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When it comes to digital banking, central and eastern Europe has long punched well above its weight.
Lenders in Poland, Turkey and Russia were light years ahead of their counterparts in western Europe in developing multichannel capabilities, while even tiny markets such as Slovakia have produced digital pioneers that have earned a place on the global stage.
Now a handful of leading players are building on this heritage to transform banking in the region and reshape the competitive landscape.
Some are constructing digital ecosystems to rival those of the Asian giants, while others are putting their faith in e-commerce as the future of banking. Some have embraced open banking and are focused on harnessing the power of fintechs, while others see in-house development as the key to digital supremacy.
Possibly the most transformational development of the last few years, in a region of diverse and fragmented markets, has been the emergence of CEE’s first genuine multi-country digital platform.
Until recently, the big western European groups that have dominated banking in the region for nearly 20 years – Raiffeisen, UniCredit, Erste, Société Générale and Intesa Sanpaolo – have been happy to let their subsidiaries develop their own digital strategies.
In 2015, however, Erste broke ranks with the creation of George, a cutting-edge multi-country platform. Originally introduced in the group’s Austrian home market, from the beginning George was designed to serve the whole of Erste’s seven-country network.
It was rolled out to the Czech Republic and Slovakia in late 2017, and then Romania last autumn. Croatia and Hungary are next on the list, while Serbia will be the last market to be connected. The rollout is expected to be completed by early 2020.
There was a natural desire to catch up with the developed world. This created an enthusiasm for things that were new and forward looking – Michal Liday, Tatra Banka
Grzegorz Cimochowski, a partner at Deloitte in Warsaw, says this could be a game changer for less digitally developed markets in CEE.
“It will level the playing field,” he says. “Currently, there are huge country differences, but if the big players start rolling out regional solutions, then the standard will even out quite quickly. It will also create an incentive for other banks to catch up.”
Maurizio Poletto, who heads up George Labs, says Erste’s platform was inspired by the success of western tech firms.
“Everyone is afraid that a large tech company will come to Europe and do banking,” he says. “If they did, they for sure wouldn’t build a separate team and platform in each country.
“Their strategy is to be scalable, focused, large and built on data. They would offer banking that works across the region.”
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Grzegorz Cimochowski, |
Cimochowski is a fervent supporter of the multi-country model.
“It’s surprising that until recently most regional banks have allowed their networks to develop their own digital platforms when it’s totally inefficient,” he says. “It doesn’t make sense to develop a mobile or internet platform 15 times when you can do it once and roll it out to 15 countries.”
Even more importantly, he adds, regional platforms allow for effective allocation of human resources.
“There is no way you can attract the best talent to 15 countries in parallel,” he says. “You can only have one or two locations where you bring the best talent.”
Or, as Poletto puts it: “Believing that each of our countries will be a leader in innovation with a different team is optimistic.”
Erste has located its main product team for George in Vienna, while secondary centres have been created in neighbouring Bratislava, Prague and Bucharest.
Critics of the regional model argue that, in a region as economically and culturally diverse as CEE, digital solutions need to be more country-specific. Cimochowski dismisses this idea as outdated.
“You can always adapt a central solution to local market conditions, but the trend is towards standardization,” he says. “In future there will be fewer and fewer local adjustments because tech customers have uniform expectations across markets.”
He points to the ease with which new European banking players such as Revolut and Germany’s N26 have crossed borders.
“They roll out to new countries with no more localization than translating a few words,” he says, “and customers buy into it.”
While George may have been built for and by central and eastern Europeans, however, the fact that it originated in Austria makes it an outlier in a region that has traditionally been a hotbed of technological innovation. Indeed, a recent survey by Deloitte ranked Russia, Poland and Turkey in the top five countries in the whole of Europe, the Middle East and Africa for digital banking maturity.
What explains the early emergence of CEE banks as digital leaders – and why have some markets in the region proved more conducive to innovation than others? Asking the digital pioneers themselves produces a range of answers – some more market-specific than others.
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Oliver Hughes, |
At Tinkoff Bank, possibly the region’s most famous disrupter, chief executive Oliver Hughes says one of the key factors behind the Russian firm’s rapid transformation from direct-mail credit card provider to digital retail bank and, more recently, full-service financial ecosystem, was the unique talent pool bequeathed by the Soviet education system.
