Where do Hungarian banks stand in the region in terms of digitalization?
Currently 13 Hungarian banks have mobile applications with great difference in quality. It is worth to know thorough international research to see the Hungarian market. Deloitte has investigated 248 banks in the EMEA (Europe, Middle East, and Africa) region in terms of digital maturity (full research is available here).
According to the research, in the CEE region out of 9 countries, Hungary stands at the 7th place in the aggregated list (and only Romania and Bulgaria are behind us).
The research divided the banks based on digitalization into 4 groups:
- Smart followers
According to the research, Hungary belongs to the group of adopters. However, they also highlight mobile banking features that are innovative compared to the EU average: biometric identification during onboarding.
What does digitalization mean in case of banks?
Bank digitalization is usually referred to the digital transformation of traditional banking products and services. Banks that are pleased with this solution can only hope to stay in their existing position in the market.
Banks’ digitalization maturity does not develop without the pressure coming from the market and customers, as Hungarian banks belong to the group of digital adopters. On the Hungarian market, customers are not putting enough pressure on banks, requiring the services they want to use on their computers or mobile phones.
At the same time, there is no competitive pressure from other market players. The services provided by the current mobile bank applications go head-to-head with each other and do not provide technical or service novelties compared to their CEE competitors except for biometric identification. Market pressures can be expected from European digitalization champions who are expanding abroad in the near future.
From the customer’s side, the digitally matured Z generation can exert pressure on banks. The members of the generation, also called digital natives, are now 20 to 25 years old and have specific needs for fast and clear banking applications. For whom, usability can also be crucial when choosing a banking application. This is corroborated by the 50,000 Hungarian Revolut users, who use an excellent British UX application instead of Hungarian mobile banks.
Let’s see 2 Hungarian examples: OTP Smart Bank and K&H mobile bank
Based on the Google Play Toplist, the 2 most popular Hungarian mobile banks are OTP Smart Bank (Google Play: 500,000+ downloads) and K&H (Google Play: 100,000+ downloads).
As mentioned already, while onboarding, when the customer registers and gets acquainted with the interface, Hungarian banks offer an innovative solution compared to the average EU’s and can be classified as digital champions at this phase of the customer journey.
There are 2 ways to log in to OTP and K&H after registration: face recognition or fingerprint (if the mobile device is capable). Both applications can be easily accessed in a short time. Setting up biometric identification during registration is explained simply and with a clearly visible customer path. In both applications, QR code is used to connect to e-bank and the approval of the transaction, which simplifies the banking process from the users’ point of view. For K&H, NFC-based payment is also available, so users can pay by their phone when touching the card reader.
The basic functions can be found in both applications: account history, initiation of transactions, mobile balance upload and card limiting modifications. These services are accessible through a clear user interface and have a good visual hierarchy.
In addition, in the apps, the nearby ATMs are accessible. ATMs are still in use as a significant part of the banking process. ATM and branch search are facilitated by filtering criteria optimizing user experience. K&H and OTP banks can be screened by opening hours, ATM and nearby branch and which one offers premium services. They can be searched transparently and comprehensibly. In 2015 White Label banking app the designed by Ergomania was innovative by letting the user search for ATMs and branches without logging in.
Innovative solutions include OTP’s ability to create voice-based transfers which work using basic technology. Currently, based on a pre-set partner template and the amount a transfer can be set, which only needs to be confirmed on a summary page. It should also be mentioned that the dashboard screen can be personalized, the user can choose which information one considers important and can see without logging in.
Impact of PSD2 and Fintech companies on mobile banking
On one side, due to PSD2 regulation, banks have to make significant changes in mobile banking, not only in terms of technology but also in the user interfaces. This can be a strong motivation for Hungarian banks to redesign existing applications from a user perspective point of view.
On the other hand, emerging foreign Fintech companies, which provide their customers a smaller segment of current banking services, are getting more widespread in the EU. A good example of this is TrasferWise, which already has a Hungarian office, Revolut or N26 mobile bank, where though it is not possible to meet a complete bank portfolio, the customers open to digitization are served at a high standard. The opportunity is given to the Hungarian mobile banks as well to develop their mobile banking service palette or to work with Fintech for open banking.
Open and beyond banking will decide who becomes a champion.
Open banking is a platform-based business approach where data, processes and business functionalities are available within an ecosystem of third-party developers or FinTech startups. This means that banking products and services appear on an integrated interface from a thirds non-bank party. For open banking, the Simple by OTP application is a good example (Ergomania redesigned it in 2017).
We can talk about beyond banking when from one application we not only can do banking but also buy out-of-bank services. For example, in addition, to initiate domestic or foreign currency transfers, we occupy a hotel room.
What does the future bring in mobile banking?
Biometric identification is expected to spread widely in the banking market in 2019. What to focus on and consider are these trends: voice-based activation, product stories, content, personalized interface history. Transparency and comprehensibility will be the keywords of 2019.
The question is whether Hungarian banks are moving their product development towards open or beyond banking after the introduction of PSD2 and the immediate transfer that they are now focusing on. To what extent will the slow market reaction speed up due to the Fintech companies targeting Hungary? To what extent does market pressure help the digitization of Hungarian mobile banks? Is there a bank that integrates blockchain technology into their system, such as mobile pay, in addition to product development? Many questions arise about the digitization of banks. What is sure is that anyone who wants to become a digital champion must take action and pay close attention to this area.