Gent Sejko: Digitalisation vs cash
Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the Albanian Association of Banks
(AAB) Forum on "Digitalisation vs cash", Pristina, 14 June 2022.
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Honourable Deputy Prime Minister Ahmetaj,
Honourable Minister of Finance and Economy Ibrahimaj,
Dear Chairman of the Albanian Association of Banks,
Dear guests,
It is a pleasure to attend this Forum, which comes naturally as a further step and logical
consequence of the joint discussions and round tables on digitalisation of financial services.
I would like to highlight that the support and promotion of electronic payments, both in
international experiences and the Albanian context, are seen as one of the most effective and
powerful mechanisms for bolstering financial inclusion and further formalizing the economy.
In this context, despite the discussions and needs for interaction and developments from the
actors, it appears like the objectives and targets are increasingly converging, and in turn the
created synergy, absolutely, will drive to an acceleration towards the meeting of the stated
objectives.
In this framework, there should be underscored that the Bank of Albania has already established
the effective premises for the foundation of a digital revolution in the payment market, through the
legal and regulatory framework in force. This framework may be considered avant-garde in the
context of the European Union. Meanwhile, at regional level, Albania is the first country that has
approved the legal and regulatory framework coupled with the promotion of "open banking" in the
market.
Here, I would like to draw the attention and explain that the concept "open banking" implies the
creation of technological developments, with a view that the information of banks' clients be open
to third parties. In this regard, we should keep in mind that - though digitalisation is so far
desired by all of us here - this development needs rather complex investments and regulations,
which promote innovation in an environment that will guarantee a maximum security. Taking into
account that the need for establishing a highly prudent environment turns more meaningful in
case of Albania - where both financial education and inclusion are relatively low - the demand for
market's actors to make safe steps is quite important.
Beyond "open banking" and the re-dimensioning of market through the introduction of new actors
and services, I would like to mention the set of the undertaken regulatory measures and
infrastructural developments, which have been focused exactly on the promotion of electronic
payments in the framework of the National Retail Payments Strategy (NRPS). It is worthy
emphasising that the so far implemented measures have driven to the successful
accomplishment of the objectives defined in the Strategy since 2021.
This success is a contribution of a broad gamma of actors, where banks in particular, and
institutions, have played a key role. In this regard, I would like to point out that market is more
aware and conscious that digitalisation is the future, as a consequence of the technological
revolution taking place in each field of life, in the perspective of their strategic development, in the
context of minimizing the costs and risks borne by traditional practices, and at the same time for
increasing the effective productivity.
Without wishing to repeat the previous statements, I consider it worthily to point out that all
market actors should be seen as our strategic partners, who in their own way have always
contributed to the financial inclusion and promotion of electronic payment services. Until a few
years ago, paying utility bills, fines, tax payments, customs and social security via the internet
and mobile seemed a utopia. Nowadays, the general public is increasingly employing and
benefiting from these services. Allow me to provide some significant figures which best converge
to the materialisation of this development. In 2012, about 96% of transfers were initiated in paper
form at banks' windows, while today about 50% of transfers are processed remotely. If we
include in the calculations the card payments, it turns out that 79% of payments and transfers
are made remotely and only 21% in bank branches. From this point of view, I deem that banks
remain committed to accommodate the needs of the e-Albania platform, both in the existing
conditions and after the creation of "open banking". Harmonization and coordination of this
platform with those of the banking system, as well as giving priority to the necessary
developments required in relation to them, will stem a facilitation coupled with a more efficient
interaction, and in turn a strengthened synergy amongst all parties involved in these processes.
However, all these developments absolutely could not have happened if a number of public
institutions and companies had not carried out technological developments, which enable their
interaction with banks. The fiscalization process is considered a very important progress, in the
light of the economy formalization, and in the context of creating the necessary preconditions for
businesses to provide electronic means of payments. This starts with the possibility of using the
QR code in the payment of bills or any other electronic instrument that can use the established
technological infrastructure, to the flexibility created by the legislation for making large value
transfers through banking channels.
On the other hand, the creation of a "central depository" of biometric data of the population, which
can be used as security elements in communication and remote authentication, is a very positive
step forwards the digitalization of banking services. Furthermore, the development of electronic
signature and the improvement of legislation on signing distance contracts is also a supportive
measure in this regard.
Despite these positive developments, we need to be aware that there is still work to be done.
First, I consider that, banks and non-bank institutions should be committed for the
implementation in practice of all the innovations set forth in the Law "On payment services". It is
also necessary to consider and assess the possibilities of infrastructural developments
endorsed in the strategy, which will enhance efficiency in the processing of payments and
transfers, such as Instant Payments or the national SWITCH.
The Bank of Albania - for supporting all these developments - is working to improve and upgrade
the systems it operates, in order to accommodate the market's demands. We have also paid
attention to the drafting of the legal framework for the creation of the basic account. This
framework aims at further promoting the financial inclusion of the population. We consider that
the adoption of this Law and its implementation by the market is very important in terms of
digitalization of financial services, also of the Government.
In addition to promoting financial inclusion and digitalization of services, financial education is a
very important element for the materialization of measures and the achievement of intended
objectives. To this end, I see our coordinated actions and intensified cooperation at the heart of
our joint efforts and work to promoting financial education as a national reform.
In addition to the above, it remains important to overcome any issue identified during all these
years by implementing the aforementioned innovations. Particular emphasis should be placed on
the problems encountered by opening accounts and signing distance contracts, which are a
necessary precondition for the digitalization of services.
Despite the legal and regulatory provisions regarding these issues, the implementation in
practice has proven to carry technical issues. To this end, we should encourage the cooperation
across all institutions and market actors to overcome the problems that may arise in relation to:
prevention of money laundering; electronic signature; concluding distance contracts; promoting
the use of electronic documents and necessary information during citizens' applications to
banks. All this would further facilitate the digitalization, in terms of payments and other services,
such as lending and investments, contributing significantly to the common objective for a
formalised and sustainable economic growth.
I also assess that by exploring the experiences of our neighbours and beyond, we can identify
additional measures that will promote the formalization of the economy and reduce the use of
cash in the economy.
I would like to end my speech by expressing once again the full commitment of the Bank of
Albania to support any necessary development, in order to achieve the intended objectives.
I take this opportunity to congratulate the Albanian Association of Banks for its huge and
longstanding work, in boosting and supporting every project, initiative or need identified by the market
and more broadly. Your dedication and professionalism has contributed very effectively, in fully
accomplishing the intermediation role between the parties, while also serving as a catalyst to
promote the achievement of objectives.
I am convinced that the discussions of this forum will be very fruitful in these areas and in
addressing rather important issues.
Thank you!