e-xciting competition
Virtual banks - those that exclusively offer online or telephone banking services - are a competitive group in the country. But if recent shifts in client and bank sentiment are any indication, it's the rivalry inside the virtual banking game that is really starting to heat up.
Three virtual banks are competing for a growing, but still small, segment of the retail banking sector. More than six million people have access to the Internet, but less than one-sixth of the wired public have Internet bank accounts of any kind, whether via a virtual bank or online access to an account with a traditional bank. What's worse for the purely virtual banks is the even smaller proportion of people who are willing to put their money in accounts that offer almost no face-to-face communication.
This landscape provides for a highly competitive battleground where on the one side the players must win over the growing ranks of the Internet savvy to the benefits of banks without branches, while on the other side the traditional banks are bettering their online distribution channels to augment the more personal services provided at their local branches.
The as-yet-unprofitable trio of mBank, Inteligo and Volkswagen Bank Direct are all jockeying for the lead in this online banking contest. Thus far, mBank is the frontrunner with 320,000 customers and €428 million (zł. 1.7 billion) in accounts. The BRE Bank-owned enterprise has experienced fast growth in its client base during its two years of operation. But as Internet penetration grows apace and wary potential customers warm to the idea of virtual banking, the market title is still any bank's to win.
"The market is definitely growing," said Marcin Materna, banking analyst at BIG Bank Gdański. "Only a small percentage of customers are so far interested. The Polish market is very competitive, and it's still early days."
The competitiveness of these banks is marked by how and whether they charge for services, such as payment transactions and opening savings or current accounts.
Inteligo, the number two virtual bank, has 180,000 customers and about €110.8 million (zł. 440 million) in deposits. The bank, which was recently acquired by PKO BP, slaps fees on most of its transactions, including bill payments, SMS access and, a new product, electronic loans. Tomasz Kazmierowski, a bank board member, said Inteligo has the best service portfolio among virtual banks in the country because its clients pay for transactions that competitors provide free of charge. Half of Inteligo's revenues are fee based; the other half come from typical commercial bank sources - interest rate margins.
Kazmierowski complains that the mass of virtual banks on the international scene, such as Egg Banking in the U.K. and even mBank, are just "interest rate shops." Competitors lure customers with attractive savings returns only, with services out of mind, he said.
But mBank sees it in a different light. The online firm, which charges no transaction fees, adds aggressive branding to the competitiveness formula.
"Nowadays, the offers of Inteligo and Volkswagen are very similar to what we have," said Sławek Lachowski, deputy executive at mBank. "There is competition between the three. There are no major differences. The only differences are brands and marketing. We are young and modern."
About 65% of mBank's clients are under the age of 35. He added that the bank attracts cutting-edge customers through marketing and interest rates, but also because it charges no fees.
Analysts, who count among the more sophisticated banking customers, seem to agree at least with the mBank fee system. "I was a client at both mBank and Inteligo," said Materna, "but I stopped at Inteligo because of the fees."
The more nascent Volkswagen Bank Direct records about €95.7 million (zł. 380 million) in deposits, and provides fewer services than its two competitors. But the numbers don't daunt the bank as it plans to continue to attack the market by introducing a host of new products, said Tomasz Czechowicz, marketing director.
There are roughly one million online accounts in the country. But an increasing number of online banking customers are simply signing up for Internet services through traditional banks. Often these firms are technological laggards, but they manage to win customers to their basic online services because they present the option of branch banking. That's a valuable asset in a country unaccustomed to technology playing a part in banking. Compare that to the U.K. where 15% manage e-banking accounts.
In Poland, Bank Pekao, Kredyt Bank, Lukas Bank and LG Petro Bank saw their online banking clients grow to 6%-78% during the first half of the year. Lukas Bank introduced e-banking services two years ago. Today its online service has 65,000 clients, more than double the same period last year. Yet, the firm considers Internet services a mere single distribution channel in its arsenal of services.
"The telephone link or the Internet link aren't separate things, but are part of the common offer, which means that they make up many links," said Cezary Działowski, Lukas Bank's e-banking manager. "This enables clients to reach their accounts in many ways, no matter where they are or from what place."
In this sense, firms like Lukas say they are not targeting the same customers as virtual banks.
"Lukas Bank doesn't compete with typical Internet banks, such as mBank, Inteligo or VW Bank, which are responsive only to the very special offers and are present only in the electronic services," Działowski said.
Nonetheless, traditional banks still prey on the same wired customers that mBank, Inteligo and Volkswagen would like to have on board. So the number of potential customers for virtual banks may not be increasing at the same pace as the growth in the number of Internet users.
mBank's Lachowski entertains this scenario: "There are certain types of consumers we'll never get," he said, after recently announcing that the virtual bank would hit profitability by 2003.
He said that virtual banks' low cost base should allow some to survive.
"The difference between mBank and traditional banks is we don't have the burden of branch costs," Lachowski said. "Once they are connected with branches, there are changes to competition."
Lachowski realises, however, that there is a certain type of customer profile that his bank has to tap.
"Virtual services will always be a niche in the banking industry," he said.
