How directly can the Estonian experience of e-banking be applied to today’s Ukraine?
Most e-bankng solutions in Estonia started out as in-house developments based on the needs of customers. They were also designed to reduce costs and move towards greater automatization of banking operations. It might prove difficult to simply transplant existing Estonian e-banking solutions and software to the Ukrainian banking sector, but it is possible to research best practices and look to successful ideas for inspiration.
What role can e-commerce in general play in the development of the Ukrainian economy?
E-commerce has became an essential part of everyday life for people and businesses all over the world. It can definitely play a role in the development of the Ukrainian economy. Five or ten years ago, nobody could foresee how quickly e-commerce would develop and change the behaviour of customers. Different e-commerce solutions make it possible to market and sell Ukrainian goods and services domestically and also abroad, leading to quicker growth and lower operational costs. But in order to export, you need goods and services that are globally competitive in terms of both quality and price. E-commerce has widened the market drastically and customers today have a far wider choice. They can compare products without leaving their computer or phone.
Many Ukrainians have concerns over the security of online banking and online commercial services. How can e-security be improved in Ukraine, and what should banks and service providers be doing to communicate security issues to the public?
Security is one of the cornerstones of all banking services. There are many technical solutions to improve the security of e-banking operations. These involve different customer authorization methods, software and systems protection, encryption technologies, and so forth. Internally, banks can do a lot to improve their own systems like building more complicated firewalls and introducing more complicated authorization systems. It is the responsibility of each individual bank to keep pace with the latest developments.
Educating banking customers is an even greater challenge. The Estonian experience with one of e-banking’s core products – payment cards – illustrates this point. It took considerable time to teach customers in Estonia that they must memorize their PIN codes and not write them on the back of their cards. The same applies to things like internet banking passwords. Customers must be taught that the security of their funds is also their responsibility and not only up to the bank. One cannot blame the police for car theft if the keys were left in ignition and the doors were unlocked.
Based on the Estonian experience, which sectors of the Ukrainian economy would you expect to benefit most from the growth of e-banking and e-commerce?
All e-banking and e-commerce initiatives aim to increase efficiency. It makes no difference which sector of the economy is involved, or whether the initiative is related to public services or everyday life. However, in terms of compatability, the service sector and international trade are particularly suitable for such innovations. E-banking will also bring benefits to B2B and P2B relationships. Everything from utility bills to phone and cable TV bills can be paid using e-banking, with service providers billing your bank directly.
Greater e-banking penetration would allow for a range of issues to be addressed online including the payment of taxes. What role could e-banking play in the modernization of the Ukrainian state?
E-banking can play a major role in simplifying interaction between the state, citizens, and commercial structures, but this also requires effort and trust from all sides. Technical issues are not so critical - everything depends on the readiness of the partners. Interaction between citizens and a wide range of state bodies can be managed via the electronic identification provided by e-banking services. This is true for both individuals and companies. For this to work, the state must trust that whoever logs into the system is actually the person they claim to be. This trust works both ways. For example, It took me no more than ten minutes to complete my 2015 personal tax report because I have authorized different banks and other institutions to send my financial data to the tax authorities, who then provided me with a pre-compiled tax report. All I needed to do was check it and make any corrections if necessary.
The next online innovation from the Estonian tax authorities is expected to be up and running within one and a half years and will focus on SMEs. It will allow them to authorize their banks to send account statements directly to the tax authorities. Tax payments will be calculated and automatically transferred from the company account without any additional reporting.
There are endless possibilities to make interaction between the state, citizens, and commercial structures more efficient and less burdensome, but trust between players remains the key issue. Based on the experience of Estonia, I can tell you that this is not an easy task. You have to change the mentality and behaviour of the whole country. However, once the process has started and you have achieved the first successful steps, the next steps will become much easier.
How could a rise in e-banking impact on Ukraine’s international trade relations and business climate?
E-banking helps to build a more efficient and transparent banking system as a whole. This is a crucial step towards smoother international trade relations. A strong and reliable banking system is the basis for the development of any economy.
Ukraine’s banking sector is currently undergoing major reforms. How could the expansion of e-banking services contribute to this process?
I think the further development and wider penetration of e-banking will make the whole banking sector, and also the whole commercial sector, more transparent. It also contributes to the efficiency of the banking sector and helps to make it more profitable, allowing banks to meet rising capital requirements.
About the interviewee: Riho Rasmann is the Chairman of the Management Board of Versobank AS