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May 2019 www.intellinews.com I Page 3
However, the large Western EE banks see themselves as regional operations with a local anchor. And so fintech partnerships are obvious for them. Especially since the existence of a classical bank account still represents the most important entry ticket into the digital banking business and provides a platform to develop other business models.
The large banks operating across the CEE region in multiple countries can give fintech access to a comprehensive customer base that negates the problems of the fragmentation of populations
in the region. After all, almost 70% of the total population in CEE is equipped with an account and a bank or credit card, while at least 50% are already actively using digital banking services of some sort.
According to the RBI Fintech Atlas, fintechs can currently tap a total market of around 150mn digital bank customers in CEE, almost 80mn of which are in Russia. Russia is an extremely at- tractive fintech location and an important market for digital banking in global terms. However, there are also five other countries in CEE where there are already at least 5mn digital bank customers: Czech Republic, Poland, Hungary, Belarus and Romania.
The trends and country names outlined above show that Central Europe and Russia, plus Ukraine, are currently the most attractive fintech locations and digital banking markets in CEE.
And the CIS market (which also includes Belarus) already stands out in a pan-European comparison as the gap between digital banking products penetration (50% of the population) and the penetration of conventional banking products (66% of the population) is already lower than
in Western Europe where the gap is almost 20 percentage points versus the 16pp in the CIS. In the development of banking services in the CIS, banks have simply leaped over several development stages and jumped straight to fintech solutions, leaving the West to catch up
with their more sophisticated offerings. The leader in this respect is Estonia where the gap between digital and traditional banking products is only 14pp. The migration to digital banking in Estonia has been so strong that banks have been closing bricks and mortar branches that are becoming increasingly redundant.
Central Europe also performs remarkably well
in terms of digital maturity: 58% of the popula- tion already actively use digital banking products. In Southeast Europe, on the other hand, there is still a lot of catching up to do, where digital pen- etration in the local banking markets is even less pronounced at 34% of the population. However, at least the conditions are right regarding for a re- peat of the “leapfrog” effect that has marked the development of the CIS fintech scene.
The CEE Fintech Atlas shows, for example, that Bulgaria is one of more exciting markets. In the less developed markets in Southeast Europe the usage of digital payments is already at high levels as well; 60-80% of the population already make use of digital payments. It transpires that pros- perity or GDP per capita income is a less decisive factor when it comes to using making digital pay- ments than in the traditional credit business. Even less developed markets in CEE currently offer great potential for banks and fintechs as a result. It is also particularly interesting here that Rus- sia, Ukraine and Belarus stand out as very special regional locations as young people are already making very active use of digital payments.
A precise picture of the CEE fintech scene in combination with the digital maturity of the local banking markets is not only relevant for western fintechs, but also for the western banks operating in the CEE region. The growth story of the last 20 years cannot be repeated in the classic banking and credit business. Growth rates in the range of 15-30% can only be achieved in the digital space. In addition, the growth opportunities for fintech's and banks in CEE in the area of digital value crea- tion are not closely linked to the level of prosperity in a country. However, in view of the facts outlined