Looking for an internet bank, payment system, or loyalty solutions? As financial technologies develop, so does their offer. One of the most interesting examples in the Latvian IT industry is the company D8 Corporation, which successfully operates in various export markets. What is their story? To find out, we visited Juris Ščerbickis, CEO of D8 Corporation.
What is D8 Corporation?
D8 Corporation is an IT product company. It was created just like many other companies. There was a group of people who were doing something else, until they felt the need for a new challenge. This was 15 years ago in 2002, when we decided to create something of our own. We didn’t succeed in implementing our business idea though, because we ran out of money, so we started thinking about how to do things differently. The majority of us came from various financial institutions, banks, or payment card organisations, so we turned our attention to financial technologies. Basically, we returned to what we had been doing before. This is what we have been focusing on since 2003.
Why such a name?
The name symbolises digital infinity, we simply flipped the infinity sign sideways. The result was D8.
What does your product portfolio include?
Our IT products are intended for financial institutions, so they are able to ensure convenient and secure services to their clients. End users mostly use our products indirectly, or through an intermediary. Our core products are related to payment card technologies, various remote access solutions for financial services, risk management and prevention of fraudulent acts, and loyalty solution technologies.
We can, of course, create a very appealing internet bank, mobile bank or payment system, but primarily, they must be secure. This means that we have to make sure that all transactions within the infrastructure are protected from all types of fraudulent acts. End users should feel confident that their payment cards are secure means of payment rather than worry about using them. Yet, in the case that these cards get compromised, we need to know how to solve it.
One of the projects we are currently participating in with our products is related to the new mobile application service of Citadele Bank – their mobile app digitalises payment cards and simulates contactless transactions at POS terminals. This gives the bank great advantages in its work with clients. For instance, if you lose your card, the bank has a tool that will allow it to provide you with a card remotely and instantly. Moreover, you will be able to pay without a card in all countries with an existing contactless POS terminal infrastructure, the number of which is pretty high. In a way, this creates additional products for banks to use, and this is the first product of its kind in the Baltics.
What is the business model of D8?
D8 uses a business model that is classic for companies of its kind. In some core export countries we have our own offices, but we mostly sell our products through a network of partners. Our partners receive commission for the sold product licences and participate in implementing and keeping products on the market.
What is your competence?
We are not a company of narrow specialisation like some of our other domestic companies, such as AirDog, Zoomcharts, Zabbix, and Infogram, which offer a single product. We operate on a well-advanced market and have developed many different solutions for various purposes.
We work in the financial solutions sector, and our strong suits include technical and functional areas, such as risk management systems, card processing solutions for commercial networks, and digital wallets. In the latter, we are among the few IT companies around the world that do it at a very high level, using non-standard solutions.
Where do you see D8 Corporation in five years? What is your development plan?
We have reached a point in our evolution when it makes sense to consider two different directions.
In the first development scenario, we continue doing what we do now. We continue developing our products and distribution network. We create new partnerships and potentially open new offices in a few countries. Basically, we continue developing organically, which is challenging enough and will take a lot of time.
In the second scenario, which is more likely, we acquire the distribution network through incorporation into another, larger, IT company. Thus, at some point, the product-based business will become interesting to the large technology companies as well. Our cooperation with the large IT companies is crucial. It is a way to skip to higher-level projects, because our goal is to sell the same for more and in bigger quantities. It is difficult for small companies and much easier for large companies.
What does export mean to D8?
Export is extremely important to D8. We export practically everything. I would say that D8’s business in Latvia makes up 5–10% of our total business, maybe even less.
When we started working with banking IT solutions, it meant we had to work outside of Latvia. In 2004–2005, the level of remote services offered by Baltic banks was considerably higher than the level of similar services offered in the neighbouring countries, and at the time it was a reasonable basis for replicating our knowledge for the markets we were trying to conquer. And we succeeded.
What homework did you do before you started exporting?
We didn’t do any homework, unless you count preparing the products. We simply did it. We found contact information online, got in touch, visited, and everything happened. Of course, luck came into play, but experience shows that even after a short conversation on Skype you can understand whether the person is someone you want to work with or not. If the feeling is mutual, everything can happen very quickly. There is no need to be afraid – just do it!
We also had several cooperation partners. What helped was that they often wanted to work with foreign rather than local manufacturers. There were several reasons for this; for example, to avoid the manufacturer starting to offer similar solutions to competitors. Once we had our foot in the door, we had to technically develop everything.
At first, the projects were quite risky and small, but at one point we landed a bigger deal and started working with more serious projects.
Which were the first export markets for D8?
If I’m not mistaken, the first foreign market that we started working with was Russia. It was followed by Georgia, Ukraine and Belarus.
The main reason for this was that we had strengths to play on. We had a story about our products, both cards and the internet bank, which at the time seemed exciting to the end users in these markets.
In which markets can D8 be found today?
We primarily work in the CIS region, but for the last three years we have been actively working on diversifying our dependence on various factors. And I’m not only talking about geographical dependence. I’m talking about dependence on specific products and partners. If three years ago 75% of our income came from Russia, then now that’s not the case. While a single card system used to make up more than 50% of the total sales, now it is no longer so. We distributed everything in a way that made us feel comfortable and would not create any serious problems in the case that our scenario went wrong.
By cooperating with our biggest partner FIS, we have managed to implement our first project in the USA. This partner is among the world’s top 5 IT companies in the financial services sector, and we often participate in their projects as contractors. Together with them, we have implemented projects in Venezuela, the Dominican Republic, Africa, India, and elsewhere. Yes, we are not the ‘leading actor’ in these projects, but they give us an insight and understanding of what else we can gain from participating. And we can only benefit from this.
What do you think is the competitive advantage of Latvian companies?
We have to demonstrate that we can be trusted and that we do what we have promised to do in the sales stage. This is an important factor in the IT industry. If someone abroad sees that we are reliable and don’t ask for huge payments in addition to what we originally asked, everything will happen on its own.
What would you recommend to other Latvian entrepreneurs wishing to export?
Go for it and don’t be afraid of the difficulties! The most important thing is to create unique products that are of interest to different export markets. I have to mention Mikrotik, Zabbix and others again because their stories are fantastic. It is very pleasant to visit Albania and be recognised as coming from the same country as Mikrotik.
I don’t think we promote ourselves enough in the markets that we want to conquer. I agree that Estonians do it much better with Skype. They use their few stars to get where other companies would love to be. We have to do the same with our success stories.
I suggest using the support of EU funds for marketing activities and participating both in small- and large-scale trade fairs, which are a great way to promote your company. Of course, don’t forget to evaluate first, which fairs are the most suitable for each product.