German-based ProCredit Bank has closed seven locations in Ukraine so far this year, but downsizing its Ukrainian presence is not on the agenda. Quite the opposite, in fact. The bank has been one of the Ukrainian financial sector’s strongest performers during the prolonged turbulence of the post-Euromaidan period, posting an annual total assets increase in 2016 of more than 55%. This robust growth has continued into 2017, with the bank’s loan portfolio up EUR 25 million in the first quarter of the current year. This impressive performance has helped to secure the support of ProCredit Group shareholders in Germany for further expansion in Ukraine. The goal of this expansion is to provide improved online services tailored specifically to meet the needs of the bank’s key clientele – middle class Ukrainians and the SME sector.
Mobile application launch
The increasing emphasis on online services is very much in line with the current banking habits of ProCredit’s Ukrainian clients. “Most of our customers didn’t even notice (the location closures),” says Viktor Ponomarenko, the General Manager of ProCredit Bank in Ukraine. “They have already come to appreciate that they can do most of their banking transactions online. There is simply no need to visit branch offices on a regular basis anymore.”
The bank plans to upgrade its existing online banking services significantly over the course of 2017, while also launching a mobile banking application. “This app will be a very important component of our business model. Smart phones have become an integral part of our everyday lives. They are now important instruments for financial transactions. We want to offer an attractive, secure and simple mobile application,” explains Mr. Ponomarenko.
Fewer customers, more transactions
ProCredit Bank’s online innovations are part of efforts to focus more on the bank’s main customer groups. This means a greater range of services for a select but growing niche of private individuals and companies looking for efficiency and transparency. It is an approach geared towards frequent consumers of banking services.
In practical terms, this transition has meant fewer customers but more transactions. Mr. Ponomarenko expects this trend to continue as the bank’s attention shifts further towards its core business segments. ProCredit Bank currently has approximately 40,000 private individual clients in Ukraine, down from around 60,000 a year ago. Mr. Ponomarenko estimates that in the current market conditions, the most suitable client base would be around 20,000. “It has never been our intention to become a bank for the masses,” he says, adding that the current changes will allow the bank to allocate more resources towards working with target customers. “Our business model is focused on providing high quality service. This requires a limited number of customers.”
ProCredit Bank’s repositioning strategy has included increasing the minimum deposit level up to EUR 5,000 or local currency equivalent, along with the introduction of UAH 100 flat monthly fee for accounts. Mr. Ponomarenko acknowledges that this new fee may prove controversial among some of the bank’s existing customers, but believes it is a sensible approach providing both clarity and competitive advantages over the more common practice of charging individual fees for separate services. “If you calculate the costs, the package we offer is very economically attractive. I anticipate that in most cases, it will actually help clients to save money.”
ProCredit Bank is perhaps best known for its work with the SME sector of the Ukrainian economy – a segment where personal banking relationships can often play a crucial role. This emphasis on SME customers will remain at the core of the bank’s business model as it embraces the cashless concept, with Mr. Ponomarenko eager to stress that the reduction in physical locations will not lead to less direct contact with SME clients. “When we talk about the SME sector, the personal touch is clearly important. You need to have a personal connection with the bank,” he says. “This will not change with the reduction in the number of branches. Every business customer of ours has a personal advisor. We will invest further in these personal services, irrespective of the number of physical branches the bank has in Ukraine.”
Keeping it simple
As the bank turns towards online innovation, one of the biggest challenges it will face is avoiding overly complex solutions. As with all internet offerings, intricate online banking services are not always user-friendly and can sometimes run the risk of undoing initial efforts to create greater efficiency. Mr. Ponomarenko says simplicity will remain a core component of the ProCredit Bank business model in Ukraine, even as they strive to add new services and improve quality. “The development of our online services is a significant investment that reflects our commitment to the Ukrainian market,” he offers. “In this context, being simple is actually a lot more difficult than being complicated. Ultimately, we aim to offer an intuitive service that covers all the needs of our customers.”