Poland is quickly building a reputation as one of Europe’s banking hotspots, with digitisation expanding fast. Its banks are young, dynamic and open to innovation. So how long can they sustain the pace of change? Abi Millar talks to Lukasz Wiktor, director of the omnichannel department at mBank, Andrzej Sierpiński, managing director at FINANTEQ, and Piotr Kowynia, CEO of Nest Bank, to find out.
If asked to run through Europe’s banking hotspots, you might not put Poland at the top of the list. The Polish banking sector isn’t as established as France or Germany’s, and it hasn’t quite gained the tech-savvy reputation of the Baltics. However, omitting Poland from the equation would do a disservice to the dynamism of the sector.
Over the past 30 years or so, Polish banking has undergone an intense transformation. During the democratic transition of the late 80s, this formerly Communist country shifted towards a free market economy, and its fledgling retail banking sector grew quickly from a standing start.
Dozens of new banks were established, reaching at least 70 by the turn of the century, while the state-owned banks were privatised. This was followed by an ongoing wave of consolidation, resulting in around 30 commercial banks today.
In other words, most Polish banks lack deep roots – and their relative youth has given them a willingness to embrace change. What’s more, the sheer number of banks has fostered competition between them, cementing Poland’s position as one of the European leaders in digitisation and mobile banking. Its fintech market is the largest in the CEE region, with around 190 fintech companies operating here as of 2019.
“Poles are a nation very open to innovation,” says Lukasz Wiktor, director of the omnichannel department at mBank. “They trust modern technologies and quickly adopt new ones. An example would be the adoption of mobile banking. In the last quarter of 2021, over 10 million Polish banking customers used banking only from mobile devices. Over 90% of card transactions in Poland are made using contactless transactions. This creates a very good climate for the development of digital banking.”
He adds that banking in Poland, through its newness, skipped several stages of development. Certain products and services, such as cheques, have never been popular, which meant people were able to quickly build trust in card payments and electronic banking.
“mBank, as one of the pioneers in the market, offered ‘full digital’ banking more than 20 years ago, which is now a market standard,” he says. “The pandemic accelerated the digitisation of the economy in Poland, and banking was ready to face this challenge.”
The beginnings of digitisation
Andrzej Sierpiński, managing director at FINANTEQ, recalls that when mobile banking first began in the 2000s, the Polish banking ecosystem was unusually receptive.
“There were and are excellent conditions for the development of digital banking in Poland – a large number of banking institutions, strong competition among them, the search for new areas of development by technological companies such as ours, and, finally, the boom in smartphones,” he says. “More and more banks were to invest in new technologies, demand for such solutions grew.”
The result was that Polish banks took their first steps towards mobile banking earlier than most of their international peers. As a software company focused on mobile finance, FINANTEQ itself played a part in this transition. In 2007, the company signed a contract with Raiffeisen Bank Polska to implement its first native smartphone application. Over the months that followed, the app was reconfigured to suit different operating systems.
“To my knowledge, the iOS banking app we developed for Raiffeisen Bank in 2009 was the world’s first mobile account access app for the iOS platform. I found no information that anyone had done this before at any institution in the world,” says Sierpiński. “Until then, banking services in smartphone browsers seemed to be the standard. The industry was cautious about apps and did not believe they would be the future.”
Of course, it didn’t take long before attitudes changed – by 2011, two additional Polish banks had approached FINANTEQ for applications, and further projects followed in the years to come.
“It was the moment when financial institutions began to believe that native applications installed on mobile devices are the future of digital channels, and that they can be used to reach customers where they happen to be,” says Sierpiński.
Today, digital banking is so entrenched, it is hard to remember a time when banks were sceptical. Almost every Polish bank now offers its own mobile app, and user numbers are growing. One study found that, in the first quarter of 2021, 38% of the Polish population actively used mobile banking applications, around half of whom performed their financial operations via a smartphone alone.
Most Polish banks have also signed up to BLIK, a countrywide mobile payments system similar to Google Pay. As of 2021, almost a quarter of Poland’s population were active BLIK users, and regularly making payments via online banking.
Many banks have also made leaps into m-commerce, for instance by allowing customers to purchase public transport tickets and parking spots through their apps. Several have implemented FINANTEQ’s e-commerce platform Superwallet, which enables users to order taxis, buy tickets for cultural and sporting events, and purchase takeaways, all without leaving the app.
