Lending innovation in Moldova, with Bogan Plesuvescu

I used to feel a little bit exotic knowing a person born in Moldova, but since he left as a baby, that’s actually all I knew about Moldova. It turns out, I should have been paying attention because it may be a small country, but Moldova is standing on the threshold of significant change: on the one hand, a formal push is now underway to bring them into the EU but on the other, there’s also the still-present threat of Russian aggression.

Moldova was once in the USSR, but arguably its historical and cultural links are stronger with its Western neighbour, Romania. In this episode, we explore those ties - and the broader state of the Moldovan banking landscape - with Bogdan Plesuvescu, CEO of Victoriabank.

If you’d like to start a conversation with Bogdan, you can find him on LinkedIn like I did, and although we didn’t really talk about it, if it his sailing you’re more interested in, which has somehow become a recurring theme among my guests, you might also want to check out his Twitter

You can read more about Victoriabank Moldova at https://www.victoriabank.md/en/ (including their VB24 Pay, Garmin Pay and Apple Pay offerings as mentioned)

Bogdan also spoke about all the help the people of Moldova have been offering to Ukrainian refugees fleeing the Russian invasion. I can’t personally vouch for Refugee Support EU, but if you’re interested in helping they seem to be a good place to start your search.

You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24

If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.

Regards,

Brendan

The full written transcript, with timestamps, is below:

Bogdan Plesuvescu 0:00

Between Moldova and Romania, there is a 15 year gap. And during my last four years living in Moldova, many times I had moments of deja vu, saying 'oh, it seems that I know what might happen in the future because I have lived it in my own country 10 or 15 years ago.

But this year is the year when they officially apply for European Union accession, people are speaking so much right now about European Union, so that's why I would say that Moldova should follow the same path like other Eastern European countries, not only Romania, but Poland, Czech Republic, Slovenia, or Slovakia.

Brendan Le Grange 0:46

Welcome to How to Lend Money to Strangers with Brendan Le Grange. I've worked in consumer lending strategy for a little over 20 years, taking on roles across the credit lifecycle in Africa, Asia and Europe. In that time, I've had the pleasure - and sometimes just the experience - of working with many different people. So I'm pretty confident when I say that Romans Zilbering is one of the true characters of credit risk strategy - just as comfortable solving errors in complex SAS code as he is propping up the bar. Any bar, but in particular, I remember one with peanut shells on the floor and turtles in little perspex cages that used its position as the only bar within walking distance of our office in Kowloon to charge almost unacceptable rates for a pint.

In fact, Roman made such an impression on me in the two years we work together that I turned him into a character in my first novel, Drachen. You can download that for free now as an ebook or buy it in any other format if you prefer. In Drachen, I cast Roman as a Russian mercenary of sorts, because well, because he speaks Russian. And although I knew he was born in Moldova, that's all I knew about Moldova. And in my little brain, it was enough to think that because Roman speaks Russian and Roman is from Moldova, Moldova must be kinda Russia. I grew up in the 80s in South Africa and they didn't teach us about the USSR with a lot of nuance so perhaps you'll forgive me for my ignorance.

Because it turns out I was completely wrong. I still love Roman, but Moldova's historical links are strongest to its western neighbour: Romania. So in this episode of How to Lend Money to Strangers, we take a closer look at that bond, a closer look at the Moldovan banking landscape. And we hear how one pioneering bank is closing the gap in terms of digital borrowing and banking experiences.

Well, Bogdan, thank you so much for making the time. You're currently the CEO at Victoriabank in Moldova, which is a country I know very little about. Although, when I was looking at the stats, I actually have quite a lot of listeners in Romania so a good portion of them will know a lot more than I do. Before we get into that, though, let's quickly have a look at your background, because that's a long career working in banking in Romania and Moldova.

So, would you mind just starting us off with a bit of context and how you got to where you are today?

Bogdan Plesuvescu 3:31

Okay, thank you very much, Brendan. Thank you very much for all this setup and invitation. My name is Bogdan Plesuvescu. I'm a father of two children, professional sailor, and banker.

My first job in banking was 19 years ago, and I started working in legal fields, becoming first Head of Legal and then Chief Legal Officer in various banks in Romania. Looking back, ABN AMRO was the employer who most influenced my future career: I always remember with great joy their school of business, their human approach, work life balance, even now we have regular meetings among us, despite of the fact that we are working in different organisations at this point of time. But during the period I worked in ABN AMRO, I understood that my career in banking must be diversified. And I was convinced that I should not do only legal in my future careers in banking, but I should start understanding that the business and the banking in the most complex way.

