One of the most striking effects of the global financial crisis in central and eastern Europe was the speed with which western commercial banks exited the region’s more exotic markets.
The exception was Raiffeisen Bank International (RBI). A decade later, the Austrian group’s 13-country network – the largest in the region – still includes frontier markets from Albania to Ukraine, as well as the only western bank subsidiary in Belarus.
Johann Strobl, who took over as chief executive in March 2017, says RBI has no plans to abandon its more remote outposts.
“We have been active in these countries for 20 years or more, so we know how to work in this environment,” he says. “These markets have also developed tremendously. They are much less frontier today than when we started operating there.”
He acknowledges, however, that there is considerable diversity across the group’s network, particularly when it comes to digital banking.
“It goes from north to south, more or less,” he says. “Northern regions are more keen to accept new technology, while in the south societies are still fairly cash-driven.”
Weaning more traditional markets off cash will take time, he adds.
“This is not an area where change is going to happen overnight,” he says. “In five or 10 years, the way customers make use of channels will obviously be different, but they will need time to adjust to new technologies.”
For this reason, Strobl is sceptical of suggestions that newer players could provide serious competition to banks in CEE, particularly given the fragmented nature of the region.
“The percentage of early adopters is similar in most countries, so it makes sense for fintechs to focus on larger markets,” he says.
“Change will therefore start and be faster in those markets, and we will have to see if there is then a need for those services in smaller markets – or if in the end, customers will find that the offer they get from banks is in most areas at least as good as that offered by the newcomers.”
Another challenge for newer entrants looking for scale in smaller markets will be the insistence of many regulators in CEE on keeping data within national boundaries, Strobl adds.
“This issue is becoming more and more important,” he says. “We are already using cloud services in several areas and have seen significant improvements in speed, flexibility and cost-efficiency. If countries try to limit access to these services, that will put them at a disadvantage.”