Retail bank conditions - stable price competition and growing technological competition

ITCB Bank Account Index, July 2017

ITCB has been regularly publishing its half-yearly analysis on retail account conditions since 2009. The current survey is based on account conditions as standing on 1st July 2017.

The scale differences between lists of conditions that have been observed for years have remained the second half of this year. It is therefore advisable to look around the market and choose a bill corresponding to our financial habits, as it can save significant amounts. Banks are increasingly looking at the technology side, having also significant price competition. In our current analysis this year, we also compared the most essential and most important features of mobile applications and their user pages.

Bankárképző, on a regular basis since 2009, has been publishing every six months analysis of the comparison of various retail bank balances offered by Hungarian banks. The basis for this comparison is the annualized bank account cost per bank by assuming customer transaction patterns according to customer types. Due to changing retail banking habits, customer-transactional practices used in the analysis of previous years were revised in 2016 and, for the sake of comparability, the new assumptions were used to compute previous orders. The changes show shifts compared to the banks' best deals this January. The amounts in the table show the calculated annual costs of bank accounts matching the profile of each customer type. The analysis shows a comparison of the packages offered to five different types of clients, in the eight large banks and the first seven small and medium-sized banks.

Compared to the previous semester the market forces between major banks remained unchanged. The CIB ECO account package has maintained its strong position, being at the forefront with OTP, K&H and Raiffeisen's different packages. Erste, after cancelling the sale of the previous Privilégium accounts last year, has positioned itself with the almost exclusive product of Egyszámla to the middle. An exception to this is the student's customer base, where Erste can offer a more favourable condition than OTP for many years. The most attractive package for premium and middle-income clients is currently offered by Raiffeisen, while for less active clients by CIB.

Convincing offers of small and medium-sized banks are to compete with big banks also this year. In fact, due to their smaller customer base, they are in a better position for customizable, targeted bids. MagNet Bank's packages are on the first place not only in their own categories, but will be included in the top box of the majors for each customer. It must be borne in mind that MagNet Bank's account of an honorary fee character may be a distorting factor, so its monthly cost can range from zero to even up to one thousand forints. Granite Bank, SberBank and Sopron Bank are also replaced alternately between small and medium banks in the second and third places this year, while Kinizsi Bank is close behind them. The FHB is clearly among the top-income earners and the premium category, whereas KDB offers competitive bills for low-income customers.

1. Low-income clients

This segment includes clients with lower income and rarely transact, using basic services. The basic account (Alapszámla) introduced after the law published in the fall of 2016 addresses the needs of this customer base, which, however, cannot compete with the banks' own products.

BA2017 1CIB ECO is outstanding also in this year's semester within the offers. Provided that the client has fulfilled the minimum discount condition of OTP Bázis, i.e. to pay a minimum wage, no account maintenance fee is charged, only the annual card fee is payable by the customer. Following the increase in the bank card annual fee, the package fell to second place among low-income customers. Similar minimum wage-related conditions are met with K&H Minimum plusz, UniCredit Bónusz and BB komfort Packages.

There is no significant change in fees in case of small and medium-sized banks either. Moreover, the basic package introduced by the regulation is not the most favourable construction for small banks, too.

BA2017 2Taking the MagNet Bank account package, the 2.400 HUF annual fee is the card fee, while the account management and cash withdrawal are free of charge. The same is true for Granit Bank's offer, the Digitális számla without Terms has no account keeping fee either and only the annual cost of the card is an expenditure.

All other offers include an account management fee, so there are significant differences - on an annual basis over 10,000 HUF - between the cheapest and the most expensive packages.

2. „Conservative” clients with average income

Clients in this category have higher income, higher banking activity, and use their credit card for purchases and for cash withdrawals. These, in turn, also result in a higher fee for customers due to the costs associated with the transaction fee.

BA2017 3Among the big banks in this category, the CIB ECO package is the first. It is followed by the Raiffeisen Díjnullázó Plusz with free account management fee, which is subject to a monthly crediting of at least 150,000 HUF. In addition to raising the annual fee of the bankcard, the OTP Simple account package also changed the name of the package, and now it is sold under Smart. It is worth mentioning that this package is for young clients under years 35, with a discounted monthly billing fee, costs HUF 4 577 per year.

BA2017 4For the analysed small and medium-sized banks, the leading account holders are - due to free account management fees – the MagNet Bank, the Gránit Bank and the SberBank. The prizes of the MagNet Diamond account package are only available on a conditional basis: at least monthly 100,000 HUF regular credit and at least two orders are met. A minimum of 150,000 HUF monthly credit is a condition for the account package of Gránit Ász and SberBank’s Fair. The increase in SberBank fees and the annual decline in FHB's package is due to the few hundred forints movement of card fees.

3. Dynamic clients with above-average income

Clients belonging in this category are already classified as high-income but not yet as the premium category. These customers' banking activity is significantly higher than those in the previous categories, they have multiple direct debit orders, use their credit cards on a daily basis, and execute online transactions.

