A role of Innova,ons in the Banking Kyiv, June 2013
25.7%23.4%40.3%37.8%8.0%13.3%19.6%11.7%9.6% 8.3%16.7%20.8%1.5%5.7%7.9%1.2%2005 2006 2007 2008 2009 2010 2011 2012PNI CPISteady Economic Growth of Azerbaijan Economy GDP growth (USD millions) Dynamics of PNI & CPI * 2005 2006 2007 2008 2009 2010 2011 2012* Popula,on Nominal Income & Consumer Price Index
Azerbaijan banking sector Historical development 4.78.513.0 14.8 16.9 18.222.54446 46 46 454443303540455005101520252006 2007 2008 2009 2010 2011 2012USDbillionBanking System Assets Number of Banks• A well regulated and supported banking system, stabilizing economic condi,ons contribute to improvements in the banking sector’s performance • Proﬁtability is supported by high interest margins and rela,vely stable fee and commission revenue-‐genera,ng capacity • The banking system was barely impacted by ﬁnancial market crisis with app. 6% of total assets in investments • A self-‐funded collec,ve Deposits Insurance Fund in place since 2007 crea,ng a strong s,mulus for customers • A Credit Bureau has been established in 2005, boos,ng retail lending • All top banks report in accordance with IFRS • Low banking penetra,on oﬀers opportuni,es for long-‐term growth • According to the CBA sta,s,cs as of 31 December 2012, the total assets of Azerbaijani banks were AZN 17.6 bn. The ﬁve largest banks account for approximately 65% of all banking assets 188.8.131.520.511.412.3151.021.72.42.93.856.12006 2007 2008 2009 2010 2011 2012Public loans Public depositsGrowing trust in the banking system
Bank Technique OJSC • Established – 1993 • Employees – 750 • Branches – 32 • Service outlets – 6 • Number of customers – 120,000 • Assets – USD 562 million • Equity – USD 83 million • Loan porUolio – USD 339 million • Deposits – USD 241 million • Exposure to the upside of insurance and brokerage via subsidiaries • Rated both by Fitch and Moody’s Highlights (December 2012) Market share (December 2012) Bank Technique 3% IBA 33% Kapital Bank 18% Unibank 3% Other 38% Xalg Bank 5%
Innova,ons in the banking ? Do we really need to innovate in the banking industry ? What do we mean by saying “innova9ons” ? Tradi9onal banking vs. Online banking ? Who is the future winner ? Who are the hidden rivals of the banks ? What are the customer expecta9ons ?
Do we really need to innovate in the banking industry ? “Banking is necessary, banks are not” (Bill Gates, 1994) “The Internet, poten9ally, oﬀers a way of taking a knife to whole layers of costs. Once a customer is convinced to carry out most of his transac9ons online, his account becomes much cheaper to administer.” (The Economist, May 18th 2000; The virtual threat by S.Long) The fact of ongoing change of the customer behaviour makes the innova9ons inevitable in today’s banking environment.
What do we mean by saying “innova,ons” ? -‐ Providing modern products and services -‐ Being in sync with the new trends -‐ Mee9ng customers’ growing requirements in: -‐ Quality -‐ Convenience -‐ Time saving -‐ Reliability -‐ Transparency -‐ Flexibility
Tradi9onal banking vs. Online banking “A new genera9on bank for those who do not want to depend on opening hours” Boursorama is a major player in online banking in Europe with approximately 5.1 million orders executed in 2012 and 1,040,801 direct accounts. Boursorama Group is part of the Société Générale Group and is present in four countries. In France, it is market leader in online ﬁnancial informa9on and the France leading online bank under the Boursorama Banque brand.
Tradi9onal banking vs. Online banking Key ﬁgures on 31 March 2013 in €m Consumer Loans – 2,135 Total assets – 4,951 Customer deposits – 3,851 Shareholders equity – 790 Proﬁt before tax for Q1 2013 – 17,2 Net Banking Income for France for ﬁrst quarter 2013 amounted to €44.2 million, up 4%. • Banking NBI: €29.1 million or 66% of NBI France; • Brokerage NBI: €13.0 million or 29% of NBI France; • Internet portal revenues: €2.1 million or 5% of NBI France 0 branches 0 service outlets 0 ATMs
Tradi9onal banking vs. Online banking Products & Services Opening an account (personal, joint) Automated personal ﬁnance management service Payments Cash delivery Increase credit card limits Change the direct debit online Housing loans 0 branches 0 service outlets 0 ATMs
Who are the hidden rivals of the banks ? In 2007, PayPal Europe was granted a Luxembourg banking license, which, under European Union law, allows it to conduct banking business throughout the EU. In Australia, PayPal is licensed as an Authorised Deposit-‐taking Ins9tu9on (ADI) and is thus subject to Australian banking laws and regula9ons In the US, PayPal is licensed as a money transmiker on a state-‐by-‐state basis. PayPal is not classiﬁed as a bank in the US, though the company is subject to some of the regula9ons governing the ﬁnancial industry.
Who are the hidden rivals of the banks ? PayPal Here is the world’s ﬁrst global mobile payments solu9on that allows small businesses to accept almost any form of payment. Facebook Inc. is about to receive money transmiker licenses to avoid regulatory backlash. The licenses to enable Facebook to handle transac9ons and to poten9ally transform its digital currency, Facebook Credits, into something that would allow it to compete more directly with banks.
Mobile / Internet banking 36 3557682009 2010 2011 2012millionMobile banking users in the US Internet banking users in the US 385163802009 2010 2011 2012millionCanada leads all countries in terms of its share of Internet users who access online banking sites each month at nearly 65%.