Coexistence of Open Banking: The Fintech Bite No Longer Hurts Banks

The entry of financial technology (fintech) companies into the banking market has posed a significant challenge to traditional banking, primarily because it has brought a substantial acceleration in the development of digital solutions. In addition to fundamentally changing the existing business model, financial institutions and service providers are gaining new opportunities to develop faster, more transparent, and more favorable services for clients. End users, or citizens, should benefit the most from this, primarily due to simplified, higher-quality, and more advanced digital services, better user experiences, multiple choices, and ultimately, more competitive prices. How much of these ‘opportunities on paper’ have been realized in the Croatian market so far?

Expansion of Business

If judging by the results achieved by the largest fintechs last year, Croatian citizens have definitely embraced digital financial services. This is especially true for Revolut, probably the most well-known fintech in the region. The company has informed us that the financial report for 2024 will be published in the summer, but they emphasize that they concluded last year in the Croatian market with half a million users, which is 35 percent more than last year.

– The number of transactions increased by 79 percent, and their volume by 90 percent – highlighted Revolut.

– Regarding the products and trends we offer in the Croatian market, we have a comprehensive, multi-currency account designed for seamless everyday transactions. This product provides a range of features: from instant spending notifications and competitive exchange rates to budgeting tools and secure money management on the go through our mobile app. Revolut is committed to transforming our clients’ financial experience with a flexible, customer-oriented approach tailored to the modern Croatian lifestyle – emphasized the fintech.

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At Aircash, they say that the business year has gone according to plan, with a special focus on international markets such as Germany, Austria, Romania, Greece, and Cyprus.

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Hrvoje Ćosić – Aircash company

photo Lider Media

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– This year we continue to step into large Western European markets, specifically Spain, Italy, and France. We plan to expand our business into the Adriatic region, where we are already in the licensing processes and expect to continue achieving the desired growth – stated Aircash CEO Hrvoje Ćosić.

Aircash’s main product is a digital wallet that can be topped up with cash, cards, or bank accounts, offering various functionalities such as sending and receiving money, paying bills, purchasing parking and transport tickets, telecom vouchers, and online gaming.

– The wallet is integrated with the Aircash Mastercard, which can be used for online and in-store purchases worldwide. We will soon introduce many new services, such as a platform for trading cryptocurrencies and digital assets, as well as services for purchasing tickets for concerts and tours of tourist attractions, and train and bus tickets across Europe – reveals Ćosić.

Bait for Other Savers

Keks Pay, a fintech within Erste, has proven to be a complete hit for the bank given its popularity. This payment application, with a presence in over 400 online stores, has become one of the more common payment methods in the field of e-commerce in Croatia. Last year, revenue from merchants, digital bills, and payment invoices recorded an increase of over 82 percent compared to 2023, they emphasize at Erste. The trend of strong growth in the number of Keks Pay users continued in 2024, marking the sixth year of its presence in the market.

– With a record 88 thousand new users last year, mostly clients from other banks, we reached a total of half a million users. The fully digital opening of prepaid electronic money accounts on Keks with the corresponding Visa card continued with a stable trend. The number of new prepaid account users in 2024 thus exceeded 26 thousand – claim Erste.

The bill payment service with Keks, which enabled the receipt of digital bills and their payment without fees across Croatia during 2021, has further expanded its scope and now offers more than a hundred different bill issuers, they add from Erste. By the end of 2024, with over 90 thousand approved requests for digital bills, nearly a million digital bills were paid, saving users of the application approximately three hundred thousand euros in transaction fees.

First and Second Choices

Data on the growth in the number of users of fintech services does not mean that citizens have turned their backs on traditional banks. Namely, the majority of fintech clients still have an account open in one of the Croatian banks. This is also evidenced by the statistics from the Croatian National Bank regarding the number of open accounts in domestic banks, which is slightly increasing. At the beginning of 2024, there were 2.92 million single-currency accounts opened, and by the end of the year, this number had increased by 0.2 percent. Bojan Benjak, a senior manager in the Business Consulting Department of the consulting firm EY and an expert in the banking sector, commented that fintech attracts clients, but traditional banks still play a key role in the financial ecosystem in Croatia.

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– ​Fintech companies have certainly taken a part of the market share from traditional banks. Clients are attracted by lower fees, faster services, and the simple user experience that fintech offers. Fees and functionalities are often one of the main reasons why users choose fintech services. According to research, users are increasingly inclined to try new financial services, and fintech is often the first choice due to its innovation and flexibility. This poses a challenge for traditional banks, which must adapt to retain their clients – claims Benjak.

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Bojan Benjak, senior manager in the Business Consulting Department of EY

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Quick Adaptation

In his opinion, fintech companies still hold the status of technological disruptors in the financial market because their ability to quickly adapt and innovate allows them to attract clients seeking alternative options compared to traditional banks.

– In Croatia, banks have become more technologically innovative in recent years, but they face challenges in integrating new technologies and adapting business models. Moreover, they are facing increasing competition from fintech companies, although this is not yet as pronounced in Croatia as in some other EU countries, such as Germany. Fintech companies often offer faster, cheaper, and more innovative services, which can attract clients who were previously loyal to traditional banks. On the other hand, fintech companies often do not offer all the necessary banking services, so it is often the case that clients continue to use banking services alongside fintech services – emphasizes Benjak.

Hrvoje Ćosić agrees that fintech companies are still market disruptors, but technology alone is not enough for true disruption.

– The key is the people, the creative culture, and the energy of the team behind the solutions because true disruption comes from a combination of technology, creativity, and strategic partnerships – believes Ćosić.

Falling Meteors

In addition to technology, fintech can attribute its rapid growth and meteoric success to regulatory changes. This is especially true for the Payment Services Directive (PSD2), which came into effect in January 2018 and requires banks to allow access to their clients’ account data to third parties, with the clients’ consent. This access enables fintech companies to develop innovative services such as account aggregators and payment initiation services. However, technology and regulation can be (and are) a double-edged sword. Not only for fintechs but also for banks.

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Revolut notes that open banking has ushered in a new era of financial services by empowering consumers with greater transparency, choice, and control over their data.

– However, this development brings significant challenges, especially as our clients become more financially literate and demand more sophisticated, secure solutions. The revised PSD2 mandates financial institutions to implement strong security measures and open API frameworks, which requires significant investments in technology and compliance. At the same time, the integration of artificial intelligence into our services promises improved personalization, smarter fraud detection, and more insightful client analytics, but it also brings challenges in managing algorithmic biases, ensuring data integrity, and maintaining ethical standards – claim Revolut.

The significant changes brought about by open banking, artificial intelligence, and PSD2 have presented traditional banks with new challenges but also opportunities, further creating possibilities for the development of innovative fintech companies, believes Benjak.

– Open banking is a paradigmatic change in the way financial services are provided and consumed. One of the key goals of open banking is to increase competition in the market, which brings better services and lower prices for clients. However, this approach also poses many challenges for traditional banks that must adapt to new rules and client expectations, while continuously remaining compliant with increasingly demanding regulations – assesses Benjak.

From the perspective of catching up technologically, it is not easy for banks, but the competitive advantage of fintech is slowly fading.