BRANCHES +REMOTE BANKING = MIXEDAPPROACH@Kozlov_SergeyNadra Bank Board MemberDirector of Retail BusinessPhD in EconomicsJune 3, 2013
MOVIE: ASSAULT ON WALL STREETA security guard for an armored truck,Jim is a blue-collar New Yorker whoworks hard to earn a living. His wagessupport himself and his wife Rosie,who is on the upswing recovering froma near-fatal illness. Yet things start tofall apart after Rosies healthinsurance stops covering hertreatment and Jims life savings arelost via a disastrous investment hisstockbroker had advised him to make.As a row of professional and personaldominoes falls, Jim is confronted bythe realization that, after beingabused and exploited by financialinstitutions for far too long, he hasonly one choice: to strike back.http://youtu.be/8Y-NqShTj5w
FINANCIAL CRISIS: BANKING VS. CASH1. Raise your hand who wants tolose all your life savings due tosome financial institution?3. Raise your hand who do carewhether it was remote (mobile) orbranch banking when you have realthreat of loosing all your life savings?“This is not a game for me. This is my LIFE!”Jim “ASSAULT ON WALL STREET”2. Raise your hand who prefer bankingvs. cash in circumstances of severefinancial crisis?
20 YEARS AND 3 CHANCES TO LOSE ALL LIFE SAVINGSDate Consequences of Financial Crisis in Ukraine and Russia1990-1992- Fall of Soviet Union to 15 independent states including Ukraine andRussia- Frozen savings in Sberbank of USSR- Hyperinflation of more then 1000 timesResult: total loss of life savings by majority of former USSRpopulation1997-1998- Collapse on stock exchanges- Local currencies devaluation (2-3 times for Hryvnia and Ruble)- States defaults- Massive bank bankruptcies in RussiaResult: partial loss of life savings due to devaluation anddeposits lost in banks which went bankrupt2008-2009- Collapse on stock exchanges- Hryvnia devaluation from 5 to 8 hryvnias per dollar- Banks bankruptcies with deposits compensated by Deposit InsurancesystemsResult: partial loss of life savings due to devaluation and delaysin deposit repayments
LIFE FINANCE HIERARCHYLifeFinanceRemoteBankingBranch BankingMoney ExchangeNatural ExchangeExperienceServiceUtilitySurvivalPersonal DataChannelLocationTransactionNeed FocusFoodIncomepercapitaFinanceComplexity
LIFE FINANCE DEFINITIONLife Finance (personal finance) refers to the financialdecisions which an individual or a family unit is required tomake to obtain, budget, save, and spend monetary resourcesover time, taking into account various financial risks andfuture life events. When planning Life Finances the individualwould consider the suitability to his or her needs of a range ofbanking products (checking, savings accounts, credit cardsand consumer loans) or investment (stock market, bonds,mutual funds) and insurance (life insurance, health insurance,disability insurance) products or participation and monitoringof individual- or employer-sponsored retirement plans, socialsecurity benefits, and income tax management.Source: http://en.wikipedia.org/wiki/Personal_finance
LIFE FINANCE HIERARCHY PRINCIPALS! 5 levels of Life Finance are ranked, according tothe order in which they influence humanfinancial behavior, in hierarchical fashion.! So long as lower levels are not covered, theyexist as a driving or motivating force forfinancial behavior.! Jump from Natural Exchange or MoneyExchange levels to Life Finance is not possibleunless there is a relevant shift in per capitaincome level.
