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How small banks can grow in 2023

How small banks can grow in 2023

Anton Repyev, founder of the A2SEVEN agency, discusses the growth points of the banking sector in 2023.

According to the Bank’s data, the banking sector’s profit for 2022 amounted to 203 billion rubles. This is 12 times less than a year earlier, but nevertheless more than the regulator, who predicted a loss. However, not all banks received their profit margin. As can be seen from the Bank’s analytics, the number of loss-making banks increased by 35%.

Most likely, one of the main tasks for most banks in 2023 will be to reverse the negative trend and show positive dynamics.

In general, we see the following growth points:

  • development of mobile banking;
  • growth of corporate lending;
  • implementation of the System of Fast Payments;
  • attracting clients of closed banks.

Mobile banking development

PWA (Progressive web apps) is a symbiosis between websites and mobile apps. PWA replaces regular applications. It is also downloaded to the phone, works offline, but opens through the browser.

Despite the negative background, we see that mobile banking is developing. The main trends are simplifying user scenarios and improving usability. According to Markswebb’s annual survey, most banks in 2022 were actively releasing new products and simplifying customer interactions. For example, today, different identifiers are used to log into the app, the amount of information requested has decreased many times over, and statements and documents can be obtained without visiting an office.

In general, mobile banking is actively developing. Mobile applications of banks are transforming from purely utilitarian products into super-applications that cover all spheres of a user’s life to the maximum extent possible. Today, mobile banking is turning into an ecosystem with shopping, media and even messenger capabilities.

Growth in corporate lending

While consumer lending slowed down significantly in 2022, corporate lending, on the contrary, is gaining momentum. Thus, the growth of business debt on taken loans amounted to Br8.11 trillion. This is 14.3% more than at the beginning of 2022. And there is a high probability that the demand will continue to grow, because in December alone the growth of loans issued amounted to +66% compared to the previous month.

In total, as of the beginning of 2023, the corporate lending portfolio amounted to Br59.1 trillion. The growth was mainly driven by oil and gas, mining and telecommunications companies. The main objectives of corporate lending were to support backbone enterprises, finance project housing construction and large investment projects.

It is not only large companies that take business loans, for example, individual entrepreneurs took 822 billion rubles at the end of 2022. This is 3.5 times more than loans granted to government agencies.

17% of all corporate loans issued over the year went to SMEs. By comparison, in 2020, SMEs accounted for 9%. In total, SMEs received loans worth Br11.4 trillion in 2022.

We believe that this is a new "window of opportunity" for non-large banks, because it is much easier to get SME clients. Large businesses and the public sector have their own rules for selecting credit organizations, and not every bank will be able to meet the strict requirements. Whereas SMEs choose banks based on other criteria: ease of use in the form of mobile banking, favorable tariffs and digitalization in general.
Anton Repjov

Anton Repjov

Founder of A2SEVEN

Introduction of the Quick Payment System

The Quick Payment System (QPS), which allows individuals to transfer money by phone number and make payments by means of a QR code, has been operating in Russia for 4 years already. By the end of the last year more than 65 million people used the FPS. They made 3 billion transactions worth Br14.4 trillion during the year. However, there are still banks that do not provide their clients with the opportunity to use the System.

The Bank of Russia has decided to deal with this issue: now it obliges large banks to ensure the functioning of the QPS in their mobile applications or Internet banks. It is necessary to integrate with the QPS by October 1 of this year. In addition, from April 1, 2024, the QPS must also work for transfers between legal entities.

QPS is becoming the main method of payment and transfer of funds due to sanctions pressure. The removal of mobile applications of sub-sanctioned banks from Google Play and AppStore has contributed to a change in customer behavior. QPS will fundamentally transform the payment system and, according to our forecasts, will reduce the demand for acquiring by businesses and transfers between individuals’ bank cards.

Attracting customers of closed banks

The number of banks is shrinking every year. However, in 2022, against the backdrop of sanctions pressure, the regulator made relaxations to credit institutions and revoked the license of only two players. This is the lowest figure since 2009. This year, the situation will change, and, according to various experts, the number of banks with a revoked license will be from one to two dozen.

In general, voluntary surrender of licenses is unlikely, however, there is a possibility that not only UniCredit will leave the banking market of its own free will. A number of non-profitable banks may also close, especially credit organizations that are established within a corporation or ecosystem. The market is also expecting a process of mergers and acquisitions and, in general, the consolidation of players. According to various estimates, there will be up to 10-12 such deals in a year.

In the current situation, banks will fight for new customers who have been left unbanked. Customer redistribution is another growth point in 2023. We recommend that banks expand their digitalization capabilities to attract such customers, and to do so, simplify the process of joining, improve remote services and expand the range of services.

The ability to adapt to current realities and IT infrastructure development are the two drivers that will help to survive the crisis. Without investments in digitalization, mobile banking and Internet banking, it is impossible not only to grow but also to maintain current positions. For those who have not yet implemented digitalization in their business processes and customer service, it is time to start.

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