PFR’s President: Banks are facing a great threat. They have to compete not only with each other, but also with financial services providers

“Poles have been exceptionally quick to embrace new financial and payment technologies. Among other factors, this has made Poland’s retail banking, payment system and credit products some of the most unique globally,” observed Paweł Borys, President of the Polish Development Fund. This has opened up a vast space for fintechs – innovative financial start-ups which are starting to challenge banks. Blockchain, the technology behind cryptocurrency, will be one of the leading technologies to change the financial services sector in the years to come.

 “Poland might gain worldwide recognition as a market providing many interesting financial-services technologies and home to internationally acknowledged fintechs. We’ve had some success in payment technologies, such as the BLIK innovative mobile payment system. But there are other innovative technologies we can be proud of, and don’t forget our top IT specialists. We’re leading innovators in the retail banking sector in particular, and our payment system and credit products are among the most unique in the world,” said Paweł Borys, President of the Management Board of the Polish Development Fund.

Compared to Europe, the Polish financial services market is highly innovative. More than 14 million Poles are active users of online banking, with more than 5 million having bank apps installed on their smartphones. According to PwC, a whopping 61 percent of mobile-phone owners use online banking – more than anywhere else in the EU. With more than 2 million customers, the BLIK mobile payment system has been very popular, too.

Poles have been exceptionally quick to embrace new financial and payment technologies, and most of them go online for banking (according to National Bank of Poland surveys, only 8 percent use traditional banking services provided at bank offices). This has paved way for new innovative products and services.

The answer to customers’ needs lies in fintechs – online-based, innovative financial start-ups. According to a PwC report called “The Financial Sector is Going Fintech”, almost two-thirds (57 percent) of bank customers would be willing to replace human advisers with a technological solution, and fintechs are likely to take over up to 33 percent of the international financial services market in the years to come.

 “Banks are facing a great threat. They are competing not only with each other, but also with other providers, mainly e-commerce platforms and other commercial entities which offer financial services. Regulators all over the world have welcomed this competition, so banks have to learn to be quick to invest in new technologies and respond to the rapidly changing customer preferences. Future banking will be more online-based and technologically advanced, as well as more in tune with customer preferences, offering a wider range of services,” Paweł Borys predicted.

Poland is one of the fastest-growing fintech markets. Deloitte estimates its value at EUR 856 m. But the Polish market’s potential is yet to be fully tapped – venture capital investment in fintechs in Poland relative to the GDP is still only 0.005 percent, while globally, it accounts for about 70 percent (Deloitte, 2017).

In the coming years, innovative start-ups might change the balance of power in the financial sector and challenge banks. EU legislation has contributed to this development – the PSD2 Directive aims to re-regulate the financial services market to reflect the rise of new providers and the digitisation of the financial industry in recent years. Starting last year, the Polish Financial Supervision Authority (KNF) set up a financial-innovation group whose task is to make sure fintechs can thrive on the Polish market.

In PFN President’s view, blockchain will be the leading technology to bring about a major change in the financial sector.

 “Blockchain is a new technology which facilitates certain types of financial transactions. Recently, it’s been often associated with cryptocurrency, but what it can actually do is make banking and financial services safer, and more immune to cyber-attacks, which are a growing threat. This technology is very effective, allowing users to make payments, hold accounts and carry out financial transactions at almost no risk from hackers. For the financial services market, this is a great asset, as it ensures safety across the financial system as well as for customers,” Paweł Borys said.

Blockchain is a distributed database based on mathematical algorithms and cryptography. It records economic interactions and financial transactions between its users. Blockchain consists of data blocks. Each block contains a set of encrypted transaction data. Individual blocks are linked to each other chronologically to make up a continuous chain. Blockchain data cannot be modified without authorisation, since an unauthorised modification would require changing the entire chain.

Blockchain is resistant to cyber-attacks, as it is more difficult for hackers to gain access to many user accounts than to hack into a single database. It is estimated that it would take the computing power of half the entire Internet to compromise blockchain’s security.

 “It is said that blockchain has exciting prospects, both as a financial services technology and generally as a technology that can effectively facilitate various transactions in the public and financial sectors. I’m sure it’s only a matter of time that it becomes widely used in Poland as well,” Paweł Borys predicted.