“Russia has some of the best maths and physics institutes in the world,” he says. “This produces a deep pool of tech programmers, designers and architects. Silicon Valley is full of Russian hard science graduates, but there are still plenty here as well.”
Tolga Ulutas, executive vice-president of digital banking at Akbank, points to Turkey’s demographics as a driver of digital development. With a population of 80 million and a median age of 31, the country is one of the largest and youngest in Europe.
“Turkey is a big consumer market with a young, dynamic population that is very receptive to new things,” says Ulutas. “That has been key to the success of Turkish banks in innovation.”
Tatra Banka chief executive Michal Liday also stresses the tech-readiness of the lender’s Slovak customer base, but says this had more to do with decades behind the Iron Curtain than demographics.
“There was a natural desire to catch up with the developed world,” he says. “This created an enthusiasm for things that were new and forward looking.”
Some themes are common across the region. Cimochowski identifies competitive pressure as the main differentiator when it comes to innovation.
“In all the most advanced markets in CEE, there were at least one or two players who set the threshold very high,” he says. “That moves the incumbents out of their comfort zone and forces them to innovate.”
Poland, for example, already had two internet banks by as early as 2001 – mBank, a Commerzbank subsidiary, and Inteligo, a startup that was subsequently absorbed by market leader PKO BP.
“They put such pressure on everyone else that all the major banks had to catch up quickly,” says Cimochowski.
Innovation in Turkey didn’t come from technology, as in the US. We have been closer to the Asian markets in focusing more on innovation based on service scenarios – Tolga Ulutas, Akbank
At ING’s Polish subsidiary, vice-president Michal Boleslawski agrees that competition has been key to Poland’s digital banking development – although he attributes it primarily to a lack of concentration in the banking sector.
“Until recently, we have had 10 to 12 large banks that have been fighting fiercely for more than a decade, not to mention another dozen mid-sized lenders,” Boleslawski says. “You can’t differentiate on price, so the only option is to come up with new solutions.
“Even then, it will only be a matter of time before someone else does the same thing as well as you or even better. The competition is so fierce that we never have the luxury of being late or not doing anything.”
This is demonstrated by fact that, while different banks have led the pack at different times, no single player has outdistanced the rest of the market for long. In the first half of this decade, the running was made by Alior, the challenger bank set up in 2008 by Italian group Carlo Tassara.
Alior’s success – by the time of its IPO in 2014, the lender was in the top 10 in Poland – was largely built on its digital prowess. However, its takeover by state-controlled insurer PZU in 2015 and the subsequent loss of most of its senior management, including legendary chief executive Wojciech Sobieraj, seems to have stifled Alior’s appetite for innovation.
The baton has been taken up by the likes of ING Bank Slaski and even market leader PKO BP. The latter, despite also being under state control, has been an enthusiastic proponent of digitalization. It was a leading light in the creation of Blik, an initiative launched in 2015 by Poland’s six biggest banks that allows peer-to-peer payments and ATM withdrawals via smartphones.
PKO BP has also been the first Polish financial institution to harness the power of blockchain. In November the bank began providing document verification to five million clients via distributed-ledger technology, the result of a partnership with UK-Polish fintech Confirm.
Competitive pressure can also explain the digital maturity of Turkey and Russia, both of which have famously fragmented banking markets.
Before a recent clean-up of the sector by the central bank, Russia was home to around 900 lenders – as well as an early disrupter in the form of Tinkoff. The latter is still a big driver of innovation but has faced increasing competition from other large players and, most importantly, Sberbank.
Known until relatively recently as the bank for Soviet pensioners, with customer service to match, the state-controlled firm has made a big push into digital over the last decade. Since launching its first online platform in 2011, Sberbank has persuaded 46 million consumers and 1.5 million business clients to switch to digital banking.
In an interesting twist, the bank has also recently shown a willingness to team up with its newer rival. Last year, Sberbank and Tinkoff collaborated on a bilateral pilot of Russia’s new Instant Payments System, a scheme launched on January 1 that allows peer-to-peer transfers via phone, email and social media.
In Turkey, stiff competition among the big private-sector banks and a clutch of second-tier challengers has also encouraged lavish investment in technology over the last decade.
