Georgia’s banking sector driven by innovation
For a country with a population of only 3.7 million, Georgia has 16 commercial banks. The fact that there are so many commercial banks in such a small market used to raise questions. Two Georgian banks – TBC Bank and the Bank of Georgia – remain the main players in the sector. Meanwhile, the other banks continue strengthening their niche by offering innovations to their customers. The current trend in the Georgian banking sector is based mostly on technological innovation.
According to the National Bank of Georgia, the country’s banking sector is represented by 16 commercial banks, including 13 foreigncontrolled banks and one branch of a nonresident bank. In February 2017, Georgian commercial banks’ total assets decreased (in current prices) by GEL 0.9 billion (or by 2.9 percent) compared to the previous month, amounting to GEL 29.3 billion (a decrease of 0.1 percent, not including the impact of the exchange rate), as of March 1, 2017.
The volume of lending by commercial banks (including loans to non-residents) in February 2017 decreased by GEL 451.7 million, or 2.4 percent, compared to the previous month, (an increase of 0.6 percent, not including the impact of the exchange rate), amounting to GEL 18.7 billion as of March 1, 2017. The volume of loans in Georgia’s national currency increased by GEL 153.4 million (2.3 percent), and the volume of loans in foreign currencies decreased by GEL 605.0 million, or 4.8 percent, in the same period (a decrease of 0.3 percent, not including the impact of the exchange rate).
Equity capital in the banking sector amounts to GEL 4.1 billion, which accounts for 14.1 percent of commercial banks’ total assets.
By the end of February 2017, commercial banks had issued resident legal entities GEL 2.0 billion worth of loans denominated in the national currency (0.9 percent less compared to the previous month) and GEL 6.5 billion worth of loans (3.2 percent less) denominated in foreign currencies (an increase in foreign-currency lending of 1.3 percent, not including the impact of the exchange rate).
In February 2017, the volume of lending to resident individuals decreased by 1.9 percent, or GEL 184.9 million, amounting to GEL 9.4 billion as of March 1, 2017.
The larization ratio for total loans was 36.31 percent as of March 1, 2017. Compared to February 1, 2017, an increase of 0.59 percentage points, not including the impact of the exchange rate. The total volume of non-bank deposits in the country’s banking sector decreased by 3.6 percent (a decrease of 0.4 percent, not including the impact of the exchange rate), or by GEL 619.1 million, compared to February 1, 2017, amounting to GEL 16.5 billion as of March 1, 2017. In February, the volume of term deposits decreased by GEL 508.8 million, or 5.3 percent (a decrease of 1.5 percent, not including the impact of the exchange rate). Demand deposits decreased by GEL 110.2 million, or 1.5 percent (an increase of 1.1 percent, not including the impact of the exchange rate).
The annual average weighted interest rate on term deposits was 4.8 percent. The interest rate for deposits denominated in the national currency was 8.8 percent, and it was 3.0 percent for deposits denominated in foreign currencies.
Contactless payments are getting more popular and more widespread. We can say that payments have passed through a ‘contactless revolution.’ Watch payments are convenient, and there is no need to take out a card. Even everyday things are adapting more and more to the new digital reality. Cardholders associate contactless payments with speed and convenience, and this sort of watch emphasizes these advances even more,” – says Nikoloz Geguchadze, General Director of JSC Halyk Bank Georgia.
The US dollar accounted for 85.4 percent of the total volume of deposits denominated in a foreign currency, while and the euro accounted for 12.0 percent.
Collecting deposits and issuing loans still remain commercial banks’ core business. Meanwhile, the methods used to serve customers are changing on a regular basis. Representatives of banks have claimed that we will soon be entering a new era of digital payments, and they are working hard to support this as a result.
Eight years have passed since the first contactless payment was made in Georgia, and this form of payment is becoming more and more popular all the time in the country. According to statistics, Georgia is currently one of the leaders among the countries of Southeastern Europe and Asia in terms of the number of contactless transactions made. Contactless payments can be carried out in almost all POS and mPOS terminals in the country.
