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Banks vie for savings clients

Catering to affluent clients, financiers personalize services

July 16th, 2008 issue

By Adrian Chen

For the Post
Growing wealth

Total personal account deposits in Czech banks, 1997-2007, in millions Kč

Date / Residents and nonresidents total
Dec. '07 2,109,765.6
Dec. '06 1,807,261.3
Dec. '05 1,653,464.9
Dec. '04 1,498,301.6
Dec. '03 1,430,309.7
Dec. '02 1,393,669.4
Dec. '01 1,215,296.3
Dec. '00 1,034,124.01
Dec. '99 992,141.5
Dec. '98 991,668.6
Dec. '97 966,990.9

Noncorporate client loans from Czech banks, 1997-2007, in millions Kč
Date / Residents and nonresidents total
Dec. '07 1,553,704.8
Dec. '06 1,221,555.2
Dec. '05 1,026,027.3
Dec. '04 875,340.4
Dec. '03 816,246.01
Dec. '02 751,295.6
Dec. '01 771,930.2
Dec. '00 823,925.7
Dec. '99 824,463.01
Dec. '98 864,697.2
Dec. '97 903,980.2

Source: Czech National Bank
With little diversity among banking services, persuading clients to open up savings accounts has been a perpetual challenge for local banks.
In the United States, a commonplace strategy to set banks apart from their competitors used to be to offer free toasters, as if warm bread and steep fees had some natural affinity.
In the past, Czech banks have passed on the toaster but managed to keep the fees. Still, as the needs of local consumers have become more sophisticated, so too have the strategies banks use to attract them.
“Before 2000, I would say that services were very old-fashioned and on a rather low level,” said Michal Mejstřík, chairman of Charles University’s Institute of Economic Studies. “During the past eight years, you could see a huge development of client-oriented services.”
Ironically, a number of these services keep the customers out of the bank itself. Internet services and phone banking contribute to this, as well as an explosion in the use of payment cards. As Internet access has become commonplace, a growing number of Czechs are banking online: A 2008 Eurostat survey found that 12 percent of Czechs have used the Internet for banking during the past month.
Last year, mBanka, a Polish retail bank that focuses almost exclusively on Internet banking, launched operations in the Czech Republic. The bank expects to have 12 branches throughout the country by the end of 2008, which, if things go well, nobody will ever set foot in.
Bank cards have taken many transactions to the streets as well. According to a report published by the Bank Cards Association July 7, banks issued 8.74 million payment cards (including debit and credit cards) by the end of March this year, and there have been a total of 36.6 million withdrawals via ATMs.
Phone banking, too, has become popular. According to Mejstřík, the local branch of GE Money Bank was so eager to keep customers away from its teller windows, that at one point it offered a promotion giving away free phones with its telephone banking service.
It seems to be working: “These days, the level of branch usage is pretty much down,” Mejstřík said. “They’re just being used for certain activities like establishing bank accounts.”  
Sophisticated banking
Because Internet banking and debit card services vary little between major banks, several banks have developed specialized products in an attempt to carve out a niche market.
Raiffeisen bank, which earlier this month merged with eBanka, is focusing primarily on “affluent clients.” Its flagship product, the eKonto account, requires customers to deposit moew than 20,000 Kč ($1,339) per month just to be eligible. The account has no fees outside of those for “outgoing payments,” said Raiffeisen bank spokesman Tomás Kofroň. Affluent clients seem to be targeted by a growing number of banks. “Private banking is huge right now,” said Mejstřík. “If [banks] see your savings are higher than the minimum, you will be approached by bankers offering you more sophisticated products.”
Extreme personalization is a major strategy as well, with many banks tailoring packages to fit customers like a very expensive glove. “We can see that clients increasingly want to have more control over their finances and financial products,” said Pavla Plachá, Česká spořitelna spokeswoman. “It is becoming more evident that clients do not want something that the bank defines up front, and then not to use half of the features. Traditional ‘financial packages’ are being replaced by freely adjustable products.”
To that end, banks offers products tailored toward specific types of clients, such as homeowners or students. Some banks even offer savings accounts for children.
A recurring theme among banks is the idea that, as they have become more wealthy, Czechs also have become more sophisticated about their money. Correspondingly, banks have begun to branch out into more sophisticated products.
“We saw a dynamic development of mortgage and consumer loans in the past few years,” said Marek Hatlapatka, head of research at the brokerage firm Cyrrus. “As interest rates went down, banks kept a strong capital base and people got richer and more willing to accept debts.”
In 2006, for example, BAWAG was the first bank in the Czech Republic to offer customers the opportunity to refinance their loans. In a similar attempt to attract clients, Raiffeisen bank currently offers investment products such as premium bonds.
Even with these new services, however, it’s proving hard to lure customers away from their old banks. “The average Czech banking customer is more fixed to his bank than West European customers,” Hatlapatka explained. “Even if he or she is dissatisfied with fees or other services, the rate of fluctuation among Czech banks is quite low.”
So maybe throwing in a toaster wouldn’t be such a bad idea, after all.
Adrian Chen can be reached at achen@praguepost.com


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