“Digitisation is changing all industrial sectors, and one of the sectors that will be impacted the most in the near future is certainly the financial sector. Shoppers are accustomed to using their mobile phones for payments and other transactions and are shying away from standing in line at a bank. Studies have shown that 20% of banking sector revenue will move into the hands of start-ups by 2020”.
We asked banking sector representatives the following:
How will banks respond to the challenge imposed by FinTech companies and what will banking look like in 2017 and beyond?
Martin Navratil, Managing Director of Telenor Banka
If we think about why Uber is so successful, we can easily conclude that it is because it’s a problem solver. The service provides a ride for those individuals who need taxi services at reasonable prices. It is a convenient, inexpensive and safe taxi service. And that is what customers value: a product that solves a problem and is easy to use.
We can easily draw a parallel with Telenor Banka. That is exactly what we did – identified the problem: waiting in lines in banks that could last up to 30 minutes. We offered the solution to the market that made financial services more efficient: a fully mobile bank.
Simple and easy, reliable and focusing on problem solving is the philosophy we use – form product creation to interaction with customers. You have to be relevant for the customer. We recently started offering cash loans with only one interest rate and no additional fees. We want our products to be easy to understand, and for our customers to have full control over their finances.
So we can expect that it will come to the certain “Uberisation of Banks”. It is all about the customer now, as we see from the Uber case, and at Telenor Banka we are certainly on that journey.
Digital disruption is happening, and it is having a profound impact on numerous industries. Banking is no exception. Everybody will have to adapt. What we saw in a year and a half after the opening of Telenor Banka is that the market is highly adaptive. For example, when we started in Serbia there were less than 6% mobile bank transactions. Only a year later, online banking exceeded the turnover in branch offices for the first time ever, and that gap is only increasing.
The Fintech phenomenon is more and more present, and we see a trend from the USA to Asia where telco operators are entering the banking sector. Telenor Banka is a retail bank that used the synergy of two industries – telco and finance. When we analyse the experiences from Serbia, we can see that they can be used in developed countries.
The fact that Telenor Banka became a case study of Gartner and other analytical companies is a confirmation that banking will continue to evolve, and fast. We will see more and more specialised companies that will move into finance, with a customer-centric approach as a cornerstone of their operations.
Xenofon Damaskos, Executive Board Member, Vojvođanska Bank
Digital disruption is already affecting every industry and the banking sector can not be any different. The only question is which form and path the forthcoming changes will take. There are many fintech companies around the world, that are competing successfully in traditional banking areas like payments, cards, accounts etc. Banks around the world are facing the challenges which the digital revolution brings in the business, also including banks in Serbia.
New technological solutions already significantly changed the usage of financial and banking services, and banks respond to customer needs by forming different applications and electronic communication.
Vojvodjanska Bank offers to its customers the option of paying via the Internet, mobile banking application, pay bills via ATMs.
Although the use of electronic banking is constantly increasing, in Serbia there is still only small number of clients which do banking transactions exclusively in this way. What is doubtless, is that data will be changed very soon, since the information technologies develop rapidly as well as customers’ needs.
We see digitization as a positive transformation that will bring innovation to further improvement of our business operations, increase the efficiency and effectiveness of the work, which brings additional expenses, and therefore we will face in the future a challenge of budget planning for advancing business.
Tendencies in the development of information technology in the banking sector predict a decrease in pressure on the counters and overcoming the traditional way of doing business. The bank branch as we currently know it, will soon be very different. This does not mean that digitization will inevitably lead to a reduction in the number of employees in the financial sector, but the skills and expertise required will definitely be diversified.
There is no doubt that in the coming period, banks have to be transformed in a certain way and adapt to a new processes and customers’ needs.
Digital means innovation, agile and fast decisions. Cooperation with startups is a solution often used, especially by USA and EU banks, in order to overcome the inflexibility of rigid organizational structures. Therefore, on the startup companies that are developing new software for banking services, we look as cooperators and partners in the future.
Simplicity, speed and security will be the focus of the banking business in the future.
Vuk Kosovac, Executive Director of the Marketing Division at Societe Generale Bank Serbia
Perpetual changes in the field of financial technology motivate banks to adapt to new market requirements and accept FinTech companies as an incentive to become more innovative themselves. It is no longer enough to only adapt to the existing needs of our clients. Now we have to strategically predict which direction trends will take in the future. I think that FinTech companies can ruffle the feathers of traditional banking in a good way, because large systems are becoming more flexible and more open to innovation. Banking is changing in terms of corporate culture and eliminating boundaries in digital operations. Societe Generale has been readily facing the challenges of the digital era. Last year we launched the first online branch office in Serbia, where clients can use more complex banking services like applying for cash loans without ever having to come to the bank. We also recently established strategic cooperation with the Centre for the Development of Technological Entrepreneurship (ICT Hub) and, together with our partners from KPMG, we organised the first FinTech hackathon in Serbia, which resulted in innovative solutions that we can use to advance our banking operations. We are also supporting Pausal.rs, the first start-up in Serbia which assists small business owners who pay a flat tax rate to independently run their businesses. I believe that these kinds of projects will multiply in the future, because banking is stepping out of the established, traditional channels and it is up to us to create new opportunities for mutual cooperation, exchanging experiences and improving our business and services together with FinTech start-ups.