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Tolga Ulutas, |
Again, recent years have seen a slight reshuffling of the pack. Early leader Garanti appears to have slackened the pace of innovation after its 2014 takeover by Spain’s BBVA, while Akbank has emerged as a new frontrunner – partly, says Ulutas, thanks to its early move into mobile banking.
“We were the first bank in Turkey to understand the value of mobile and to really invest in the technology,” he says. “As a result, today we have the highest mobile penetration in the sector.”
More recently, Akbank has invested heavily in new technologies such as artificial intelligence and is also setting the pace on blockchain. In 2017, it became the first bank in Turkey to offer international money transfers using the new technology through a partnership with Ripple.
The competition theory also helps explain why markets such as the Czech Republic, CEE’s most developed economy and an early leader in internet and smartphone penetration, has lagged some of its less advanced neighbours in financial digitalization.
The Czech banking sector has been both highly concentrated and extremely stable for more than a decade, with the four largest lenders – all subsidiaries of western European groups – accounting for around 60% of total assets.
Boleslawski at ING Bank Slaski says the effects of this market structure can be felt in neighbouring Poland.
“A lot of Czech clients close to the border want to open accounts with us because our product offering and payment times are so much better than what they can get in their home market,” he says.
Another factor often cited as enabling CEE’s digital banking leadership is a lack of legacy IT infrastructure. This obviously applies to emerging markets worldwide but is particularly true of the former communist bloc, where the vast majority of banking-sector development has taken place in the 30 years since the fall of the Berlin Wall.
“The lack of legacy systems is our blessing,” says Boleslawski. Hughes agrees.
“If you’re sitting on a mainframe that was implemented in the 1970s, it’s pretty difficult to move either your back office or your front office,” he says. “In Russia we were completely unencumbered by that.
“Obviously Tinkoff was greenfield, which made it a lot easier, but even big players like Sberbank were able to do some leapfrogging that banks in developed markets couldn’t do.”
Banks were distracted by restructuring and cost cutting. They didn’t have the luxury of being able to adapt their business models for the digital era in a gradual fashion – Grzegorz Cimochowski, Deloitte
Not everyone is convinced that this is a game changer, however. Deloitte’s Cimochowski notes that most CEE lenders had to create middleware in order to build digital platforms on top of their core banking systems, just like their western counterparts.
“Their problems were less, but they still had challenges,” he says.
The role that regulation plays in digital development also divides opinion. In Russia, Hughes says the central bank’s hands-off approach has been a big help to tech pioneers.
“Where they see innovative plays by leading financial institutions, they wait to see how it works and then sensibly shape legislation around it,” he says.
He also praises the regulator’s willingness to take the lead on industry-wide initiatives such as the instant P2P transfer system and the establishment of a national biometric identification system.
Launched last year, the biometrics project allows banks to open accounts without the need for a physical meeting.
“It is hard to overstate the importance of this in a country as large and sparsely populated as Russia,” says Hughes. “It will take Russia to a completely new level compared with other global markets.”
Ulutas says a more proactive approach to industry coordination on the part of the regulator would be helpful in Turkey, particularly with initiatives such as the creation of a national digital identity based on blockchain – something Akbank has been pressing for.
“This could be a game changer for Turkey, but it’s critical for banks to cooperate with each other,” he says.
He also attributes the relatively slow emergence of Turkish fintech at least in part to the cautious approach taken by the regulator. At the same time, he notes, this has not been a barrier to digital development by the country’s banks.
“Innovation in Turkey didn’t come from technology, as in the US,” he says. “We have been closer to the Asian markets in focusing more on innovation based on service scenarios. This didn’t need a lot of regulatory support.”
Another characteristic common to CEE’s most successful digital banking markets is that their economies and lenders suffered less than peers during the financial crisis. Russia and Turkey rebounded rapidly from short downturns, while Poland was famously the only country in Europe that managed to avoid recession in 2009.
This meant that, at a crucial period for digital development, banks in those countries had the resources to invest in technology. Cimochowski says this helps to explain the divergence within the region, particularly in relation to southeastern Europe, which experienced economic stagnation and ballooning bad debts in the aftermath of the Lehman collapse.
“Banks were distracted by restructuring and cost cutting,” he says. “They didn’t have the luxury of being able to adapt their business models for the digital era in a gradual fashion.”