For the first time in the region, JSC Halyk Bank Georgia allows payments to be carried out on a contactless basis using a wristwatch. Watch2pay watches are equipped with a personalized banking card that customers may receive at a branch of JSC Halyk Bank Georgia. This innovative product was launched in 2016.
In 2015, JSC Halyk Bank Georgia introduced the first contactless mPOS terminal in the Southeastern Europe region. A year later, more than 100 outlets were equipped with mobile terminals, including those that were previously unable to process card payments at all. The Watch2pay with a contactless payment card was another innovative project that the bank implemented together with the MasterCard payment system.
A CLOUD-BASED MOBILE PAYMENT SERVICE IS ONE OF THE LATEST INNOVATIVE PRODUCTS IMPLEMENTED BY VTB BANK GEORGIA.
Later, VTB Bank Georgia added a new feature to its Mobile Pay App, making it possible to transfer money simply by waving two mobile phones near one another. The bank was the first to offer Georgian and regional customers this innovative feature.
The mobile generation, which has been the main instigator for banks to implement innovative technologies, is also being offered video banking. In February of this year, VTB Bank Georgia launched VTB Video Bank, an exclusive mobile application allowing clients to carry out any kind of cashless banking operations remotely via direct communication with a bank employee (using video calls).
This app allows users to carry out various banking operations, and, most importantly, the VTB Video Bank service, including registration, is completely free charge.
The importance of implementing remote and technology-based services is something that ProCredit Bank Georgia has also noticed. Among the innovative banking solutions that the bank is now offering its clients are convenient new drop boxes that enable clients to deposit money into their current accounts quickly and safely, as well as cash-in ATMs that make it possible to make cash deposits into a client’s account. The main reason for installing these advanced services in 24/7 zones was to offer faster and more convenient services.
“Georgia is one of the most advanced contactless payment markets in Europe. This innovation has succeeded primarily thanks to the fact that Georgian banks and their clients are open to innovation and are not afraid to try new things,” – said Elena Brazhnik, MasterCard Europe’s customer service manager in Georgia.
These drop boxes enable clients to deposit money into their current accounts quickly and safely, and the deposit is automatically credited to their account upon completion of the operation.
The drop boxes are especially convenient for business clients because both company representatives and third parties (distributors, dealers) can conveniently deposit large sums of money into their accounts 24 hours a day.
Unlike standard ATMs, which only allow clients to make cash withdrawals, cash-in ATMs make it possible to make cash deposits to a client’s account. At the same time, clients have the opportunity to view their account balance and recent transactions. In continuing to bring advanced technology to the Georgian market, ProCredit Bank later introduced another innovation: the Universal Plus Cash-in ATM, which allows users to deposit and/ or withdraw up to 300 notes in one transaction. Deposits are counted automatically and then credited immediately to the selected account. Universal Plus is available to all the bank’s customers.
“Cash transactions are decreasing on an annual basis. On the other hand, non-cash payments are increasing. In terms of non-cash operations, we see the future in virtual cards based on NFC technologies. A new era of payments based on digital technologies is approaching. This means that our mobile devices will be the only thing that we will need to make payments not only in our home country but also abroad. This simplifies life. It is no longer necessary to paste [payment] stickers [on mobile phones] or carry plastic cards. The development of this technology will contribute to a reduction in cash transactions,” – said Valerian Gabunia, Chief Retail Banking Officer at VTB Bank Georgia.
In addition, these ATMs accept both domestic and foreign currencies. Banking has been one of the fastest-developing sectors of Georgia’s economy since 2003. In the intervening years, banks have been able to win the trust of customers, who had previously had rather negative banking experiences dating back to the 1990s. According to a Gallup World Poll, when asked whether they had confidence in the country’s financial institutions, 78.8 percent of Georgians responded positively. In addition, the fact that the sector has gained the confidence of foreign investors is also important. Accordingly, around 90 percent of all bank assets in Georgia are foreign-owned.
Currently, the Bank of Georgia and TBC Bank, the country’s two largest banks, are listed on the London Stock Exchange, a fact that raises their international profile and ensures that they meet international standards for corporate governance and transparency.