Branching out
By : Wioletta Buczek
The coffees good too: Cyber banks are catching on in Poland as increasing numbers of customers sign up for online accounts.
After queuing for two hours just to pay his bills every month, Michal, 29, jumped at the chance to open an account at mBank, Poland's first virtual bank launched by BRE Bank last year.
"The opportunity (of free online banking) sounded promising so I decided to take a chance," he said. "I'm a happy man now because I can do all the basic banking operations via the Internet."
Since mBank's arrival, the number of Poles who have switched from traditional brick-and-mortar retail banking to Web services has surpassed industry expectations. According to the latest estimates, 300,000 Poles or nearly 10% of the 3.4 million-4.5 million with Internet access now bank online. But while banking experts agree that the Internet will one day revolutionize the industry, that day is still several years off. Compared to Poland, 7 million Americans or 44% of the population with Internet access use online banking services, according to Online Banking Report. In its first year of business in 1995, Security First Network Bank, America's first virtual bank, logged 5,000 accounts.
"Let's compare our country with the United States where 20% of all Internet users have online bank accounts," said Slawomir Lachowski, president of mBank. "If we apply the same ratio to Poland it gives us a potential client base of 700,000 to 800,000." mBank had 75,000 accounts by early June.
Nevertheless, also bullish on the sector's future is Poland's second virtual bank, Inteligo, a joint venture of Netherlands-based Inteligo Financial Services and Germany's Bankgesellschaft Berlin, which started operating last month.
"At the end of May we had 8,000 bank accounts; this is twice the number we estimated in our business plan," said Tomasz Kazmierowski, executive vice president of Inteligo. "What's more, the total value of deposits with the bank is very high too, and on average it amounts to zl. 3,000-zl. 4,000 per account," added Andrzej Klesyk, head of Inteligo's coordination committee.
Inteligos Andrzej Klesyk (front) and Tomasz Kazmierowski. The virtual bank hopes to net 150,000 accounts within the next year.
Kazmierowski said the bank's goal of 150,000 accounts within the next 12 months is achievable. "According to the optimistic scenario, within the next three years there will be 5 to 6 million Poles wanting to open a virtual bank account," he added.
Quick and convenient
The reason for the worldwide success of e-banking is simple: it's convenient, and saves time and money advantages more Poles are looking for, analysts said.
"We see our potential success in the large number of clients who want 24-hour, non-stop access to their bank account," Kazmierski said.
As far as costs are concerned, Internet banking is significantly cheaper than transactions carried out via the telephone, branch offices or ATMs. According to Arthur Andersen consultancy, the average cost to conduct a transaction via the Internet is several cents compared to $1 at a teller window.
"Internet banking is first of all an alternative for retail banking because retail services are the most expensive for banks," said Marcin Materna, an analyst at Big Bank Gdanski (Big BG).
The cost of a traditional retail bank account is zl. 2-zl. 20 per month, compared to lower or non-existent fees for Internet accounts.
In addition, the development of an average retail network of 40-50 traditional branches requires an investment of about $50 million-$70 million, while the rollout of an Internet network costs just $1 million-$1.5 million, said Artur Szeski, an analyst with Bank Pekao.
Such massive start-up savings allow virtual banks to lure customers with high-interest deposit accounts of nearly 17% annually twice the level offered by traditional banks. "Because we do not have brick and mortar branches, which cost a lot of money, we can offer our clients cheaper, convenient services and more attractive deposit interests of 16-16.5%," Boguszewska said.
Traditional banks respond
But as more virtual banks come online, the high-street banks are going on the counteroffensive by boosting their own Internet operations.
Log on for details: WBK unveils its online banking service at Warsaw's Palace of Culture.
"The Internet is one of the most efficient ways to sell financial products because they do not require the physical delivery of goods," Szeski said. "That's why so many traditional banks are now working to provide their customers with the Internet as another channel of access to their banking products."
Bank Pekao, which in 1998 became Poland's first retail bank to offer Web services, has logged 10,500 Internet customers out of 2.04 million total accounts. Following Pekao are Wielkopolski Bank Kredytowy (WBK), Bank Przemyslowo-Handlowy (BPH), and Fortis Bank.