Until recently, connectivity was also an issue for SEE markets such as Romania and Bulgaria, which were slow to achieve critical levels of internet and smartphone penetration. This has improved in recent years, however, and banks in the region are now also trying to close the technology gap – so far with limited success.
There are signs, however, that the process could be speeded up following the emergence of CEE’s first large cross-country digital banking platform.
The other big change in CEE digital banking in recent years has been that the battleground has shifted. In more advanced markets, at least, the focus is no longer on who will be the first to provide basic omnichannel banking services, but rather on who will be most successful in taking it to the next level.
This is partly about harnessing the power of new technologies. As in other regions, banks in CEE are eagerly exploring the potential of biometrics, robotics and data analytics. AI is generating particular interest. Both Akbank and Tatra Banka say it is top of their development priorities – although not everyone is convinced.
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Maurizio Poletto, |
“I haven’t experienced one chatbot that sounds meaningful to me yet,” says Erste’s Poletto. “They all look intelligent up to a point, but then they’re very stupid.”
With the notable exception of Tinkoff, which does all its IT development in-house, banks in CEE are happy to import innovation. Over the last couple of years, this has prompted the creation of a large number of incubators and accelerators – from Raiffeisen’s Elevator Lab to Akbank Lab – as lenders compete for the services of the best fintechs.
Poletto notes that, here again, having a pan-regional platform gives Erste an edge in CEE’s fragmented markets.
“Being able to offer half a million customers here or 100,000 there is not very attractive for potential fintech partners,” he says. “With George, they can integrate once and gain access to a pool of 15 million customers.”
The more fundamental debate currently taking place in CEE, as elsewhere, is over the evolving role of banks. Cimochowski notes that what today’s digital leaders have in common is a disproportionate share of “beyond-banking” functionality in their applications.
“This is where the fight will be,” he says. “It clearly won’t be about the efficiency of banking operations. If you focus on that, you become a utility company, and we all know how that plays out – continuous press on margins and the eventual emergence of a handful of winners who have enough scale to deliver services at the lowest cost.”
As Hughes notes, this is precisely the challenge facing some of the most successful new players in the financial sphere.
“Anyone can knock out debit cards with a nice format and grab a chunk of market share,” he says. “The question is how do you make money from that? It won’t be on the transactions, it’ll be on the other services which you can cross-sell into that customer base.”
Tinkoff’s answer has been to follow the lead of the Asian tech giants by providing a vast array of ancillary products and services, in a bid to keep customers within its digital ecosystem. Initially focused on retail clients, the bank has recently expanded its offering to include a platform for small and medium-sized enterprises.
For Cimochowski, this is the future of banking. “The best examples come from China, where banking is just a tiny component of the services that the likes of Tencent and Ant Financial provide to customers,” he says. “That’s inevitably where banking in the rest of the world will also evolve. The winner will be whoever provides a suite of services that make the lives of customers and businesses easier.”
Data is fundamental People who whinge about new data rules and GDPR and use that as an excuse for not doing anything are going to be left behind – Oliver Hughes, Tinkoff Bank
Sberbank has also adopted the Asian ecosystem model – but outside Russia, with its population of close to 150 million, it has so far proved less popular in CEE. Even in Turkey, the region’s second-largest market, there seems little enthusiasm for it.
“I don’t believe a ‘walled garden’ approach is sustainable, either in Turkey or elsewhere,” says Ulutas. “It might notch some small victories due to sheer market share, but it will be very hard to defend.
“Banking is a heavy utility service, and that isn’t enough to hold an ecosystem together. You need to open your capabilities to others and become a player in their game and vice versa. You need to create and be part of multiple ecosystems.”
ING’s Boleslawski also argues for a more open ecosystem model. “For me, creating an ecosystem doesn’t mean you have to meet all the needs of a customer but rather those in which you can add value and where you have a competitive edge,” he says. “If you try to build a Chinese-style ecosystem in Europe, you will fail, because with the current divisions between countries in areas such as currency, language and regulation, no one has sufficient scale to dominate the landscape.”
Poletto acknowledges the appeal of the Asian ecosystem model but questions its practicability. “It’s a nice dream to think you can keep customers on your property,” he says, “and for certain features this is doable through plug-ins and extensions – but you get to a point where the features your clients want are too large and too complicated.
