E-banking wars

A survey of 13,000 e-banking customers conducted by money.pl has shown that four banks are forging ahead to lead this highly competitive sector. Within this group the fight for first prize has reached fever pitch and the heavy artillery is on the move. It's impossible to predict who is going to win this battle, as the situation has been rapidly developing over the past year.

The previous leader, mBank, has been losing ground. In 2004 it led the field, but now it can't even claim second place. It maintains the lead with the greatest number of customers, but only reached third best in the survey. First place went to Lukas Bank while Multibank took second. Volkswagen Bank came fourth. Lukas Bank's success is a particular a surprise as its involvement in e-banking dates back only a couple of years, while mBank was an early pioneer.

Coming around
Two years ago, Richard Mbewe,  head analyst at the Warsaw Investment Group (WGI), said: "The main reason for success in e-banking is understanding the client." Since then, e-banks have gradually come round to his point of view. In its early days e-banking was only used by Poland's yuppies, but during the last couple of years it has begun to attract a wider customer base. mBank passed the million-customer mark a while ago, followed by Inteligo, which has over 450,000 clients. The battle began when the traditional banks also saw the importance of the internet and e-business and started improving their own web services.

"Competition has indeed been getting more intense. Traditional banks have discovered that they failed to take enough notice of the internet and as a result, have started to chase the e-banks, becoming partly e-banks themselves," says Cezary Działowski, Lukas Bank's e-banking director. "As a result, competitiveness has grown and customers are gaining thanks to the price wars."

High security
The security of e-banking has been increasing rapidly over recent years. Now banks are using sophisticated 1024-bit security codes - unbreakable, according to experts' claims. Also, the longer e-banking exists, the more customers are getting from the service. A digital signature, for example, allows people to do almost anything they would in person at a bank.

"Security has been brought to a very reasonable level," says Remigiusz Sopel, an IDMSA.PL banking and finance analyst. "And it guarantees that the quality of e-banking services is as good as those in the traditional companies."

Mortal combat
In view of all the advantages e-banking provides, it is not surprising that the struggle to reach the top spot has become so intense. "This war will continue as the market is not yet full and there is still space for competition. So far it has been very satisfactory for the customers and banks will do everything to attract their attention," said Andrzej Lech, president of the Warsaw Banking Institute. "And look what mBank has been doing," adds Lukas Bank's Działowski. "They've been opening real service centers because they know they'll soon reach their limit in virtual space."

"We do not underestimate the importance of surveys nor the competition, but we are not afraid," Paulina Rutkowska, mBank's spokesperson replies. "However, our customer base is vast and loyal enough to think of the future instead of giving too much attention to polls. That's why we're now going to focus on the small company sector and risk management."

Banks have increased the number of advertising campaigns and have been spending more and more on meeting potential customer expectations. In 2005 e-banks will spend three times what they spent in 2002 and experts claim they'll invest even more in the years to come. Volkswagen Bank launched three brand-new marketing campaigns this year alone. No one is staying behind - mBank has maintained a nationwide media campaign from the beginning of the year, and Inteligo, one of the oldest e-banks in Poland, launched a year-long promotion program covering all major Internet media.

"The e-banking services market will carry on increasing its capacity so I believe advertising, marketing and PR outgoings will keep on growing," Sopel states. "For the next couple of years this competition will be a tight race, but I don't think any of the major players will get knocked out any time soon. What might happen is a growth of service flexibility towards customers who, in my opinion, will benefit the most as a result of the fight."

When the e-war is going to end, no one can say. However one thing is sure - e-banking is changing fast as it follows market trends. With the traditional banks out to get a slice of the pie, the virtual branch is having to dig in. But, as the example of Canadian ING Direct shows, an e-bank can become number one. The rewards are out there. May the best bank win.