BANKING SERVICES IN TERMS OF CHANGING ENVIRONMENT: CASE OF MACEDONIA

BY: TOME NENOVSKI, EVICA DELOVA JOLEVSKA, ILIJA ANDOVSKI

Presented by: KIRAN MAHEEN

 There is a change coming in the banking networks that is mainly brought on due to two factors: 1. increased competition in the financial sector 2. technology improvements Research has concluded that both these factors are interrelated Increased competition leads to the banks providing new products and services to increase efficiency Use new technology and distribution channels

 The new marketing philosophy requires any product to be available at any time Implies increased use of electronic banking

Turns banks into shops with 24 hour service.

INCREASED COMPETITION IN THE FINANCIAL SECTOR

Deregulation changed position of banks Example: USA Assets have decreased from 70% to 30% (100 years) Debt from 19% to 14% (80-90) competition

 Liability: new technology, deregulation

mutual funds

Assets: Growth- money/ bond market

new ways of borrowing money So banks can either: A) increase risk B) improve products and services

 Enhance risk to hope for a better outcome in non regulatory environments OR Improve products and services decreasing cost by use of new technology and distribution systems. Eg: credit cards, decreased branches.

CASE OF MACEDONIAN BANKS

Trend of increased competition and new products has still not affected the market 3 large banks, bank controlled environment, less competition (65%MS) (oligopoly)

Assets- 90% (depositary financial institutes)

Low customer sophistication Low financial intermediation

Concentrated Environment

THE IMPACT OF TECHNOLOGY CHANGES ON BANKING ACTIVITIES

Banks have little choice but to leverage technology to its fullest so that they can: 1. Construct a new image for their branches 2. Inform consumers about products and services 3. Enhance customers branch experience 4. Execution of basic banking services without queues.

METHOD OF PAYMENT
More automation, less paper transactions High cost transaction low cost transaction Cheques Debit Cards Extensive use of plastic cards for various purposes Automation of special payment circuits for regular small value payments.

CREDIT CARDS
Standardized size and shape Versatile, adaptive Convenient Secure Used for: 1. withdrawals 2. make payments 3. Take small loan

MACEDONIAN BANKS
Trend of increased use of credit cards can be confirmed in the Macedonian banking sector. (2006 -2010 ) no. of credit cards -400% No. of transactions- 500% Total household exposure for 7 percentage More ATMs growth HOWEVER: more debit, less merchant more withdrawals.

THE INTERNET
Changed the role of banking : 1)the operating costs are lower, resulting in a redundancy of employees 2) its saves time and money on the clients because it can be used from home at any time 3) it can be used for cross selling of other bank products.

MACEDONIAN BANKS
Internet compliments rather then substitute banks Increased use of online banking 37% increase in retail No. of transaction- 33% However : security issue

THE IMPACT OF TECHNOLOGY ON CREDIT ASSESSMENT TOOLS

credit scoring tools, rather than using human judgment. data base with quality data for sufficient period of time is of crucial importance

Transparent underwriting
Decreasing operating expenses and decreasing default rates

 Credit card scoring: optimal, coherent, autonomous, cheaper

Credit bureau: (collects info from various sources) asses credibility, credit worthiness, -affects loan and IR (risk based pricing)

MACEDONIA
there is law for credit bureaus from 2008 and one credit bureau is already established. Started with its operations from January 2011. Therefore the type and quality of information that provides is yet to be assessed Still early to assess the usefulness of the date in the risk management process.

CONCLUSION
Banking is a dynamic activity constantly subject to changes. The increased competition and increase in technology has changed the way banks operate

Macedonian bank though they are still traditional have started adopting this new change