Page 52 - FintechAtlas2019

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Digital catch-up
At full speed in CEE
In this issue of the CEE Fintech Atlas we from Raiffeisen RESEARCH have tried to estimate the speed with which
the banking sector across CEE is catching up in the area of digital penetration. We have done so by looking at previous catch-up rates (in such areas as internet usage or digital banking penetration). Then we added expected catch-up rates in the area of digital banking services (e.g. digital payments, use of the internet for purchasing and payment) to the available penetration rates (from 2017/2018). Based on these assumptions, we expect about 66% of the population in the CEE core markets (Austria, Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Kosovo, Poland, Romania, Russia, Serbia, Slovakia and Ukraine) to use digital banking services in 2020. This
is about 16 percentage points more than the nearly 50% suggested by the 2017/2018 data. By comparison, the level of penetration of traditional banking services is expected to have increased by only 2 to 4 percentage points over the same period (2017/2018 to 2020).
The so-called catch-up rate in the penetration of digital banking services (compared to the most mature markets) is thus about 5 percentage points per year. Such convergence rates are to be expected, especially in the early or middle phases of a catching-up process (such as the previous spread of conventional banking services or of internet penetration and usage across the region). With regard to the CEE sub-regions, we continue to see Central European (CE) markets in the forefront, with a digital penetration rate
of just below 80%. And we estimate that the current average digital penetration rates in the Eastern European (EE) and the Southeastern Europe (SEE) markets are almost 70% and 50%, respectively. We continue to regard the CE markets
of Poland, the Czech Republic, Slovakia and Slovenia, together with Russia and Belarus, as the leading digital banking markets (in terms of the active use of digital banking services by the general population). In these countries, digital penetration rates are above the regional average. Hungary and Croatia are close behind. Moving forward, however, the rate of growth in the penetration of digital banking services in the above-mentioned countries should slow down. In most SEE markets and the Ukraine it is conceivable that penetration rates will remain similar to those of recent years. Overall, however, levels of digital sophistication in the individual CEE markets will continue to differ widely, even if the less developed markets are catching up strongly.
Given the assumptions outlined above, the difference in digital penetration compared to Western Europe and/or leading Western European digital banking markets should also have narrowed significantly in recent years (from about 25 to 30 to about 15 to 20 percentage points in 2020). Furthermore, the total number of people actively using digital banking services in the CEE core markets may rise to close to 200 million in 2020 (based on our estimate of a digitally active population of about 150 million in 2017/2018). If the Baltic States and Turkey are added, this figure should rise to about 265 million people.