Inteligo
Customers: 180,000
Deposits: €110.8 million
mBank
Customers: 320,000
Deposits: €428 million
Volkswagen Bank Direct
Customers: 10,000
Deposits: €95.7 million
Three virtual banks are competing for a growing, but still small, segment of the retail banking sector. More than six million people have access to the Internet, but less than one-sixth of the wired public have Internet bank accounts of any kind, whether via a virtual bank or online access to an account with a traditional bank. What's worse for the purely virtual banks is the even smaller proportion of people who are willing to put their money in accounts that offer almost no face-to-face communication.
This landscape provides for a highly competitive battleground where on the one side the players must win over the growing ranks of the Internet savvy to the benefits of banks without branches, while on the other side the traditional banks are bettering their online distribution channels to augment the more personal services provided at their local branches.
The as-yet-unprofitable trio of mBank, Inteligo and Volkswagen Bank Direct are all jockeying for the lead in this online banking contest. Thus far, mBank is the frontrunner with 320,000 customers and €428 million (zł. 1.7 billion) in accounts. The BRE Bank-owned enterprise has experienced fast growth in its client base during its two years of operation. But as Internet penetration grows apace and wary potential customers warm to the idea of virtual banking, the market title is still any bank's to win.
"The market is definitely growing," said Marcin Materna, banking analyst at BIG Bank Gdański. "Only a small percentage of customers are so far interested. The Polish market is very competitive, and it's still early days."
The competitiveness of these banks is marked by how and whether they charge for services, such as payment transactions and opening savings or current accounts.
Inteligo, the number two virtual bank, has 180,000 customers and about €110.8 million (zł. 440 million) in deposits. The bank, which was recently acquired by PKO BP, slaps fees on most of its transactions, including bill payments, SMS access and, a new product, electronic loans. Tomasz Kazmierowski, a bank board member, said Inteligo has the best service portfolio among virtual banks in the country because its clients pay for transactions that competitors provide free of charge. Half of Inteligo's revenues are fee based; the other half come from typical commercial bank sources - interest rate margins.
Kazmierowski complains that the mass of virtual banks on the international scene, such as Egg Banking in the U.K. and even mBank, are just "interest rate shops." Competitors lure customers with attractive savings returns only, with services out of mind, he said.
But mBank sees it in a different light. The online firm, which charges no transaction fees, adds aggressive branding to the competitiveness formula.
"Nowadays, the offers of Inteligo and Volkswagen are very similar to what we have," said Sławek Lachowski, deputy executive at mBank. "There is competition between the three. There are no major differences. The only differences are brands and marketing. We are young and modern."
About 65% of mBank's clients are under the age of 35. He added that the bank attracts cutting-edge customers through marketing and interest rates, but also because it charges no fees.
Analysts, who count among the more sophisticated banking customers, seem to agree at least with the mBank fee system. "I was a client at both mBank and Inteligo," said Materna, "but I stopped at Inteligo because of the fees."
The more nascent Volkswagen Bank Direct records about €95.7 million (zł. 380 million) in deposits, and provides fewer services than its two competitors. But the numbers don't daunt the bank as it plans to continue to attack the market by introducing a host of new products, said Tomasz Czechowicz, marketing director.
There are roughly one million online accounts in the country. But an increasing number of online banking customers are simply signing up for Internet services through traditional banks. Often these firms are technological laggards, but they manage to win customers to their basic online services because they present the option of branch banking. That's a valuable asset in a country unaccustomed to technology playing a part in banking. Compare that to the U.K. where 15% manage e-banking accounts.
In Poland, Bank Pekao, Kredyt Bank, Lukas Bank and LG Petro Bank saw their online banking clients grow to 6%-78% during the first half of the year. Lukas Bank introduced e-banking services two years ago. Today its online service has 65,000 clients, more than double the same period last year. Yet, the firm considers Internet services a mere single distribution channel in its arsenal of services.
"The telephone link or the Internet link aren't separate things, but are part of the common offer, which means that they make up many links," said Cezary Działowski, Lukas Bank's e-banking manager. "This enables clients to reach their accounts in many ways, no matter where they are or from what place."
In this sense, firms like Lukas say they are not targeting the same customers as virtual banks.
"Lukas Bank doesn't compete with typical Internet banks, such as mBank, Inteligo or VW Bank, which are responsive only to the very special offers and are present only in the electronic services," Działowski said.
Nonetheless, traditional banks still prey on the same wired customers that mBank, Inteligo and Volkswagen would like to have on board. So the number of potential customers for virtual banks may not be increasing at the same pace as the growth in the number of Internet users.
mBank's Lachowski entertains this scenario: "There are certain types of consumers we'll never get," he said, after recently announcing that the virtual bank would hit profitability by 2003.
He said that virtual banks' low cost base should allow some to survive.
"The difference between mBank and traditional banks is we don't have the burden of branch costs," Lachowski said. "Once they are connected with branches, there are changes to competition."
Lachowski realises, however, that there is a certain type of customer profile that his bank has to tap.
"Virtual services will always be a niche in the banking industry," he said.
Inteligo
Customers: 180,000
Deposits: €110.8 million
mBank
Customers: 320,000
Deposits: €428 million
Volkswagen Bank Direct
Customers: 10,000
Deposits: €95.7 million
