Deloitte Study: Czech Banks and Users Best Prepared for the PSD2 in CEE
Prague, 15 January 2018 – Czech banks are the most aggressive in their PSD2 strategies in the CEE region. Czech users also show the highest use of digital banking channels in the region. These are the results of two surveys conducted by Deloitte among European banks and banking customers in Central and Eastern Europe. PSD2 took effect in the Czech Republic and most European countries on Saturday, 13 January, opening the banking market to FinTech companies and other third-party providers.
The European PSD2 Voice of the Banks survey conducted among 90 EU banks provided insights into how the banking community has been preparing for the new “open banking” era, with a special focus on the Central and Eastern European region. The CEE PSD2 Voice of the Customer survey conducted among banking customers from Central and Eastern European countries analysed their digital banking preferences and readiness to adopt new innovative PSD2-enabled services.
“Market players with a licence will be able to offer new types of payment services – Account Information Services (AIS) and Payment Initiation Services (PIS),” said Radek Musílek, Attorney-at-law at Deloitte Legal.
Challengers vs. minimalists
CEE banks tend to be less aggressive in their PSD2 strategies than their Western European peers. Two distinct groups of CEE banks have emerged:
- “Challengers”, represented by large universal incumbent banks, are the players most open to the opportunities arising from PSD2. A significant majority are pursuing a cooperative strategy involving other parties.
- “Minimalists”, typically medium-sized and smaller players, often follow a defensive compliance-only approach or have not yet settled upon their strategy.
A significant proportion of Western European (WE) banks pursue an aggressive PSD2 strategy aimed at gaining larger market share. However, the Czech banks are just behind their WE peers as regards the degree of aggressive strategies.
Future of PSD2 in retail, payment services and lending
The biggest impact is expected in retail banking, payment services and consumer lending. Many banks are considering alliances with FinTechs. Cooperation with FinTechs is considered by a large number of banks whereby a high level of interest has been declared by CEE banks in partnering with FinTechs. CEE banks and their WE peers alike expect PSD2 to have the biggest impact on retail and SME banking, while they identified the areas of payments and consumer lending as key opportunities.
Amazon and Google not yet perceived as competitors
While CEE banks are slightly more worried by the FinTech players, WE banks think that large banking incumbents are best positioned to benefit from PSD2.
New digital challenger banks also came through quite strongly as threats perceived by banking incumbents; surprisingly, BigTech companies like Google and Amazon are not yet perceived as major competitors, despite their proven ability to disrupt the payments market.
Czechs in the lead of using digital banking
Most of the CEE banking customers still use multiple banking channels, despite the ongoing shift towards digital and mobile. The CEE region can be split into two distinct groups: while Romania and Bulgaria remain below 20% share of digital banking channels, there are more mature digital markets represented by Poland, Hungary, Slovakia and especially the Czech Republic already reaching up to 70%.
Despite the high internet and mobile penetration in many countries, over 11 million CEE banking customers (1.3 million Czech customers) remain “branch” or “internet hostages” – users who prefer to perform all their banking activities online or on mobiles, but are forced to use branches or internet banking as many transactions are not yet digitised or supported by mobile banking applications.
This segment represents a clear opportunity for agile PSD2 challengers to win their direct customer relationship through advanced digital offerings leveraging PSD2. 42% of CEE Multichannel and Digital customers quoted more advanced digital channels as one of the top 5 reasons for switching to another financial services provider. On top of that, a wider range of products and services offered by other providers also played a role in the Czech Republic.
“For banks, PSD2 shall be a clear message to become proactive in their digital transformation efforts. Banking services have – due to the closed and heavily regulated nature of the banking system – stayed aside of the innovative digital offerings provided by the fast growing eCommerce and FinTech sectors,” said Štěpán Húsek, Partner and Technology Leader of the Deloitte Central Europe PSD2 Programme.
Czechs are the least willing to give consent to sharing their data
Despite the fact that up to 35% of CEE banking customers indicated they would be comfortable with sharing their account information with another bank in exchange for innovative online services, with mere 18% the Czech Republic remains the most conservative country. The average consumer awareness about open banking and its benefits remains low across all CEE countries. Willingness to share data with non-banking entities is even lower, with FinTechs having the lowest confidence of customers.
Czech users would be most willing to share their bank account data in exchange for a personalised offer (eg a loan) if this positively affected the cost of product or service (eg credit score).
Market impacts likely only after one to three years
PSD2 has a clear disruptive potential but its adoption on the market (including the Czech Republic) will be a long-term process. Most CEE and WE banks expect the biggest impact of PSD2 to be felt between one and three years after its effective date. Some WE banks are more optimistic and expect effects already within the first year, due to the more mature FinTech sector in WE.
“PSD2 is not expected to have an immediate ‘big bang’ impact on the financial services sector. Rather, its effects will be gradual and irreversible. PSD2 challengers who wish to generate profits will need to invest in building trust and awareness among customers in order to leverage market opportunities” added Petr Brich, Director of the Deloitte Central Europe PSD2 Programme.