How did technology transform clients’ behavior and how banks managed to adapt to the digitalization of financial services?
In the digital era that we are experiencing, consumer-banking habits continue to evolve and to diversify at a speed we have never seen before. As our clients’ needs for efficiency and excellence have amplified over the years, new devices and digital banking tools have been developed, in order to give customers the convenience of banking on the go. 46% of banks’ customers prefer to use only digital channels such as mobile phones, PCs and tablets to conduct their banking, according to a PwC survey. And the number of these “omni-digital” customers is increasing rapidly.
The digital customers have high expectations and they demand applications and online platforms that are ready to use. Thus, the banking system must constantly improve the delivery of financial services on digital channels, expand its presence online, and connect with people 24/7 through social networks.
This is why our strategic focus is to permanently upgrade our mobile banking application, Mobile ME, and our online banking platform, Garanti Online.
Regarding all of the above, is the implementation of an exclusive digital strategy a viable option for banks?
Although technology revolutionized the way people perform their banking operations, due to the rise of digital banking clients have become more independent when conducting banking transactions, especially basic ones. Banking is and will continue to remain an industry conducted by people, for people. And you do not have to take my word for it. Last month, a PwC survey showed that banks’s physical branches are here to stay. According to this survey, almost 60% of people would turn to a branch when applying, for example, for a loan or for a new checking account.
People come to a bank’s branch for a face-to-face experience with a person in order to have financial information explained to them so they can make informed decisions. And this type of behavior is not likely to change anytime soon. Thus, the banking industry should not abandon the traditional channels of interaction with customers in favor of digital ones. An optimal combination of these channels, both traditional and digital, is recommended.
What place will banks have in their clients’ lives in 10 years?
In a ten years’ period, the banking system will most likely be fundamentally different from today. Customization will help banks become an integral part of clients’ everyday lives, a long-lasting partner in the newly-established economy, which will most likely head for cashless transactions and a predominantly digital experience. This does not mean that banks’ physical branches or banks’ employees will disappear. Far from it. If anything, I believe that digital transformation will be used more and more by banks in order to increase their efficiency for their branches, while their employees will continue to provide consultative banking services, but for more complex products, rather than transactions.
Moreover, the big challenge for banking will be to anticipate customers’ needs and the use of Big Data will help them do it. Future banking will be a highly individualized experience.
In a ten years’ time, a bank might be able to make shopping suggestions to its customers, based on their buying preferences or online behavior and might recommend which account to be used for a transaction, based on the resources available in each account.
The depth of customer data banks have at their disposal must be used with great responsibility and in compliance with the General Data Protection Regulation – GDPR, which overhauls the way organizations handle personal data.
What is the pace at which Romanian clients adopt Internet banking and mobile banking?
According to statistics, only 7% of the population, with ages between 16 and 74, uses internet banking. Still, there has been a significant progress in the past 20 years. The Romanian banking industry’s bet on digital is the right one, even more because we have room for growth.
Let’s not forget that Romania is a country with great potential when it comes to digital and online banking. It is among the countries with the fastest fixed broadband Internet speed in the world and has a growing number of Internet users. At the end of 2017, there were more than 4.8 million fixed internet connections and over 20 million mobile internet connections, according to ANCOM.
How many of Garanti Bank customers use Internet banking and mobile banking? Which has been the evolution year-to-year?
Garanti Bank is one of the most important players in the Romanian banking system when it comes to internet and mobile banking. When it comes to those consumers who prefer to interact with their bank digitally, they tend to do that more and more via a smartphone. We see this trend here in Romania as well. In the first quarter of 2018, we noticed a 168% increase in transactions made using our mobile app, Mobile ME, compared with the same period last year. We see a spectacular growth not only in the number of mobile transactions, but also in the number of clients who prefer to interact with the bank using a smartphone. As a matter of fact, earlier this year, within the 10th edition of the “Online Banking” Gala, organized by Finmedia, Garanti Bank received the “Best Performance” award for our Mobile Me application, which had the highest increase in number of users, individuals. We also see a steady increase of clients who use our internet banking service – Garanti Online, in all business lines (Retail, SME, Corporate) and the average transaction value on this platform is around RON 9,500.