“If SMEs want tax accounting software, does it make sense to build that into my app, or is it better to provide seamless integration between my app and the software provider? The former is nice in theory but painful to deliver, because once you integrate a solution into your interfaces you need to maintain it.
“Plus you probably need to integrate multiple solutions because your clients won’t only use one provider, which adds more layers of complexity. For me, easy integration with a third party is definitely the way forward.”
One thing all today’s CEE digital pioneers agree on, however, is the importance of collecting and utilizing data.
Hughes sums it up: “If you don’t use data effectively, you won’t be able to create the right customer experience, you won’t be able to do proper risk management and you won’t be able to leverage machine-learning and AI to gain a competitive edge.”
He admits that a more relaxed regulatory environment makes this easier in Russia than in countries closer to the EU – but he says European banks need to find ways to meet the challenge.
“Data is fundamental,” he says. “People who whinge about new data rules and GDPR [the EU’s General Data Protection Regulation] and use that as an excuse for not doing anything are going to be left behind.”
Tinkoff Bank: the ecosystem architect
Ecosystem is one of the buzzwords of modern digital banking – but what does it actually mean? For some, it simply implies adding a few additional services to existing systems. Others see it as part of the open banking revolution, whereby banks will offer partners and peers access to their digital platforms.
Tinkoff Bank has bigger ideas. For the Russian challenger bank, the point of an ecosystem is to provide so many products and services that customers have no need to leave the platform – a model more familiar in Asia than Europe.
In pursuit of this goal, Tinkoff has been continuously expanding its product range over the last five years. Retail customers can already buy everything from shares and insurance to cinema tickets and holidays via the bank’s platform. Theatre, concert, restaurant and taxi booking services were added at the end of last year.
“We want to create a lifestyle ecosystem, so that means entertainment, travel, shopping and transportation, as well as financial services,” says chief executive Oliver Hughes.
Tinkoff also tries to lock in users through financial incentives in the form of discounts, offers and cashback.
“The more services you use within our ecosystem, the more value you get as a customer,” adds Hughes.
He admits that this type of ecosystem brings its own challenges.
“When you only have a couple of products, it’s easy to keep the customer experience tight and clean,” he says. “When you have 25 products, it’s much more difficult to integrate them without cluttering your interface.”
Tinkoff’s solution has been to create multiple apps with a single entry point; thanks to sophisticated biometric technology, customers can switch seamlessly between apps without having to go through a new authentication process.
Hughes argues that, to make this type of ecosystem work, providers have to be able to do their tech development in-house.
“It requires data and IT skills that you can only do yourself,” he says. “You have to customize external solutions and you’re reliant on external parties. They are too slow from a time-to-market perspective and don’t give you the flexibility you need.”
Above all, he adds, the interface is key.
“If you can’t design that properly, then you’re toast,” he says. “It requires sophisticated loyalty platforms and the deployment of new technologies, such as machine learning, to drive targeted offers, relevant marketing, recommendation engines and smart underwriting.”
So far, the response to Tinkoff’s strategy has been positive. The bank currently boasts around eight million customers and is signing up new ones at the rate of 250,000 a month. It has also been successful in reducing its traditional reliance on credit products. By the end of last year, more than 30% of top-line revenue was from non-credit business lines.
Tinkoff is also trialling the ecosystem concept in the small and medium-sized enterprise segment, which it entered in 2016. Over the last three years, the bank has been targeting micro and small businesses with an ever-expanding suite of ancillary services, including tax accounting, customer relationship management and website creation.
These are already proving popular with Russian entrepreneurs. More than 70,000 of Tinkoff’s SME clients – nearly a fifth of its total customer base – use the free cloud accounting software provided by the bank.
Akbank: making the most of mobile
Akbank’s reputation was built on serving Turkey’s corporate sector, but more recently the bank has been making a name for itself as a leader in digital banking for retail clients.
A strong focus on – and copious investment in – mobile has produced a wealth of innovative solutions designed to maximize customer engagement. Recent launches include Axess Mobile, an app that offers consumers different services depending on their mood.
Tolga Ulutas, Akbank’s head of digital banking, explains.
“Your weekend mood is very different from your Monday 9am mood; your shopping mood is different from your traditional banking mood. If you want to shop, you don’t want to have to go through an app full of banking products and investment options.”
