia – a globally renowned company that manages the customer experience. The company has more than 15 offices worldwide, including locations in London, Paris, Sydney and New York. It has more than 500 customers, including PayPal, IBM, Airbnb, Best Western and many others. Both the customers and the sectors represented are numerous and diverse.
“We will be the first Georgian organization to work with this firm. Ultimately, this should enhance the quality of service even further,” states Archil Gachechiladze.
Closely related to the subject is the issue of effective feedback, which presents another challenge to large and successful banks across the world. Providing such feedback in a short space of time can only be possible if employees have access to the latest and most relevant data and information in order to provide a quick and clear response to customers.
Dealing with this challenge effectively whilst renewing the mission statement is particularly important for Archil Gachechiladze, as he also equates fulfilling this mission with achieving success. As in all other cases, he has a detailed understanding of what success looks like: “Bank of Georgia must operate an effective system. All employees should look forward to coming into work and feel that they help shape a better Georgia by working in this bank. Each customer must be happy about working with the bank and be influenced by the positive aura that exists within the organization. Consequently, the business will be oriented towards appropriate values and the shareholders will be satisfied.
“In order to achieve all of this, we must ensure that the spirit and emotion of our mission statement reach our customers,” says Archil Gachechiladze. To this end, the CEO chose to implement a widely used digital platform in the shape of Workplace. According to Archil Gachechiladze, it is “something like an internal Facebook for employees.”
Indeed, Workplace uses a new generation of technology and simple operations to completely transform the quality of communication and culture in companies of any size and type. Several days ago, Archil Gachechiladze held a presentation where the number of virtual attendees interacting through comments exceeded the number of attendees physically in the conference room. “People are slowly getting familiar with using this approach in a corporate environment,” states the CEO.
Improved communication may require numerous changes in internal processes, as was the case in this particular instance. Moreover, it is not only the system that must undergo appropriate adaptation, but the employees as well. Bank of Georgia employees are characterized by their ability to quickly adapt and develop themselves. “When we hire people, we pay particular attention to their readiness to adopt change. For example, the knowledge possessed by recent university graduates will no longer be relevant in ten years. It is, therefore, important to be ready for changes. We must understand that each one of us is constantly learning,” explains Archil Gachechiladze.
The CEO himself has learned the importance of teamwork, and that one person cannot change reality: “A leader can play a big role in forming a team, but the success of the organization, and of the leader himself; is ultimately determined by that team.”
The fourth and biggest challenge facing every bank across the world is maintaining trust under the backdrop of growing fragmentation of the financial sector. In many areas, Facebook, Apple and PayPal are the main competitors of banks in the 21st Century. Trust is a crucial component, which distinguishes the financial sector from other players.
In this regard, the figures speak louder than any words that can be used to describe the trustworthiness of Bank of Georgia. In terms of its total assets (34.3% market share), total loans (34.6% market share) and customer deposits (33.9% market share), the bank holds a third of the market.
Bank of Georgia offers its customers a broad range of corporate and retail banking products, property management and brokerage services. In 2012, shares of the Bank of Georgia Holdings plc (LSE: BGEO) received premium listing on the London Stock Exchange. BGEO has also been part of the FTSE 250 and FTSE All-Share indexes since June 2012.
When a company’s shares are floated on the London Stock Exchange, its trustworthiness is measured parallel to that of the country that it represents. This is something that Archil Gachechiladze is particularly proud of: “Since 2006, when we attracted the first $100 million of investment in the country’s capital, we have been representing Georgia to investors and assuring them that this is a place worth investing in. Our role is to create a positive stimulus. We always want more, and we try to help people and the country to realize their potential.”
Q&A Blitz with the CEO of Bank of Georgia
Name a successful recent reform
Although we were not affected by this particular reform, as we pay the profit tax in full, the introduction of the Estonian model has left many of our customers – mainly medium and large-scale corporations – with more money to expand their business, which ultimately translates into growth in internal investment and provides a great stimulus both to ourselves and the country as a whole.
The impact of the growing use of cash
The less cash there is in circulation, the faster the process of digitalizing bank services, which will ultimately save time, money and energy.
Development prospects for the capital market
It is difficult to imagine the development of the capital market without the development of the economy. In regional terms, we have a small economy. Therefore, I cannot foresee the stock exchange developing faster than the Georgian economy, although the pension reform will create a positive stimulus in this regard.
Success of the banking sector and the key to growth
I now believe that the banking industry is reaching the stage where its growth and success is entirely and directly linked to the country’s economic growth.
The main challenge to business growth
Bureaucracy and the judiciary system. I would like the legal system to be more effective. In this case, it would speed up the process of resolving problems faced by our corporate clientele and ourselves. Naturally, this would greatly facilitate quick and effective decision-making. Georgia has potential to develop at a quick pace, but this will only be possible if an orderly legal system and effective bureaucracy is in place.
Larization Policy
The basis for the Larization process must be formed by savings in the national currency. The economic policy driving the country is crucial in this regard. Here I can see potential for improvement. The higher the level of trust in the Georgian economy, the higher the degree of Larization.
Banking Regulations
The regulations introduced over the last two years, which were aimed towards stimulating de-dollarization and reversing the rapid growth in consumer loans, reduced banking activities to a certain extent. However, it has also reduced economic risks in a crisis. It is important to maintain a balance between economic growth and risk.
Banks: Friends or Foes?
Constructive criticism is important to us. However, criticism of the banking sector often exceeds constructive boundaries. I think that the level of aggression towards banks has decreased recently. We do not expect everyone to like us, but we definitely want to show people that they can change their current reality if they so wish, and that we are here to help them determine what needs to be done to change this reality. If we play a positive role in this process, then I believe that people’s attitude towards the banks will further change towards the better. Our mission is to help people realize their potential.
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