Digital technology is the future of banking in Armenia
Media Room

YEREVAN, November 5. / ARKA /. Digital technologies continue to progress rapidly, penetrating into virtually every area of our lives, including the banking business. The ongoing globalization and fierce competition made the largest banks in the world shift to a new business model - digital bank model, enabling their clients to make transactions by using remote channels such as Internet and mobile devices.

Armenian banks too try to follow the new trends in order to become more competitive in the market. To that end Ameriabank held recently a plenary discussion on the topic of "Is the spread of remote banking services in Armenia grounded?". The event brought together representatives of Ameriabank, HSBC Bank Armenia, Beeline and Ucom telecom providers, the Central Bank of Armenia, as well as information security experts and representatives of IT companies. The participants discussed the current trends in the banking services, as well as the prospects for the use of remote services.

Digital Bank is the strategy of the future

The use of digital technologies is not something new for the global banking business. As for Armenian banks, they began to use digital technologies quite recently. More precisely, they have begun to actively introduce various channels of remote services, particularly, the online and mobile banking only this year.

According to a study by Ameria advisory firm, only three of the 21 banks operating in Armenia provide no online banking services, in particular, for individual customers. The survey, conducted by the advisory firm in 11 towns of Armenia, revealed that at the end of 2014 only 2% of bank customer used online banking, up from 1.3% in 2013.

However, the Armenian banks still have much room for development. Thus, the global percentage of online banking use is 28.7%, with the most active users being in North America (48%) and Europe (37.8%). The most active users of online banking are in Iceland (91%). Although the level of the use of remote service channels in Armenia is still low, market experts believe that a digital bank is the future of the banking business in Armenia.

Ameriabank retail operations director Arman Barseghyan says widespread use of remote services in Armenia has no alternative, but this will take time. According to him, the success depends primarily on the general welfare of the population. He says these services are unavailable for certain segments of the population, the majority of who are residents of provinces where the level of the use of Internet, smartphones and simple banking services is still very low.

Mihran Muradyan, the head of the retail operations department at HSBC Bank Armenia, says the future of banking operations in Armenia depends on the use of digital technologies. According to him, in some countries, for example, in Singapore, bank branches do not use the human resource and the entire work is done entirely in digital format.

According to experts, the development of technology in the world has changed dramatically not only businesses, but also the people, their lives, habits and the way of thinking. According to Vakhtang Abrahamyan, a member of the Armenian Central Bank Board, development of digital technologies in Armenia’s banking sector is linked with the young generation that does not imagine their life without smartphones and gadgets.

"The 21st century bank customers who master new technologies very quickly will require new technologies, and the banks will have to follow these rapidly changing trends," he said. These trends, according to Abrahamyan, are confirmed by the example of the UK, where 40% of bank customers from the millennium generation have never visited their bank. "

No progress without risk

Naturally, the development of new technologies brings about new risks, in particular, the threat of fraud and hacker attacks. The Central Bank of Armenia, as the regulator, pays great attention to the safety of the banking system and banking products, including online banking. All the banks in Armenia have their internal set of rules under which the banks must conduct periodically - monthly or quarterly - "penetration testing." International safety certificates are also effective in the country.

Nonetheless, the risks are still present. According to a cyber security expert Samvel Martirosyan, the majority of Armenian banks are equipped with quality protection systems against hacker attacks, but there are also 4-5 banks with serious vulnerability that expose their online customers to danger. He added that no serious hacker attacks on domestic banks have been reported yet.

"We are not interesting yet to hackers because of small online market of the country. However, the market is growing and no one can rule out hacker attacks in the future," Martirosyan said. He, however, considers that potential vulnerability of banks to hacker attacks is a theoretical threat, but nevertheless it must be taken into account by the banks.

Non-bank players and banks are partners

The development of digital technologies today is ahead of time, with banks having little time to transform their activities in order to adapt to new realities and fully comply with modern trends. Therefore, along with the banks the other non-bank institutions, in particular, payment systems and telecommunication companies, began to provide financial services.

According to many bankers, new digital companies pose a significant competition to the main types of banking services by depriving the banks of part of their profits. One such example is Google, running the plastic debit card, which is used by millions of consumers in the Google Wallet. In many countries PayPal, Apple Pay and other mobile banking services and wallets rank first in the provision of online payment services.

According to Maxim Khalmatov, the head of information technology unit at ArmenTel telecommunications company, banking and telecommunications companies in Armenia are not going to compete with banks in the market of financial solutions, but want to become partners. He believes that that will happen, largely due to the regulatory peculiarities of Armenia and its market characteristics, in particular, the behavior of banking institutions and telecommunications companies, as well as due to the limited market.

In such circumstances, the banking business will be preserved in its pure form for a limited segment of customers only, in particular, for corporate and premium segments, while the combined products and services, where banks and non-bank player will have respective roles in the provision of customer services will be increasingly dominating in retail operations market.

Updated 18.11.2015, 14:49
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