Axess Mobile allows customers to choose a mood and creates targeted offers to match, from savings products to holiday planning services. Thanks to artificial intelligence, the service allows for an unprecedented level of personalization.
“The app is backed by an analytical engine that can generate an alternative app from thousands of different scenarios based on the customer’s individual data,” says Ulutas. “Even I don’t know how many options there are at a given time.”
Similarly, Akbank is hoping to add a local element to its mobile platform by working with smaller retailers.
“Local merchants are generally overlooked by banks,” says Ulutas. “The small butcher on the street corner that you walk past every day is just not on their radar.
“We’ve created a facility that allows those retailers to target customers in their neighbourhood with marketing campaigns though our digital platform. By including them in our merchant network, we are offering them the chance to compete directly with the big supermarket chains.”
So far, the response to the initiative has been mixed.
“You can create the APIs [application programming interfaces] and open up your platform but that doesn’t mean firms will sign up,” says Ulutas. “Small companies in particular are wary of interacting with banks, so it takes a lot of targeted effort to convince them to work with us.”
Other recent mobile-based initiatives include the integration last year of a mobile phone store into Akbank’s banking app.
Ulutas says this was a natural development for the bank.
“Our customers are mobile by definition,” he says. “We know their handsets and their creditworthiness, so if they want to apply for finance for a store-based cellphone, what better place could there be?”
Akbank also scored a surprise success last March when it broke new ground in Turkey by offering shares in the IPO of electricity distributor Enerjisa Enerji on its mobile app.
“We only put it on the app two days before the listing, but the response was incredible,” says Ulutas. “Three-quarters of the applications we collected came via mobile channels, and many were from customers who had never participated in a listing before. It was because we made it easy and available.”
Further proof of the impact of Akbank’s commitment to innovation comes from its engagement figures. Users of Akbank’s digital channels visit them on average 19 times a month, while 70% of general purpose loans and 55% of credit cards are now sold via online and mobile.
Despite the recent economic upheavals in Turkey, Ulutas says the bank has no plans to cut investment in technology.
“Obviously, we are prioritizing some services that are more relevant to the current market situation,” he says, “but we haven’t made any changes to the overall level of investment.”
ING Bank Slaski: Poland’s e-commerce pioneer
The battle for supremacy in the Polish banking market entered a new arena last year when ING Bank Slaski became the first bank in the country to launch an internet gate for online retailers.
Dubbed Imoje, the facility offers internet shoppers a range of payment options, including Poland’s first deferred payment solution. Using technology provided by Twisto, a Czech fintech in which ING bought an equity stake in 2017, this gives customers 21 days to pay for purchases without additional fees.
Michal Boleslawski, vice-president of ING Bank Slaski, says the investment in Twisto was “an enormous jump” for the bank.
“It significantly shortened the delivery cycle for this product,” he says, “because Twisto had already been developing a credit-scoring algorithm for three years.”
The Imoje payment gateway is already proving popular with Polish retailers. After six months of sales, more than 600 e-shops have already signed for the service, well ahead of initial targets.
For Boleslawski the move into e-commerce – a space currently dominated by non-bank players – is a no-brainer for ING Bank Slaski.
“Banks in Poland have given away territory in e-commerce,” he says. “This is an area in which we should naturally be leaders.”
It is also a segment that remains relatively undeveloped in Poland, where just 5% of retail sales go through digital channels – barely a quarter of the rate in the UK, Europe’s most developed internet shopping market.
“That shows the potential for growth in this segment,” says Boleslawski. “For banks this is key, because even if you don’t acquire any new clients, if you already have a certain customer base, you will be able to grow with the market.”
Inevitably, given the highly competitive nature of the Polish banking market, imitators are already lining up. mBank has indicated that it intends to launch an internet gate this year and Alior is looking to copy Twisto’s deferred payment solution. Even market leader PKO BP is said to be eyeing e-commerce.
“We are racing to provide this to as many clients as possible before other players come in to split the market,” says Boleslawski.
Tatra Banka: leading the tech charge in Bratislava
Unusually for a CEE tech pioneer, Tatra Banka comes from one of the region’s smallest markets. Slovakia’s population of 5.4 million is seven times smaller than that of neighbouring Poland, central Europe’s digital banking innovation hub.