“Poland is a great place to develop new models for the global financial market,” says Sierpinski. “The market is changing all the time, digitalisation is progressing. Banks, still competing with each other, are experimenting, looking for new digital solutions. They are wondering how to reach out to new customers, how to make their offer more attractive to survive in an increasingly competitive environment.”
Examples include Alior Bank, a self-styled ‘digital disruptor’ launched during the financial crisis in 2008. The bank has invested heavily in fintech partnerships and projects, including AI and biometrics, and has scrapped many of its branches in favour of further tech investment. It was also the first bank in Poland to use public blockchain technology.
Poland’s largest bank, PKO Bank Polski, won first place in Finnoscore’s 2020 rankings, which compares the digital competence of European banks. That year, its awardwinning IKO app registered more than 1bn log-ins for the first time, while clients had more than 1m interactions with its AI-based voice assistant. The bank also runs an acceleration program for fintechs called ‘Let’s Fintech with PKO BP’.
Another frontrunner is the neobank Nest Bank, which builds convenient digital banking solutions for small businesses, and has worked with fintechs to develop m-commerce services.
“Our clients were some of the first in Poland to open business checking accounts online, within minutes,” says CEO Piotr Kowynia. “Innovation continued with the first online business loan that we offered last year. We took full advantage of the possibilities offered by open banking, introduced by the EU directive PSD2. Small companies can now take out a loan without leaving their office at home. Nest Bank is also the first bank in the world to introduce Visa Mobile, which means its customers can access the service directly in their banking app.”
All this said, while Poland may be a great test ground for innovations, digitisation doesn’t really have much to do with who has the flashiest tech. It’s more about the simple goal of improving the user experience: making interactions more seamless, and rolling out personalised solutions that keep up with customers’ changing needs.
“Perfect digital banking is the one where the client always has access to services that facilitate his daily needs,” explains Wiktor at mBank. “Statistically, clients do not want to focus on banking and do not have much time to think about managing their finances. The bank should be running in the background.”
Key to this strategy is an omnichannel approach, in which the client can start their interaction through one channel and easily switch to another. Here, the idea is to support employees as well as boosting customer convenience.
“We anticipate intensive development of digital channels, but our advisors are an essential part of these channels,” says Wiktor. “We will improve the tools of remote communication and collaboration, which will enable employees to effectively support clients without having to visit the branch. Automation techniques, such as a voice assistant, chatbot or intelligent search tools, are a way to reduce costs and relieve our employees from repetitive tasks.”
He sees a clear opportunity in the form of the cloud, which as yet has not realised its potential in Poland. Cloud solutions will enable data analysis at an unprecedented level, allowing banks like mBank to better adjust their services and take a personalised approach to each client.
“We do not always need be the first. We want to improve the services and functionalities that are used by our clients every day, so as to build deeper, systematic relationships,” says Wiktor.
Challenges and opportunities
Of course, while the Polish banking sector is thriving by many measures, it is not without its challenges. According to a 2021 paper by Stefan Kawalec, president of the consulting company Capital Strategy, bank lending to companies is increasingly being replaced by state aid. Kawalec believes the ensuing reduction in ‘credit allocation efficiency’ may harm the Polish economy more generally, even contributing to a drop in GDP and fall in living standards.
Banks are also facing risks related to their Swiss franc mortgage portfolios, which may drive further consolidation in what is still quite a fragmented sector. Central bank governor Adam Glapinski has warned this may adversely affect competition.
On top of that, banks are facing high regulatory burdens and high costs. This is forcing the need for solutions with a clear business value, delivered to a reasonable budget.
“One way to achieve this is to create software teams that work for the bank in a stable composition over a long period,” says Sierpinski. “Another approach is to use no-code solutions that solve some software development problems. Since a large part of bank development is done by outsourcing companies, banks must take care of proper onboarding of developers, explain their business and show them the limitations.”
Despite the larger economic challenges, the possibilities for innovation are extensive. And with so many digitally savvy institutions fighting it out in the marketplace, we might expect the pace of development to continue for some time to come.
“The Polish payment market is one of the most diverse and open to innovation in Europe,” says Kowynia. “Banks in Poland are racing to innovate in mobile payments, and the Covid-19 pandemic has only increased the pace of this race.”
This article appears in the Summer 2022 edition of Future Banking