Elisabeta Gjoni: Innovation in the banking sector
Speech by Ms Elisabeta Gjoni, First Deputy Governor of the Bank of Albania, at the
conference on "Innovation in the banking sector", Tirana, 14 May 2015.
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Good morning and welcome at the Bank of Albania to discuss about innovation in the
banking sector.
The Ministry of Innovation and the Bank of Albania, under the auspices of the Minister for
Innovation and Public Administration, Ms Milena Harito, and the Governor of the Bank of
Albania, Mr Gent Sejko, in collaboration with the Albanian Association of Banks, organise
this activity jointly in a common approach to work together and discuss ideas among the
main stakeholders of innovation in financial services.
Honourable Minister Harito, Honourable Chairman of the Albanian Association of Banks,
Your excellencies ambassadors, representatives of banks and businesses, and of the
Albanian private sector, dear colleagues, I take this opportunity to thank you, on behalf of the
Bank of Albania for your commitment and collaboration for this activity.
We are living in a new phase of banking that is frequently qualified as a silent revolution in
the way we do things, and the way we live, which poses challenges to any developing or
influencing stakeholder.
People use technology for the new ways of communication it offers: to create social groups,
purchase online and why not, to use banking and financial services. That certainly implies a
wide spectrum of actions: from generating online the account statement to transfers and
payments via electronic platforms from various institutions, which are different from banks,
digital money or virtual currency. Physical and digital worlds are intertwining rapidly. What do
we imply with financial innovation, while speaking about financial technology ( Fin Tech)? An
expert of this field says than Fin Tech should not indispensably be a rather complicated or
sophisticated technical concept. Fin Tech supports business to be more effective and the
systems to function better and faster, or simply to make life easier to individuals/businesses
through the use of efficient financial services.
Authorities have a decisive role in being committed to and supporting innovation. Advanced
countries, such as Great Britain, are a good example of this approach. In the United
Kingdom, the volume of transactions has grown by 74% since 2008, compared to 27%
growth for the whole world or 13% for Silicon Valley. The British success is driven by the
large support of government strategies and programs, from the regime of the points of sales,
initiative to encourage investments and the establishment of the regulatory framework that
provide grounds for the success of new initiatives, the possibility to access credit data for
small-size enterprises, in the payment system and equal participation in the free competition.
What can a Central Bank do? In its role as the regulator, the Bank of Albania's vision is to
contribute to the future, aiming to establish a highly adequate environment for boosting
financial innovations and modernising the financial structure. Our regulatory regime aims at
fostering innovation, being a positive catalyser and not a barrier.
We aim at being avant-garde for a modern financial infrastructure. But experience shows that
technology always is a step ahead and rapidly spreading. Technology has no limits and we,
as regulators, should adopt rules and laws that these technologies be used by the
consumers, individuals or businesses. At the same time, we should be aware of the risks that
accompany these new technologies. Finding a perfect balance between the promotion of
new ideas and the regulatory prudence constitutes one of the major challenges in this
regard.
Bank of Albania has designed a payments regulatory framework, which paved the way for
the development and modernisation. This framework provides all banks or other suppliers of
financial services with the possibility to access the payment system in an equal and
transparent way, thus contributing to the development of a competitive payment industry,
without any asymmetry.
Bank of Albania welcomes the contribution of innovation and technology in financial services
as a support for achieving its strategic objectives for financial inclusion and reduction of cash
use in the economy. These objectives serve crucially to both the transmission of the
monetary policy and the safeguarding of financial stability. The international experience has
shown that the employment of innovative means in the banking and financial system
contribute to reducing social costs in the economy from 1% to 2% of GDP. In the case of
Albania, this figure may be higher, as cash use in economy is considered to be high.
Allow me to highlight some of the considerable developments of banking system.
Nowadays, businesses and individuals are increasingly using banking services, mainly in the
payments market, where the adaptation of information technology to the development of
banking services and products is more substantial.
In recent years, the use of banking cards has been rising, not only for basic services, but
also as a means of payment. This is followed by the development of the necessary
infrastructure, such as PoS and ATM devices. As reported by banks, the number of PoS and
ATM devices currently stands at 6.427 and 811, respectively. The number of physical Points
of Sale grew 19% in 2014, compared to 2010. Recently, we have also seen an increase in
virtual services through the development of infrastructure for the realisation of e-commerce.