Nikola Vuletić, Director of the Retail Sector at UniCredit Bank Serbia
Changing clients’ everyday habits, which are characterised by personalisation, more flexibility and the exceptional speed at which activities are carried out, has practically challenged banks to change their approach and start improving their operations, i.e. to digitise themselves, after decades of traditional banking. Many believe that the digital currency Bitcoin is one of the forerunners of many FinTech companies, among other things. At the same time, this digital currency is the first indicator that clients can execute transactions without paying fees or without an official regulator, and that it is possible to apply for a loan via an e-service, or through so-called P2P lending, which directly links creditors with borrowers. This naturally poses a question of where banks stand in all of this?
Although different banks have different answers to this question, they also share one similarity – they have all invested much more in information technology. When we say digitisation, we are primarily referring to improving websites and online/mobile banking platforms, as well as using social networks as a way of communicating with interest groups.
On the other hand, financial leaders are aware that the digitisation process should be an integral part of the long-term strategy of banking business in order to change the habits and the mindset of banking staff. The result of this is a strong growth of investments in the banking sector through different programmes for the incubation of FinTech companies and the acquisition of talent through competitions like appathon, hackathon and others. Concurrently, UniCredit Group, as one of the leading financial groups in Europe, has included the Digital Agenda in its Strategic Plan. Our estimates have shown that the number of users of online banking services will double in the next three years, while the number of users of mobile banking services will grow sevenfold. In the following three years, our Group will invest over a billion euros in implementing its Digital Agenda and the digitisation of the operations of all of its members.
So, what is banking going to look like after 2017? On the one hand, we are going to have clients who are using all available communication channels, not only in banking. We are talking about communication via Viber, Skype, WhatsApp and the utilisation of smart watches, smart TVs and gaming consoles. In combination with an electronic signature, this will ensure fast and safe online applications and the granting of banking products without clients having to personally come to the bank. On the other hand, banks will continue to invest in the development of innovative services and staff who are going to work on creating and improving the user experience.
Darko Popović, Member of the Executive Board and Head of the Retail Division, Banca Intesa
As the digital revolution started transforming the financial services industry, FinTech companies began changing banking sectors across the globe. FinTech boom over the past couple of years and the success that digital ventures achieved in a rather short period of time sent an important message to banks, propelling them to rethink their strategies and embrace emerging innovations. Some banks were quick to respond to the challenge, some faced hurdles due to legacy ICT systems and decided to invest in incubating FinTechs, while others took a collaborative API approach with established FinTech players. Capitalizing on the flexibility of this approach while relying on their traditional strengths and strong customer bases is perhaps the best chance for banks to meet the rapidly evolving needs of the modern banking customer.
Serbia currently does not have a single active FinTech company, but several firms are in process of securing National Bank of Serbia licenses to start operating as payment institutions. This means that we may expect to see first changes in 2017 and they could result in win-win partnerships that will be able to generate benefits for all sides – banks, FinTechs and customers. I would say that most banks in Serbia are aware of this impending change, devising digital strategies and rolling out new services to better tackle the challenge. As the pioneer in the implementation of new technologies, Banca Intesa has always been able to recognize and understand the changing needs of its clients and is constantly working on further adapting its services to the requirements of the digital-savvy customer. As a result, we are about to launch the first mobile wallet in the Serbian market and we also plan to enable online applications for cash loans and credit cards. We will continue to develop our offering through 2017 and the years to come, staying ahead of the innovation curve and providing our customers with more convenient and advanced ways of banking.
Miloš Nedeljković, Head of Partnership and Digital Banking Department, Sberbank Srbija
Innovation and ideas know no boundaries or range. Modern users are becoming more demanding, because they expect information and services to be at their disposal immediately, without spatial or time limitations. The rise of the virtual electronic currency called Bitcoin, in addition to greater use of smart devices and mobile phones, has permanently changed our way of life and society as a whole. As a concept of IT application, digitisation essentially expedites this process and helps companies to adjust to new business conditions. Currently, it is only up to regulation or legislation to determine the extent to which banks can use and offer readily available digital technology to their clients.
Although there is the paradigm whereby banks are traditional institutions that are difficult and slow to change, the current situation is the complete opposite. Leading banks will go through this transformation in the fastest and most effective way, because they have the capacity and resources necessary for this change. With the entry of telecommunications companies into the financial and payment sphere, we can say that banks are already facing tough competition. On the other hand, banks devise their products to suit the needs of the ‘banking population”, which is only half of the total population that needs financial products and new payment methods. The emergence of innovative solutions from FinTech companies, which dominate this field, will also spur customers to transfer to cashless transactions. FinTech companies actually just prove the fact that, in this day and age, capital is not the most important development resource – people and ideas are.
The thing that sets the financial sector, or rather banks, apart from other industries is the fact that their products and services took on the digital or electronic form a long time ago, along with all precautionary measures which entail safety, data protection and big data. Hence, it is reasonable to expect that banks are up for the challenge ahead.
In such business surroundings, the future of banks lies in partnering with FinTech companies, which is something that the biggest global banks have already done. The roles are clear – banks have the knowhow, acquired funding, huge user databases and trust in the services they offer, while FinTech companies are in charge of generating ideas, research and development. In this way, banks have access to creative solutions that contribute to the rationalisation of operations and to new customer segments for whom they did not previously have adequate products.