Nevertheless, the Raiffeisen subsidiary has scored a number of notable firsts. It was the first bank in the EU to offer contactless payment via mobile and one of the first worldwide to introduce voice identification in its call centres.
Some of its innovations have bordered on the gimmicky – apps for Google Glass and Microsoft’s augmented reality headset HoloLens, for example – but many add measurable value. The launch last year of a face biometric identification system made Tatra Banka the first lender in Slovakia to be able to offer account opening and consumer loans for new customers via mobile only.
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Michal Liday, |
Chief executive Michal Liday says this could be a game changer for the bank.
“This is the kind of functionality that usually only belongs to challenger banks and it will make it more difficult for them to compete with us,” he says. “We can now combine the strengths of a traditional bank – a large customer base, banking expertise and proven profitability – with the freshness and mobile focus of challenger banks.”
At the same time, Tatra shows no sign of losing its appetite for bleeding-edge technology. At Elevator Lab, its new accelerator in Bratislava, the bank is working with fintech partners on initiatives including personalized biometric ATMs and car dashboard banking, as well as a range of AI projects.
The opening ceremony in September of Elevator Lab – an offshoot of Raiffeisen’s group hub in Vienna –featured Pepper, a humanoid digital assistant that offers to help clients with tasks such as installing mobile banking, opening accounts and taking out loans. Pepper is currently touring Tatra’s national branch network.
While Elevator Lab may be new, however, Liday is keen to stress that Tatra has always been happy to import technology.
“ We were working with fintechs before the word was invented!” he says.
He is convinced that the future of banking lies in this type of collaboration.
“Bridging the gap between fintechs and traditional banks adds value for both,” he says. “Fintechs are small, flexible and nimble. As well as bringing specific services and solutions to our customers, their entrepreneurial spirit helps to keep us fresh and prevents the ossification that can afflict corporate entities.”
Erste Group: the digital network effect
When it comes to digital banking development, received wisdom in central and eastern Europe for many years has been that local is better. So when Erste unveiled plans in 2014 to create a unified digital platform for its seven-country network, the project met with some scepticism from regional bankers.
To date, however, Erste’s faith in the concept has been justified by the results. George, as the platform is known, has been successfully launched in four countries – Austria, Czech Republic, Slovakia and Romania – and had four million users by the end of last year.
While some adjustments have inevitably had to be made for different markets, Maurizio Poletto, head of George Labs, says his team has adhered as closely as possible to the remit of building a generic platform that works across all markets.
“There is plenty of specific functionality,” he says, “but overall the experience, the branding, the design and the feature set is standardized across the network.”
As George is rolled out, the previous digital platforms of Erste’s subsidiaries are being decommissioned. Poletto admits this has resulted in a loss of functionality in some markets – but says this is not necessarily a bad thing.
“We used this project to do a clean-up phase,” he says. “The local platforms were full of features that were rarely used but still had to be maintained, which created complexity on the interface and was very inefficient.
“We wanted George to have the 20% of solutions that are used by 80% of customers, so in each country we looked at who was using each feature and how often. Based on those numbers, we then decided whether to include it in the George core, transform it into a local extension or remove it.”
For the same reason, Poletto is cautious about embracing open-banking principles.
“We are keen to work with partners, but I wouldn’t call it open banking because we are very selective,” he says. “Anyone we work with will have access to our customers, so we need to be very sure that they can add value.”
Nevertheless, Erste is currently working with three fintechs on potential extensions for George. These include a prediction engine that will allow customers to analyze their future cashflows under various scenarios based on their transaction history.
Poletto is also keen to collaborate with retailers. His team is already working with partners in Austria and the Czech Republic on a feature that would give customers access to shopping receipts via George and is looking at ways to integrate loyalty schemes into the platform.
Another project in the works would enhance users’ existing ability to customize George.
“We want to help them see their financial life in context,” says Poletto. “That means organizing transactions by topics – holidays, home, car, et cetera – rather than by products.”
Erste still has three more rollouts to complete – in Croatia, Hungary and Serbia – but senior executives have already hinted at plans to launch George as a standalone platform outside its existing network, likely in western Europe.
From a technical perspective, Poletto says such a move would make sense.
“We built George in Austria around the Single Euro Payments Area,” he says. “That means we did 80% of the work that would be necessary to connect to a bank in Germany or France or Italy.”