So little by little, I added business components on my legal background, and I started doing this when I joined to Banca Transilvania as the Chief Workout officer in 2013, in charge with the collection and turnaround procedures for clients who are in distress at that moment of time. Due to the the development of Banca Transilvania, I was attracted by merger and acquisition transactions and I participated in a very small team negotiating the biggest M&A transactions in banking in Romania. In the last six years at Banca Transilvania I was involved in many M&A transactions. This started with acquisitions of Volksbank and then acquisitions of Bancpost a member of the ESG group.

Based on this in 2018, I accepted the challenge to become the Chief Executive Officer of Victoriabank, a newly acquired subsidiary of Banca Transilvania in Moldova. So, from the very first moment when Banca Transilvania became the major shareholder together with the EBRD in Victoriabank, I started work as a Chief Executive Officer there. And since then I exercise my mandate of a complex turnaround of this bank into a modern and very digital bank, I can say.

Brendan Le Grange 6:11

Before we go too deep into the work you're doing at Victoriabank now. Yeah, 19 years ago you started working in banking in Romania and it's been an interesting 19 years in terms of, obviously, what's happening in broader banking and fintech and the move to digital but in terms of Romania's history, too. What are some of those big things that you've noticed in that time?

Bogdan Plesuvescu 6:33

Yes. So looking back in my career, I can say that, at the beginning in Romania, there are many banks and mostly local owned banks - who previously were state owned banks and then there are privatised after the communism in Romania. There were some shareholders from Turkey or Greece, typically the shareholders looking for emerging markets and looking for higher returns. This was in early 90s, I would say.

After Romania started down the road of European Union accession. international investors started to look more actively in Romania and especially in banking sector and so, little by little, banks like ABN AMRO, Unicredit, Raiffeisen invested in Romania. And they gradually became the largest banks in Romania, with international shareholders bringing their know how, bringing in their colleagues, and teaching us how to do banking, real banking not local banking we were used to previously.

I was fortunate that initially I worked for a bank with Turkish shareholders, where I learned very much negotiation skills because, as you may know, Turkish citizens are very good in negotiations. Having this part together with ABN Amro it helped me a lot in my career. Then, then 2006-2008, the crisis came. It was all over the world, and the banking system in Romania was affected as well. However, I can say that Romania was lucky enough because the banks at that moment of time were very well capitalised and with a good liquidity - we had, and we still we have, a very tough regulator. And even before the crisis, National Bank of Romania, refused to ease the regulation in Romania on capital allocation or minimum reserves for the bank, insisting in preparing the banking systems for eventual crisis. That's why it was not like it was in other countries.

However, we had several banks exposed, especially the banks who either didn't have, at that moment, the support of strong shareholder or the banks who invested a lot in mortgage loan not denominated in local currencies. Then soon after the crisis, they were forced to divest their business.

Brendan Le Grange 9:07

And then you move to take this role in the newly acquired Victoria bank in Moldova. And when I saw that initially, it was interesting to me and this is showing more my ignorance than anything else. I'll blame it on South African government school education, but the only person I know from Moldova, his family left during the Soviet Union days, and the fact that he spoke Russian. I'd seen Moldova as more related to Russia, but actually as soon as I looked, I saw the talks about even potentially re-merging Moldova with Romania - it's the national language, there's huge connections to Romania, so perhaps for other people listening who are also ignorant like I was, what are the links between Moldova and Romania, and how connected are those two cultures, those two business landscapes?

Bogdan Plesuvescu 9:59

There are periods when they were more oriented to the east, closer to Russia, or they're more closer to the west. Yeah, I will not enter into too much politics in here. I will say only that Romania and Moldova are speaking the same language, they share the same culture.

You know, after the Second World War Europe was divided, West and East. And in the East, including Romania, the influence of Soviet Union was very high. We are fortunate in Romania that - well, fortunate and unfortunate - fortunate that we were allowed to speak our own language, we were not deported to Siberia, and Russians were not replacing the local population, we were not fortunate because we had 45 years of communism, when our liberty was more than a little bit affected. But coming back to Moldova, they were not so lucky like Romanians, and until 1991, Moldova was part of Soviet Union.