LIFE FINANCE HIERARCHY BY COUNTRIESLevel GDP per capita (current US$)* Countries Remote Banking > 30 000 30 countries: Norway, Switzerland, USA, Japan, Germany, France, UK Branch Banking > 10 000 and < 30 000 33 countries: Greece, Estonia, Lithuania, Latvia, Poland, Russia, Brazil, Kazakhstan Money Exchange > 1 000 and < 10 000 85 countries: Azerbaijan, Belarus, Turkmenistan, China, Ukraine, Armenia, Georgia, Moldova, Uzbekistan, India, Kyrgyzstan Natural Exchange < 1 000 31 country: Tajikistan, Cambodia, Nepal, Bangladesh, Rwanda * World Bank national accounts data, and OECD National Accounts data files for 2011
The more you know about financial institutions andbanks the less TRUST you haveCountry TRUST Level Rwanda 91% Natural Exchange Cambodia 87% Natural Exchange Nepal 81% Natural Exchange Bangladesh 81% Natural Exchange Norway 73% Remote Banking China 72% Money Exchange India 70% Money Exchange Uzbekistan 66% Money Exchange Tajikistan 66% Natural Exchange Japan 63% Remote Banking Georgia 62% Money Exchange Kazakhstan 57% Branch Banking Estonia 55% Branch Banking Armenia 54% Money Exchange Kyrgyzstan 52% Money Exchange Country TRUST Level Azerbaijan 50% Money Exchange Poland 50% Branch Banking Switzerland 47% Remote Banking Belarus 47% Money Exchange Brazil 45% Branch Banking Germany 38% Remote Banking USA 37% Remote Banking Moldova 37% Money Exchange Russia 33% Branch Banking France 32% Remote Banking Latvia 32% Branch Banking Lithuania 29% Branch Banking Ukraine 28% Money Exchange UK 27% Remote Banking Greece 13% Branch Banking Source: GALLUP World 2012 http://www.gallup.com/poll/162602/european-countries-lead-world-distrust-banks.aspx#2
M-PESA CASE: FROM NATURAL EXCHANGETO MONEY EXCHANGEUTILITY
A CENTURY AGO: FROM MONEY EXCHANGETO BRANCH BANKINGSERVICE
15 YEARS FROM NOW: FROM BRANCH BANKINGTO REMOTE BANKINGE X P E R I E N C E
THE FUTURE IS HERE: FROM REMOTE BANKINGTO LIFE FINANCEPersonal
VALUE CHAIN: EVOLUTION OR REVOLUTION?Level Value Extractor CommodityLife Finance Life Finance Providers(Internet Start-ups,Social Networks,Telecoms, etc.)BankingServicesRemote Banking Banks Non-cash MoneyBranch Banking Banks Physical Money(cash, gold, etc.)Money Exchange Merchant GoodsNatural Exchange Seller and Buyer ItemLoss of TRUST in existing financial institutions andbanks leads to raise of new Life Finance Providers
UKRAINE: INTERNET AND MOBILE REVOLUTIONTechnology drives the speed of changebut does not determine the system0%10%20%30%40%50%60%70%80%90%2004 2005 2006 2007 2008 2009 2010 2011 2012Internet Users, % of populationUkraine USA
TECHNOLOGY DOES NOT REPLACE THE TRUSTM2 to M1 Money Supply Ratio0%100%200%300%400%500%600%2005 2006 2007 2008 2009 2010 2011Ukraine + Foreign Currency Cash Ukraine USA
BACK FROM BRANCH BANKING TO MONEY EXCHANGE120001300014000150001600017000180001900020000210002005 2006 2007 2008 2009 2010 2011 2012Ukraine: Decreasing Number of Branches
UKRAINE: SELL BRANCH BANKINGBEFORE YOU SELL REMOTE BANKING! BACK TO CASH: Due to 2008-2009 economic crisisdecrease in the number of branches connected with theswitching of customers from Branch Banking to MoneyExchange rather then development of Remote Banking.! TARGETING BRANCH BANKING: According to proposedLife Finance Hierarchy Ukraine is on Money Exchangelevel. Further advance to Branch Banking will lead toincrease in the number of branches.! MIXED APPROACH: The key challenge for UkrainianBanking System today is to restore TRUST and confidence.Branches play key role in this process as well as in theprocess of advancing customers further from BranchBanking to Remote Banking levels.
@Kozlov_Sergey@Kozlov_SergeyNadra Bank Board MemberDirector of Retail BusinessPhD in EconomicsTHANK YOU! QUESTIONS?www.facebook.com/sergey.a.kozlovua.linkedin.com/in/kozlovsergey