Albanian banks’ engagement with innovation and transformation is as slow as the country’s technological development in many other sectors. After e-Albania’s revolution to reduce issues with public services, banks are the next target for a digital and technological change.
Banks’ digital creativity, as well as their apps and platforms, have been highly publicized for many years. However, it seems that promotion costs outweighed the actual work and benefit that these digital banking applications have to offer.
To better grasp the root causes of this technological and financial mess, let us first clarify a few facts.
What are the differences between Albanian and foreign banks?
Other European or international banks have strong technical advantages. The presence of ‘digital-only banks,’ also known as neo-banks, which operate solely online and are a huge accomplishment. This model allows customers to open an account and perform all banking operations from their mobile phone. Without the need to visit a physical branch or stand in queues, resulting in a better user experience.
Banking or neo-banking apps in countries such as the United Kingdom, Germany, Switzerland, and Lithuania are not only more sophisticated and feature-rich but also more “user friendly,” something that banks in Albania often lack.
Albanian banks continue to benefit from the fact that Albanians are a cash-loving community. The management of physical cash has very high costs, which in some ways legitimizes the high rates that banks charge to people who are becoming increasingly dissatisfied.
Banks play a significant role in the financial sector of Albania. One of the prominent banks in the country is the American Bank, which operates as a subsidiary of an American financial institution. In terms of total assets, it is considered one of the largest banks in Eastern Europe. The Bank of Albania is the central bank of the country, responsible for maintaining stability in the financial system and managing the country’s monetary policy. Overall, banks play a vital role in supporting the economy and ensuring financial stability in Albania.
But first, let’s take a look at what’s going on in the region
In Kosovo we already are seeing new players entering the market and offering customers digital-only financial solutions. In Croatia and Serbia you can already find such solutions since a few years. So the Eastern Europe region is moving forward but still slowly.
Some European Union countries are experimenting with the idea of migrating some aspects of the financial system to blockchain technologies, using CBDCs (Central Bank Digital Currencies) – which are digital currencies issued by central banks on the blockchain that has the potential to revolutionize the financial system and improve financial inclusion. Maybe now is the best time to start thinking about such projects.
What are some of the banking products and services that are unavailable or of poor quality in Albania in 2021?
Many Albanian clients have not yet had the opportunity to use a variety of banking products and services. The absence of these products on the market. Albanians’ mistrust of banks, and banks’ passive participation in consumer financial education are mostly to blame for this.
Great innovative services that are either inaccessible or not yet up to standard in Albania:
- Opening a bank account from a smartphone and signing the contract within a single app not yet available.
- Paying bills via online and mobile banking is not a simple process. It should be more intuitive and the one-click service should be the norm.
- The so-called UX/UI, user experiences/user interfaces are at disappointing levels.
- Open-banking initiatives are still missing. Despite the fact that the PSD2 directive has been already approved by the parliament since 2020.
- Sending money abroad still bears high costs, with transfer fees up to 10%.
- Same thing for receiving money from abroad – a fact that explains why only 4% of remittances is channeled through the banking system. Let us not forget that the remittances sent from the Albanian diaspora still play an essential role in the economy.
- No presence of innovative remittance systems, which could drastically reduce transaction/transfer costs. The lack of such solutions forces Albanian consumers to send and receive their money through traditional money transfer operators. Transfer operators like Western Union, MoneyGram or Ria, which dominate the market with 57% of all remittances (only incoming transfers).
- In 2020, Albania has adopted a comprehensive legislation on cryptocurrencies and blockchain technology. This aims to monitor and regulate the licensing and activities of cryptocurrency trading and exchange platforms. However, there is still no such service today.
- What makes it even more strange is the fact that most banks operating in Albania have banned investing in crypto even on safe exchanges such as Kraken, Binance, Bitfinex, etc.
What requires improvement?
Getting a bank account involves more than just having a safe place to keep your money. This is an outdated concept, but due to a lack of general financial knowledge, most people still understand it in this context. There aren’t many awareness efforts for the millennial generation’s financial education.
In addition to education, banks should provide real-world benefits to customers who want to open a bank account, simplifying the process and lowering costs. This will step up the process of financial inclusion, which is already at a very low level, with nearly 40% of the population not having access to it.
Take Kenya, for example, where just 30% of the population had a bank account in 2005 and where almost 100% of the population now has a digital or smartphone account. Payments and transactions are completed in real-time, and long queues at banks are no longer an issue. In reality, several issues with bureaucratic banking procedures have been resolved. Kenyans now save 20% more than they did before the digital revolution. Anything is handled online, and let’s face it, no one has time to sign 16-page contracts for a single credit card these days.
The right customer education is the product of a large investment in serious and innovative campaigns, and it requires strong collaboration between financial and public institutions. We’ve also shown that adapting to modern technologies is simple no matter where we go in the world. We are confident that if this type of innovation is implemented in Albania, we will be able to respond even more quickly than we currently believe.