Considering that we constantly work on new functionalities for all our digital products, we expect more and more of our clients to start using our mobile and online services. Recently, we have relaunched an upgraded, more user-friendly version of our internet banking platform – Garanti Online. Now, it offers a more intuitive interface, an easier to use menu, and simplifies the steps a user must follow in order to perform operations. Moreover, all menus now have a uniform, optimized design.
In developing our digital services we benefit from the support and knowhow of our shareholders. Turkiye Garanti Bankasi AS (TGB) has over 6.5 million digital customers. Also, 42% of Spanish financial group Banco Bilbao Vizcaya Argentaria’s clients (BBVA), approximately 24 million, are digital. BBVA was recognized last year by Forrester Research, as having the best mobile banking app in the world, in a ranking of mobile service offerings from 53 banks across the Globe.
What transactions are being made using Garanti Online and ME Mobile?
The clients who use our mobile and Internet banking services usually make different cashless transactions, payment orders, or check their account balance. Almost 80% of all operation made are Electronic Funds Transfers (EFT), intrabank transactions, bulk payments – very popular with companies that have large volumes of payments and want to increase productivity, and card payments. The last one is due to the fact that Bonus Card is one of the most rewarding payment tools in the market for both cardholders and merchants. Customers accumulate bonuses every time they perform a transaction with their card, both inside and outside the country.
When we are talking about the mobile banking, for retail customers at least, intra-bank transfers, electronic funds transfer and card debt payment are more evenly split, around 20 percent each. Foreign exchange transactions and Invoice Payments follow, with around 10 percent.
The future of banking is digital. Everyone in the financial sector says so. That means that bankers have to invest in cyber security. How will the banking system tackle these risks?
The banking industry is well aware that in this ever-more-connected environment, cybersecurity is paramount. For 89% of banks, enhancing cyber and data security is the number one priority, according to Ernst & Young.
Not only banks’ employees will have to be trained in order to better tackle cyber security risks, but also the clients must be informed on how to safely use digital services, designed to make their life easier, while protecting their data.
In the future, artificial intelligence and advanced analytics could play a key role in the prevention of cyber-attacks.
How would you evaluate the local banking system? According to the National Bank of Romania (NBR) 80% of banks registered profit last year. On the other hand, in a few months the National Bank of Romania (NBR) will alter Regulation no. 17, which will limit the access of individuals to loans. Do you think that these changes in regulation will affect banks financial results in the near future?
I would say that today’s focus lies on consolidating the banking system’s strength and health, rather than its size. We currently have an NPL ratio which is diminishing year after year and which is significantly lower than the market average. In 2014, in the banking sector, NPL ratio was above 21%, but now it is slightly over 6%, according to the National Bank of Romania (NBR). The Romanian banking system registered an impressive overall profit of RON 5.3 billion. The system is very well regulated, monitored and governed, as well as adaptable to any change in legislation or regulations.
In the past year, we have noticed a growing demand for loans, especially for consumer loans. Considering the increased appetite for lending, it is understandable the search for ways to support a sustainable credit development.
2017 has been the best performing year in Garanti Bank’s 20 years old history in Romania. What are your expectations for 2018?
I believe that what differentiate now the banks are a healthy portfolio and an acceptable level of risk. Garanti Bank has proven in these two decades of activity in Romania that it is a solid bank, a trustworthy financial partner for its clients. Our financial results from last year are a proof of this. Last year we registered a RON 109.7 million net profit and revenues of RON 504.3 million. Our NPL ratio is considerably below the market average.
Since it started its activity in Romania, 20 years ago, Garanti Bank has managed to grow year-to-year above the market average. Its strategy for the future is to continue this organic growth and to maintain a quality portfolio and an adequate profitability.
 Top financial services issues of 2018
 PwC’s 2018 Digital Banking Consumer Survey: Mobile users set the agenda
 Ernst & Young’s Global Banking Outlook for 2018