But in 1991, Moldova gained its independence, and ever since all the way struggling to find it in identity, its path. And as you mentioned, there is the discussion about European Union accession. People are speaking so much right now about European Union, and not only because it's something they dream about, but most of the population - it's a 2.5 million official population - but most of the youngest people in Moldova are already working in European Union, they already know what it means to be in Europe.

Brendan Le Grange 11:38

And the banking landscape, what did you find when you landed in Moldova? Was it in a similar position to the Romanian banking landscape, or were there different things that needed to be done to get the business up to the level you you'd like to have it at?

Bogdan Plesuvescu 11:54

So when I landed and had officially moved in Moldova, after a few months, I would rather say that between Moldova and Romania there is a 15 year gap. And during my last four years living in Moldova, many times I had moments of deja vu saying oh, it seems that I already lived this several years ago. So I know what might happen in future because I live it in in my own country 10 or 15 years ago. So this might be an opportunity for the bank because I understand the changes will occur in Moldova in the next period of time. So Moldova should follow the same trend the same path like other Eastern European country, follow not only Romania, but like Poland, like Czech Republic like so then also watch or followed.

Brendan Le Grange 12:46

Yeah, when I was doing my MBA, we were always looking at Estonia, as an example. Yes, the benefits of being a small country in a digitising world. As the world becomes more digital, it gives a chance to accelerate and catch up some of those those gaps that exist maybe even leapfrog some of the old technology when I was looking at Victoria bank, lots of talk about innovation and going digital, how do you see yourselves as a sort of a banking brand in the Moldovan landscape?

Bogdan Plesuvescu 13:16

So we can speak about Victoriabank, but first of all, it's important to understand the level of the banking system in the scale in in Moldova, because, as I mentioned, it is a small country - in terms of square meters and also in population - the GDP is around E11.5 billion, GDP per capita is E4,400, average salary is about E450 per month, with unemployment rate of 3.5% and the inflation rate, the official inflation rate, at this moment of time, it's around 22%. And to understand the banking system, it's 51% of the total GDP in Moldova. To understand the scale of that, Victoriabank in Romania alone, which is the biggest bank in Romania, is bigger than the combined banks in Moldova - but the competition is very tight and this affects the margins very, very dramatically.

There are 11 banks in Moldova, too many for this population.

Now coming back to Victoriabank, in 2018 Victoriabank was the third largest bank in Moldova. We are always proud of our history and about the innovation which were brought into Moldova by Victoriabank, since the moment it was established as a bank.

Actually Victoriabank was the first private owned bank in Moldova. It was set up in 1989, the same period of time when Romania became free of communism. Then, there are some novelities during the period of existence because Victoriabank in 1997, they were first bringing a credit card issued in Moldova, then the next year, in 1998, it was the first ATM, and then coming to, let's say, the latest history, in 2017, we are launching the first wallet NFC solution for Android customers in Moldova, which was the VB24 Pay.

During my, my mandate, let's say, other novelties were released in Moldova. And in 2019, we are the first to bring wearable payments in Moldova once we launched Garmin Pay; then the first tap to phone solution so now we can do payment directly on your mobile phone; and, last but not least, together with two other banks, we launched the Apple Pay solution for Moldova.

So it is in the blood of this bank to bring novelties, and despite of the fact that its maybe not the biggest bank or not the most profitable bank, is always looking for innovative solutions.

Brendan Le Grange 16:13

It certainly sounds like you're that closing that 10-15 year gap very quickly. From a lending point of view, when you're making your lending decisions for those credit cards, or those loans, what is the data environment like? Is there is there a credit bureau, do you have alternative data, what does that look like?

Bogdan Plesuvescu 16:29

Yes, there is not only one credit bureau, there are four, which makes our life complicated because of the cost of interrogating so many database are very high. In Romania, for example, there is only one, but yeah, in Moldova, this is what we have so we have to manage.

But speaking about digital lending, we've done serious steps, critical steps I'd say, for preparing for this digital lending. And maybe this year or next year, it will become a very common topic in Moldova, and also in Victoriabank as well. So first of all, there was this loan origination software, which implemented quite successfully two years ago, and mainly for our consumer lending. It's now fully centralised and fully locked in this loan origination software. This year, we will be able to extend this also to the small enterprise lending.