The expansion of infrastructure for the use of cards is accompanied by the considerable
increase in the number of debit and credit cards in circulation. In 2014, 777.195 debit cards
and 84.824 credit cards were issued, or, in relative terms, increasing 103% and 20%,
respectively from 2010. Notwithstanding the innovations, cards in the world remain very
convenient, preferred and secured instruments. (While these tendencies show progress, in
Britain statistics reveal a decrease in the volume of transactions via cards, due to electronic
transactions via mobile phone or other means.)
The increasing use of electronic services such as home banking is a considerable
development. Thus, in the last years, these services were more used and the users'
spectrum expanded, including not only businesses, which where the target group at the start
of supplying this service, but also by individuals. At the end of 2014, the number of accounts
accessible via internet stood at 145211, from 27368 at the end of 2010, followed by fourfold
increase of such transactions conducted via these accounts.
The encouragement of the use of payment instruments is reflected in the increase of activity
of settlement and clearing systems operated by the Bank of Albania. In 2014, the activity of
the Albanian Interbank Payment System (AIPS) grew by about 1.5 times, compared to the
beginning of operations of this system in 2004. Also, the Albanian Electronic Clearing House
System (AECH) shows a considerable increase. The value of transactions cleared in this
system, during 2014, was 10 times higher than the value of transactions cleared in 2005,
when this system started to operate. The measures taken by the Bank of Albania in March
2011 contributed to the use of the clearing and settlement systems. The measures consisted
in the reduction of commissions applied to the users for transactions in the Albanian lek.
I would like to underscore that large spaces still exist for improvement and narrowing the gap
between the Albanian market and the advanced markets, and to some extent between the
regional markets, .They should, therefore, constitute our common challenge for the future.
In the framework of encouraging market towards these innovative services, the Bank of
Albania as the regulator and catalyser has undertaken recently a set of measures. In more
concrete terms, the establishment of legal and regulatory basis for the e-money institutions,
followed by the licensing of the first institution of this type in March 2015, constitutes a
premise to introduce the innovative services in the Albanian market of payments. The
regulation of the activity of these institutions is based on the European practices not only in
the framework of Albania's adherence to the Single European Market, but also as one of the
most optimum solutions in terms of security and efficiency at national level.
The liberalisation of the payment systems market through the Law on Payment Systems will
boost the development of the market. This legal framework provides the necessary space for
private enterprises, and lays down the standards in terms of security and efficiency, and will
support the development of a contemporary financial structure. That is shown by the
licensing of the first operator of the national payment system by cards, which also plays the
role of the local processor, and we hope to have a direct impact on promoting the use of
cards as a means of payment. A priority in the near future for the Bank of Albania is to
establish regulatory framework and provide for the operation of private payment clearing and
settlement systems.
This year marked the establishment of the central Albanian Financial Instrument Settlement
and Registration (AFISaR) system of government's securities. The new system provides
premises for the development of the securities market, rendering these assesses more liquid
and, consequently, promotes their use in the commercial exchanges in the domestic
economy.
Bank of Albania is aware that the needs for further and more programmed interventions are
still high considering the low level of penetration of either financial services or relevant
innovations. Banks, various operators and suppliers of services have great potentials for new
mechanisms and instruments.
In the framework of institutional architecture and understanding the need for coordinating of
efforts at national level, in 2014, Bank of Albania approved the regulatory base for the
establishment and organisation of the National Committee of Payments, which includes the
Ministry of Innovation, Ministry of Economy, Ministry of Internal Affairs and representatives of
the banking system. The committee that will be convened soon, will provide considerable
contribution to promoting collaboration and interaction, for strengthening security,
sustainability and effectiveness of the national payment system in Albania.
Wishing for an open and fruitful discussion, I look forward, and I think I am not the only one,
to listening attentively and hope that the following issues will be addressed:
• Advancements that banks will adopt for the payments in the next 5-10 years;
• Barriers, problems, opportunities and risks that prevent the progress;
• Views of traditional banks about the payments via mobile phones supplied by mobile
phone companies and assessment of the preparation degree of banks for
cooperation or competitiveness;
• New trends for the increase of payments security. Which is the place of biometric
elements?
Congratulations and Thank you for the work you do. You are part of the future. We all are
looking forward to the next meeting of a continuous discussion on the forthcoming
innovations.