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The role of innovations in the banking business


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Ulvi Mansurov, CEO, Bank Technique, Azerbaijan

Published in: Economy & Finance, Business
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The role of innovations in the banking business

  1. 1. A  role  of  Innova,ons  in  the  Banking  Kyiv,  June  2013  
  2. 2. 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  
  3. 3. 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 2007 2008 2009 2010 2011 2012Public loans Public depositsGrowing  trust  in  the  banking  system  
  4. 4. 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%  
  5. 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  ?  
  6. 6. 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.          
  7. 7. 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  
  8. 8. 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.  
  9. 9. 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  
  10. 10. 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  
  11. 11. 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.  
  12. 12. 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.  
  13. 13. 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%.    
  14. 14. Thank  you  !