And it's important because we can implement automatical scoring. And so there are many files right now which never reach to any people, it's automatically scored, and automatically the decision comes from the software. If it is yellow, there are several people looking into it, or if it is red to automatically knock out from the decision. But this is only the beginning, and once the legislation will allow the banks to extensively recognise people based on videos or based on not face-to-face discussions, I'm sure that we'll we'll be able to speak more about digital lending.

Brendan Le Grange 18:16

You're listening to How to Lend Money to Strangers. If you're enjoying it, please hit the little plus button to subscribe and share it with your connections on LinkedIn. Now, let's get back to the show.

Bogdan Plesuvescu 18:28

This moment of time, we are able to do digital lending only for the people who are already customers of our bank, because we already have know your customer done in our bank and also they have an electronic signature available, they do not have to come to the bank to sign. So they apply on our website. They signed it electronic/ digital and the money are on their account. I'm sure that by the end of this year, or maybe next year, with modern tools, this digital lending will increase - firstly for individuals and then for the small enterpreneurs.

Brendan Le Grange 19:08

Yeah, the identity verification is usually the hardest one to get through. Then Bogdan, in terms of the big subject of the day: hopefully we're moving out of COVID now, but obviously around the world, we've had a couple of years of unsettled markets of unexpected risks. How did the Moldovan market get through that? Was there a lot of change in risk, or is it one of the markets where things were generally fairly stable?

Bogdan Plesuvescu 19:36

Actually, no, it was very affected. There are some legacies issues, a lot of scandals and the biggest one is 1 billion stolen from the state. But Victoriabank, for example, when I joined the bank in 2018, the non performing loan portfolio was about 30%. 30%, that's huge for anybody. And so our main focus during that period before the COVID, and it's helping us now very much. So our main focus in 2018/ 2019 was to recover the huge non-performing loans and replace it with quality loans.

So we managed during this period of time to reassess our portfolio. In 2018, 80% of the loans were large corporate exposures, and 15% individuals, 5% SMEs. Now, in our portfolio, we have 65% individuals 15% smaller enterprises, and only 20% large corporate. So, the COVID hit was in a moment when this portfolio was already, let's say, very stable and were not very much impacted. Of course, March, April, and even June were quite a lot affected, but then little by little started to recover.

Of course, we there are some concerns and the recent developments in the borders of Moldova thing that are threatening more than COVID crisis. I think that this is the main factor which might affect the not only the economy but also all the industries in Moldova. We have seen a lot of people becoming scared on the 24th of February when the war started, and as happened also in Romania, people ran to transform their local currency deposits into Euro/ USD, and even taking their money out of the bank. Luckily, the banking systems was very solid, all the banks were able to cope with this new type of threat. And this period of time took only two or three weeks and after that population started to chill to come down and to realise that the banks are working, so they started again to build up their deposits.

But on the economy side, there will be some complications and more threats: the gas price will increase, so all these will go up the chain of production, more cost of the products and basic products that will be affected. But I'm sure that this war will not last for forever, it will come to an end and at this moment of time, the so called Marshall Plan of European Union to help Ukraine to be reborn, it will also be like an opportunity for Moldova to participate in this effort. And many people will start understanding, and to learn, about Moldova. Not, like you said in the beginning, like a Soviet Union country.

Many people will remember Moldova as being the country who helped a lot of Ukrainians during the moment when they left the countries and by do not want anybody to leave their their home of their countries and to come with a stranger, but still to see a lot of empathy, and a lot of optimism, and a lot of help.

Brendan Le Grange 23:14

No doubt difficult times for the short term, but hopefully, yeah, a future that's bright and full of growth opportunities for Moldova and indeed, the whole region. So Bogdan, thank you so much for joining me today and it's been a pleasure chatting to you and learning more about Victoriabank and Moldova, so I look forward to keeping an eye on the innovations you bring to the market and indeed hope for a brighter future for the country.

Thank you again for inviting me and looking forward to hear news from you as well.

And thank you all for listening. If you haven't done so already, please like, share, and subscribe to the show. How to Lend Money to Strangers is written, hosted, and edited by myself Brendan le Grange, the show music is by Iam_Wake and you can find show notes, full written transcripts, more in-depth articles, and details on how to book me for speaking engagements at www.howtolendmoneytostrangers.show

And I'll see you again next Thursday.