The FINANCIAL — After introducing the first Cloud based payment platform MobilePay in Georgia and the Caucasus VTB Bank Georgia plans to equip its ATMs and banking kiosks with NFC technologies. With this innovative product the Bank has left behind its competitors and plans to maintain leadership in the future.
More than 600 VTB Bank customers are already enjoining the ease of purchasing a desired item by simply waving their mobile phone near a POS terminal. Banking card and sticker soon will the past, as MobilePay is so simple, secure and fun to use.
“MobilePay is a payment system which enables customers to upload as many banking cards as they want to it. Payment is done solely with one’s mobile device. Further development of MobilePay will be ATM withdrawals via mobiles. In near future VTB Bank Kiosks will also be able to identify customers just via MobilePay. There are unlimited opportunities. So, this is a product with a big future,” Valerian Gabunia, Chief Retail Banking Officer, Member of the Board, told The FINANCIAL.
“We expect that the number of active users will reach over 5,000 by the end of the current year. VTB Bank Georgia is the first bank in the region to have launched this product. Georgians are very open to innovative products, so we expect it to be very popular among our clients and we are sure they will enjoy the privilege of banking with us. On the other hand we are looking forward to see customers switching to VTB from other banks,” said Gabunia.
In Gabunia’s words, VTB Bank Georgia has ambitious plans becoming a market leader in technological innovations. “We expect to become the number one importer of hi-tech banking products in Georgia.”
In his interview with The FINANCIAL, Gabunia talked about the newly launched product MobliePay. In addition, he gave his estimations of the current year for the Bank and shared his expectations for 2016.
“VTB Bank Georgia plans to offer lots of innovations to its customers in 2016. The Bank will invest a lot in technologies and further develop alternative banking channels. Only 5 branches will be added to our branch network. We do not expect to have increasing demand from borrowers due to the slowed economic growth of the country. However, we expect a slight growth of our market share next year.”
Q. Who comprise the main segment of Mobile Pay users?
A. Every owner of an Android smart phone, equipped with an NFC is the target segment. We are the only Bank to have launched this service, so MobilePay service is allowed exclusively for the customers of VTB Bank Georgia.
Georgians embrace innovations quite rapidly. In addition, our citizens are already using contactless payments on municipal transport. There is good ground for implementing innovative technologies in Georgia. Accordingly, the target of our new product is a wide range of the population, regardless of age.
Over 95% of POS terminals are equipped with the contactless system. So, mobile payment is available in almost every spot. Contactless payment is not yet available via ATMs but VTB Bank will soon equip them with NFC readers. I am sure that other banks will also follow us.
Q. Card payment is increasing in Georgia on an annual basis. Meanwhile, cash is still dominating. What is the role of the banking sector and in particular, VTB Bank Georgia, in speeding up this trend?
A. The share of cash operations in the country is still big. Promoting cashless operations is first of all beneficial for banks. Keeping cash in ATMs is very expensive for us. We have quite a solid sum of cash in our ATM’s , which does not generate any direct revenue. Some positive news is that since 2010 cashless transactions have increased in Georgia by two and a half time. The rough estimate share of cashless payments amounts to 15% here in Georgia. In European countries card payment transactions make up over 47%. Eastern European countries are being left behind. Meanwhile Nordic countries, Norway specifically – plans to be the first cashless country. So, the global trend shows that minimizing cash is a future trend. Georgia is following this tendency. On its side, the role of the banking sector, we see our mission in offering secured, trusted and flexible instruments for payments. We also provide proper infrastructure in order to allow cardholders to make a cashless payments. Card payment is one of the guarantors of transparency of the economy. It minimizes the share of shadow economy. Accordingly, promoting this payment system is in the combined interest of banks, the Government and the whole of society. From the current outlook, I am optimistic that cashless payments will amount to over 50% in Georgia in 10 years’ time.
Q. Due to external risks 2015 has been quite a difficult year for the Georgian economy. How would you estimate it for VTB Bank Georgia?
A. It is quite a difficult year. We witnessed huge devaluation of the currency, by 30%, just in 2015. It was not only a local problem. The processes have been developing with the same scenario throughout the whole region. Luckily, we have found out that our economy is more stable than those of our neighbours. Economic growth indicators are good proof of that. We expect the economic growth of Georgia to reach a little over 2% in 2015. The growth rate of Azerbaijan will be similar. Kazakhstan and Armenia will stay at the same level, with no growth. Ukraine, Russia and Belarus will all face decrease of GDP. The impact of these events has had slumped demand for loans. The number of applications for loans has been reduced by 15% at our bank. It is an important factor for the economy. People have stopped spending as much as they used to do before. We have also become cautious of crediting in foreign currency, due to the high risk of devaluation. The increased number of restructured loans was the second problem that the devaluation carried for the banking sector. Growing volume of overdue loans has been the third problem.
Q. What are your expectations for 2016?
A. We expect the country to have over 2% economic growth next year. It is important to mention that 2016 will be election year in Georgia, which generally has not a positive impact on economy and business. It is important to have a close look at the situation developing in our region. We have to consider Georgia as a part of regional economy. The situation developing around us is always influencing our country as all the neighbouring economies are tightly linked.
Our expectation are that Azerbaijan, Kazakhstan and Armenia will have maximum 1-1.5% of GDP growth. Whilst Russia, Belarus and Ukraine will end the year with no growth.
As for the banking sector, we expect to have growth in 2016. However, this growth will not be significant. We do not expect an increase in demand for loans. Over 60% of the Georgian banking sector consists of foreign currency assets. That means that the data changes immediately, in line with the change of the exchange rate making the size of the market difficult to predict. If we had assets only in the national currency, fluctuations would not have any impact on it.
Some people state that the banks are profiting from current situation and generating even higher profits than previous years. Above statement is not correct, as interest incomes deriving from interest bearing assets denominated in foreign currency is the only driver of profit growth.
Q. What is your position regarding the recently cancelled police eviction?
A. There are two main problems this decision will bring. The first is that the processes of eviction will be prolonged in time. The second is extra expenditure associated with the process.
At the same time, we understand that involving the court in an eviction process is an international practice. Despite some inconvenience, I do not believe this regulation will have any dramatic impact on the sector.
Q. The Vice-President of NBG has recently criticized commercial banks for not properly delivering important rules to their customers, like effective interest rates on loans, currency risks and financial expenditure. What is the reason for that?
A. The first survey was conducted in 2012. If we compare the recent data with the previous ones, we will find a huge advancement in this regard. The main concern of NBG was that commercial banks’ employees were not always delivering this information verbally. As the survey has shown, only 50% of workers proactively informed their customers about effective interest rate and risks of currency fluctuations. Despite that, all above information was provide in written to all the customers on the cover page of their loan and deposit contracts.
The survey has shown us that we need to put even more effort in this direction. I am optimistic that the results of the next year will be much better, just as the current year have been better than those of the previous years.
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