"We decided to launch our Internet arm (in January 2000) because we saw that (the Internet is) what our customers will benefit from, and currently some 40% of individual customers use our Pl@net service," said Waldemar Leszczynski of Fortis Bank. The bank, which has 6,000 retail accounts, said more than half (or 3,500) of its customers use online services. WBK, which has been particularly aggressive in promoting its Internet service, announced this month that it has 103,895 Internet customers out of 500,000 personal accounts.
BPH has registered 15,000 online customers out of 550,000 accounts.
Also now offering Internet banking services are Handlobank, the retail arm of Bank Handlowy, medium-sized Lukas Bank, Bank Slaski and even the state-owned colossus Powszechna Kasa Oszczednosci Bank Polski (PKO BP), which started online banking at the end of last year. PKO BP said it has 3,493 Internet customers out of 4 million accounts.
One of the last banks to roll out Web-based services is commercial bank Big BG. Although the bank declined to specify when it would start its service, Wojciech Kaczorowski, the company's spokesman, said it would be launched after the installation of a new IT system. Kredyt Bank, which also plans to introduce its Web service in the next few months, said its version will be unlike anything already on the market. "Because we are one of the last to offer online banking, it has to be better than the other services available," President Stanislaw Pacuk said.
Banking on the future
Despite the advantages offered by virtual banks, most analysts said they would not threaten the position of traditional banks because various psychological and behavioral issues such as trust, security and customer reluctance to change may curb the expansion of regular banks in Poland.
"The reluctance toward Internet banking is understandable if one realizes that many issues, such as safety conditions, electronic signatures or Internet access are still unresolved in Poland," Szeski said.
Many technological solutions used by Polish companies do not guarantee adequate safety in online transactions, and the bill on electronic signatures, which is likely to streamline the online business, is still being discussed in the Sejm. Initially planned for the end of last year, the bill has already been postponed several times.
"We will not see fierce competition between traditional and virtual banks now because virtual banking is still a question mark for most Polish customers," Materna of Big BG said.
"Although 97% of our clients are happy with Internet access, some 18% say they are afraid of online banking in general," said Bartosz Chytla, banking solutions director with Fortis Bank.
Some institutions are also cautious about banking online. "Bank Pekao was the first to open an Internet branch because we wanted to give our customers the option," said Sebastian Luczak, spokesman for Bank Pekao. "Still, we don't see it as a competitive edge. This market is in its infancy and it needs time before people's mentality changes and technology advances. Now there is no widespread Internet access in Poland," he added. Maria Wisniewska, Pekao's president, said earlier this year that Internet banking would play an important trump card in fighting for retail customers not earlier than in five to six years' time.
Moreover, because Poles are lukewarm toward banking in general they are unlikely to entrust their life savings with an unknown, virtual institution. With 10 million individual banking accounts in Poland, 40% of them are run by state-owned PKO BP, the only bank most Poles recognize.
"If we want to expand we need to target a wide range of customers, and to do that we have to change habits and everybody knows there are few things more difficult than changing habits," mBank's Lachowski said. "It's of strategic importance for our business that mBank is associated with its owner, namely BRE Bank, which is a well-known Polish corporate bank."
Representatives of Inteligo disagreed with that assessment, saying the stereotype of Poles as traditional customers only is inaccurate. "It is true today we are targeting mostly young and affluent clients who have a modern attitude toward banking and know how to check the shareholding structure of the institution they will entrust with their savings," Kazmierski said. "But if you recall the history of expansion of credit cards or mobile telephony in Poland, you realize how quickly Poles adapt to novelties."
Regardless of whether Poles change their attitude toward online transactions, Internet banking worldwide has proven to be an efficient way of conducting simple banking transactions, while more complicated procedures still require personal contact with a banker. For the next few years then, Internet banking will remain a convenient supplementary service for customers rather than a modern replacement for traditional banks, analysts said.
"On the one hand, Polish clients are more quality oriented, so it is important to provide them with a full range of opportunities," Materna said. "And that is why most traditional banks already have Internet branches. Still, Internet banking is a niche service targeting a specific group of clients with a limited range of banking needs, and that is why it is far from likely to entirely supplant traditional banks."