BA2017 5There was no change in the big banks’ conditions either compared to the previous semester. Raiffeisen Bank's Díjnullázó Plusz Bonus package, similar to the previous category, provides a strong offer; even CIB ECO, which reduces its transaction fees, cannot overtake it. Taking OTP Smart, also this category offers clients under 35 years an annual fee of HUF 4 577. In the case of a K&H Bővített Plusz package, the account is free of charge for a credit exceeding 150 000 HUF, the Bank charges only card and transaction fees depending on quantity.

BA2017 6The order of small banks remained unmoving compared to the last half year. With regard to prize packages, the first three offers also compete with the big bids. In case of the KDB Net account package the account management fee is free of charge if at least HUF 80,000 monthly credit is received in up to two batches and at least two collection direct debits have been completed.

4. University students

Banking students, usually under age of 24 or active student relationship, are specifically targeted at banks by specially tailored bill bills, completely unique conditions and discounts. Most young people do not have or have low regular incomes and their bank activity is limited to occasional online transfers and card purchases.

BA2017 7At the top of this list is the Erste Egyszámla package, with a discounted Maestro Slide card and free account management. Conditions are the valid student card and the age of 14.

The Junior package for the OTP Bázis package consists entirely of the transfer fee, a free MasterCard Online Junior card and a free account management fee up to the age of 24. Finalist is the K&H Bank Trambulin with its invoice package for students of age between 18 to 25 years. CIB ECO clears this year's terms of payment with the same minimum wage as free monthly account management for students between the ages of 18 and 24. Budapest Bank, which ranked among the largest banks in the July 2017 conditions, came out with a discounted Hello BB account for the students at the time of this analysis, which we will only be able to compare to the next survey.

BA2017 8Most small and medium-sized banks also have a separate package for students. The list is kept by MagNet Bank, which is due mainly to the fact that its account management fee is the one above mentioned honorary fee character. Sopron Bank offers a special student account, which is a very favourable condition with Maestro Youth Card and HUF 99 monthly account management for full-time students aged 14-26. Among the offers of the Granite Bank, it is worth to choose the Digitális account package for an annual card fee of 300 HUF, free account management and more favourable cash withdrawals. Sberbank, FHB and Kinizsi Bank also offer student packages, but there is a significant difference between the costs of these packages in comparison to the top banks.

5. Premium clients

Active banking, over average, high income and minimum one bigger savings. These are features for customers who can be classified into the premium category. The purpose of banks is to provide these higher income clients with special packages, even with significant transaction fees, by compiling the most favourable conditions.

Premium clients should pay special attention to banking offers since there are some criteria that can be met with free account management fees, however, if the customer does not meet these conditions, the amount payable may considerably increase.

BA2017 9The list is run by the Raiffeisen Premium Gold 2.0 account package: in case of the yearly free account management fee the Prémium Start smartcard is HUF 5,740, and the Visa Gold bankcard package costs 9,990 HUF per year. Condition for that is a $ 400,000 credit on the account or a minimum savings of $ 8 million. The UniCredit Premium Gold account package offers Premium Banking credit cards at a discount, in addition, a free account management fee as well. This is subject to payment of a monthly HUF 400,000 credit, or placement of savings of at least HUF 5 million for a new client. The CIB ECO account package is also free of charge, but the annual cost may vary depending on the choice of card types.

BA2017 10Small and medium-sized banks, although not specifically targeting this group, can offer a very favourable offer to premium customers as well. Granite Bank, FHB and SberBank offer a special premium package. The cost of FHB Premium did not change compared to last year's semester. The prerequisite is much lower than in the big banks, here is a one-time minimum of external credit of 180,000 HUF. The condition of 3rd Category of the SberBank Fair account is a regular 300 000 HUF credit and 4 transactions in a total value of HUF 50,000. If the condition is met, monthly account management is free of charge. Similar to the Granite Bajnok account package, we can get a free account management fee if a credit account of at least HUF 280,000 per month is received.

Mobile applications

In addition to price, the development of technology is becoming increasingly important in the strong competition between banks. When choosing a bank, it may even be crucial to what kind of online banking or mobile solutions a bank offers to assisting or easing banking activities. Banking over smartphone is also increasing in Hungary, so we have mapped the applications of banks we have studied along with features that are important to an average user. The results and the available main features are shown in the chart below.

All major banks have a free downloadable mobile application. Most applications are able to initiate transfers, check balance of payments and bank account history, or simply modify the limits of our bankcard. For example, in-app currency transfer, group direct debit or deposit and termination i.e. managing our savings can be a competitive advantage. Many banks included additional search services for check payments, bank branches and ATM, but also current exchange rate information in apps of CIB, OTP, UniCredit and Raiffeisen. Interestingly, more and more banks are introducing fingerprint authentication instead of traditional PIN code solutions. OTP and Erste Bank run multiple applications simultaneously on the market, each of which performs a different function (eg Simple, OTPay, Nice Card, Erste MobilePay, Erste Market, etc.).

BA2017 11

Taking the small and medium-sized banks, Granite, MagNet and Sberbank have a mobile download application, keeping pace with the technological development of larger banks; they also offer basic functions such as account management or account search. At Gránit Bank, there is no possibility of transfer within the application, however, the first time in Europe, they came out with NFC payment function in the application. The Sberbank mobile is able to initiate foreign exchange transaction, while clients who have savings at MagNet Bank can simply manage their money through the application.

BA2017 12