Digitalization of Banking Expands in Southeast Europe

Banks that want to be leaders must offer their clients more than traditional financial services. Leading market players enable various activities that collectively form an ecosystem of solutions offered to users. According to Deloitte’s 2022 Digital Banking Maturity Report, selected leading banks in our region provide globally competitive digital offerings to their clients, while most banks still have room for improvement.

The fifth edition of the Digital Banking Maturity Report, the largest global survey on digital banking, covered 304 banks in 41 countries, including Bosnia and Herzegovina, Croatia, Serbia, Slovenia, and Bulgaria. The degree of digitalization of the banking sector was assessed based on three factors:

• Analysis of over 1200 digital functionalities that make up the user’s digital journey,
• Assessment of user preferences regarding 26 most popular banking activities, and
• Identification of best practices in the area of user experience (UX).

The analyzed banks were divided into four categories: Digital Champions, i.e., the most successful banks that set the direction of digitalization in the banking sector. This category includes 30 banks. Smart Followers are the next category, encompassing banks that seek to replicate the solutions of digital leaders. The last two categories include Digital Adopters, banks that have just begun the digitalization of their operations, and Digital Latecomers, banks that are lagging in digitalization.

– Our report shows that investing in digitalization pays off, even for leading banks in the market, if executed correctly. This is evidenced by the financial results of leading banks that have invested in digitalization, such as a +1.5 percentage point higher ROE or a +5 percentage point higher share of net fees in total income compared to less digitized players in the banking sector – stated Dejan Obradović, senior manager in Deloitte’s consulting department.

The results of user preferences in using digital channels for performing everyday banking activities and seeking information showed that products such as credit and debit cards, account opening and management, and banking products were segments that recorded the highest increase in digitalization since 2020.

Global Trends: Beyond Banking Services as Key to Personalized Service and Improved User Experience

The authors of the report state that the increase in remote banking services has irrevocably changed the banking sector. The ability to open a personal account via online banking or a mobile app is offered by 80 percent of digital leaders and nearly 70 percent of other banks, making it almost an essential service. To achieve a competitive advantage, banks must seek ways to provide additional non-banking services to create true differentiation.

Therefore, it is not surprising that banks are becoming a market tailored to customer needs, offering non-traditional banking services such as purchasing parking or transportation tickets, mobile phone top-ups, password managers, cloud storage, special discounts, and promotions, etc., which drive user engagement and enable an improved user experience, ultimately leading to personalized service for each user based on collected data.

Regional Digital Development of Banking for the Population vs. Digital Leaders

Of the 40 surveyed banks across the region (Bosnia and Herzegovina, Bulgaria, Croatia, Serbia, and Slovenia), the majority, i.e., 88 percent, consider themselves digital beginners or those lagging in digital development. However, the remaining 12 percent consider themselves digital leaders or smart followers. According to Deloitte’s report, some banks in Southeast Europe already offer highly competitive digital products to individuals (clients) in our region.

In-depth comparison of the functionalities of regional digital leaders with the global average reveals that the greatest progress has been made in the scope of available information on digital platforms, accompanied by onboarding of new users and everyday banking services. However, there is still a significant opportunity to improve customer relationships and increase available functionalities on the mobile platform.

Since 2020, digital leaders globally have significantly invested in banking insurance, card management, authorization, and the ecosystem area. These areas represent segments that our regional banks still need to catch up on to bridge the gap to digital leaders. These opportunities should be explored and selectively included in the digitalization plan in the short to medium term to gain or maintain their competitive advantage.

Such characteristics would enable regional banks to offer clients unique (personalized) and connected experiences across all interaction channels, thereby meeting customer needs in non-traditional banking areas of the user’s life to ensure a true ‘beyond banking experience.’

The digitalization of banking services reflects the increasing prevalence of mobile devices in our daily lives. Deloitte’s report highlights that the activities most frequently conducted via smartphones are seeking information about banking products, checking account balances, transfers, and investments. These activities fall within the basics of the banking segment.

The report’s results emphasize that banks need to approach the decision-making process regarding investment in digitalization from three aspects:

• Improving user experience,
• Implementation costs, and
• User education plan.

Users will only be willing to use online platforms if they understand them and if the cost of their use does not exceed the benefits of using them. Regional banks that will be leaders in digitalization in the near future are those that enable innovation and education about it at fair value.

Croatia

The same study was conducted in Croatia with results similar to those of other countries. Compared to previous years, mobile banking is developing much faster than online banking, which is in line with global trends.

The report’s results show that in the development of digital channels between Croatian banks and global trends, there are minimal differences in the area of digitalization: the availability of all necessary information on the website that is important to clients, basic payment services, account balance reviews, and basic user support functionalities.

The availability of information is particularly high as 64 percent of functionalities when gathering information were available through online banking, public websites, and mobile banking channels for Croatian banks included in the research, placing Croatian banks above the global average in this category.

The most significant differences are in the creation of digital platforms, establishing ecosystems, and business models that will enable banks to provide users with a distinctive and connected experience with the bank, across all communication channels, as well as the opportunity to understand needs related to other aspects of the client’s life that are not directly related to the bank.

A range of functionalities with the greatest potential for innovation are those that clients can use for their everyday needs (payments, authorizations, personal finance management, card management, etc.), beyond banking functionalities (paying for travel arrangements, renting cars or bicycles, managing investments and insurance), and terminating relationships through digital platforms such as closing current accounts or other banking products.

Conclusion

The path to further development of digital channels and transformation of the business model is not easy, and the challenges are numerous – from system stability and security, user experience design, to segmentation and defining a digital strategy around priority clients for the bank. From digital leaders, we expect a new generation of products and services in channels, while from established banks, we expect them to reduce the observed differences in the upcoming period. One thing is certain, further and constant investment in enhancing digital channels and information technologies for banks remains a priority and the core of the business strategy.