According to the Uni Credit Group, the demographics favour digitalisation in CEE: younger generations (digital natives) are playing an increasingly significant role in society and economy with almost 50 per cent of the population being under 35, versus 40 per cent in Western countries. Young, digitally savvy customers are generally-speaking less loyal to companies or brands and tend to perceive financial products and services as interchangeable.
The new generations of clients value convenience and prefer to execute transactions remotely—if possible, without direct interaction with the institution.“Advances in security and verification will enable all aspects of sales, service and delivery to be conducted online. Technology is making it easier for customers to switch banks, making relationships much less sticky”, a PwC study states.
This means that banks’ target markets and are no longer “defined by its physical footprint, but by its technology, regulatory boundaries and marketing budget”. The PwC experts forecast growth in the importance of smart devices and predict that it will take its place alongside cards as the primary medium for consumer payment.
Demographic changes provide opportunities for growth and require innovation to develop new products and services. Developed-market populations are ageing, driving focus towards savings and investment and away from credit and consumption. Customer expectations are being reshaped by interactions outside of the banking industry, according to the PwC study.
The next generations of customers want the type and quality of service they receive from sectors that place significant focus on customer experience. Also, an increasing number of women is heading households. They are controlling wealth and spending and becoming the primary earners.
Market observers agree that most banks have recognized the need to deepen customer relationships. FinTech offers financial institutions opportunities to improve user experience and customer relationship management. One goal of the first F10 FinTech Hackathon in Vienna is to boost innovation in the Central and European banking sector by bringing FinTech and the local bank network closer together.
Numerous FinTech initiatives in Eastern Europe currently focus on digital or mobile payments. Slovakia is considered one of the world leaders in cashless payment with a transaction volume of 1623 million US dollars in 2018. The statistics portal Statista forecasts an annual growth rate of 11.5 per cent until 2022.
In Bulgaria, a volume of 1.2 billion US dollars was transferred via alternative financial technologies in 2017 and it is expected to reach 2.2 billion US dollars in 2018, according to the Austrian business technology platform Trending Topics.
The Czech Republic has a relatively big and fast-growing market for FinTech. Czech banks are considered some of the safest and best-run in Central and Eastern Europe, but also the most conservative – which makes them targets for emerging FinTech firms.
Romania is the other hot candidate for being the starting point of the banking revolution: bank commissions in Romania have been among the highest in the region. Therefore, the prospects for banks that offer alternative and efficient digital services for the young generation are excellent, a study of Saxo Bank finds. It is crucial to venture into untapped markets and address unmet needs, for FinTech to grow.
“Many have predicted the fall of the traditional bank, as disruptive new entrants win share by offering a better customer experience through new products and channels. Yet, despite the emergence of new competitors and models, we believe the traditional bank has a bright future – the fundamental concept of a trusted institution acting as a store of value, a source of finance and as a facilitator of transactions is not about to change”, the authors of the PwC study mentioned above conclude. In Poland, the banking sector has recognized that FinTech is not only a threat to traditional banks but more a chance to address changing customer needs and design more efficient processes.F10 FinTech Incubator & Accelerator also firmly believes that collaborations between banks and FinTech companies are the key to satisfying the needs of the next generation of banking customers. One goal of the first F10 FinTech Hackathon in Vienna is to boost innovation in the Central and European banking sector by bringing FinTech and the local bank network closer together.
One of the winning teams of the F10 FinTech Hackathon in Vienna will receive a Golden Ticket for the Top 25 of the F10 P2 “Prototype to Product” program. This 6-month Accelerator Program guides and supports FinTech, RegTech and InsurTech Startups with innovative prototypes on their journey to successful companies with paying customers. The Golden Ticket allows you to directly jump to the last step of the selection process – the speed dating in Zurich - and thus to skip most of the application hurdles.
The revolution of the finance sector to which F10 is contributing does not end there. Insurance is another sector that will undergo relevant changes within the next years. Like FinTech, InsurTech offers solutions to create new customer touchpoints and manage processes more efficiently. Insurance technology, however, has a slightly different focus than FinTech as the significant part of the InsurTech business is in serving retail clients. Market observers agree that online and mobile channels as well as digital technologies offer quick wins in insurance retail because the importance of millennials and in insurance increases quickly.
Are you ready to address the challenges the finance industry is currently facing due to demographic changes and new customer expectations?