Каталог статей из сборников научных конференций и научных журналов- Transnational banks in central and Eastern Europe: where do russians want to invest their money?

V. S. Minсiсova Candidate of Economic Sciences, assistant professor,

Financial University under the Government of the Russian Federation,

Moscow, Russia

Data sources and research process

The research of several (19) questions concerning Russian economy destabilization was held by the author in a form of questionnaire with the usage of Google Docs service. The list of questions concerned the author’s idea to find out if Russian residents prefer to invest their money into transnational banks, national banks or to save them in other terms, investment objects or cash. We also tried to find out whether people are ready to save or spend money after the imposition of sanctions, the drop in oil prices, the retaliatory measures of the Russian Administration to European and American partners and the sharp depreciation of the rouble against the major currencies.

The questionnaire was filled in via internet by 106 volunteers within 2 months during the period between 17th January and 18th  March 2015, i.e. during the peak of hype around currency fluctuations and uncertainty of economic situation in the Russian economy.

Volunteers were selected by chance all around the country. The only clause for them was to be Russian economic resident aged 18+ working. No attention to their gender or family situation was paid. It happened to be that the interviewed were the representatives of the middle class aged mostly 23-40 (84,7%) with 14,3% aged 40-75. Most part of the interviewed declared to be working/living or spending most part of their lives in Moscow, Moscow region, some 12% of them from Saint-Petersburg, Novosibirsk, Yaroslavl, Kazan, Ulan-Ude, Tver – major cities of central federal district or Siberia.

The occupation of the interviewed differed from economy and finance (36,2%), services excluding financial (21%) to creative professions (15,2%), heavy and light industry (8,6%) and some others.

Savings or spending: what do respondents prefer after the economic troubles.

In today's economy, it's hard enough to keep up with the bills, let alone save money. But still the question of dividing money between risky saving and today’s consuming is still the one that touches both producers and consumers of goods, services and capital, which is the most interesting for the topic of our research. When recession hits, most reporters focus on consumer spending. And sometimes it is necessary even for the governmental aims. E.g. in Japan in 2001, economic analysts contended that Japanese consumers were saving too much, and the only way to jump start the giant Asian economy was to get Japanese consumers to stop saving and start spending. [2]

In Russia at the turn of 2014-2015 the consuming burst was initiated automatically by the economic situation. Thus on the New Year’s eve Russians consumed more by a third to keep their money because of the cheap rouble [6].

Our research attests the tendency. Now 34,3% of respondents declare that they would prefer to spend their available funds for goods and services rather than save or invest them. It should also be mentioned that they mean having those funds and still 61,9% are ready to invest their money. Among others the second popular variant (40% of respondents) of investment was to open a deposit with a bank so the banks interested in the Russian market should still feel positive about the prospects of deposit taking: more than a quarter of Russians intend to put their money in banking accounts. Consider the fact that, for example, only the Russian-based banks opened 733 mil rouble accounts for their clients inside the country [3]. This implies a very promising market for the financial players.

As for the pre-crisis (or pre-sanctions and retaliatory measures and Russian rouble exchange rate fall) intentions of the Russians we should say they differed noticeably. Only 26,7% (compared to 34,3%) of respondents intended to spend their money. Another 69,5% wanted to invest. Even more preferred banking deposits to keep their income: 43,8%.

After all that means that the decrease of those wanting to put their money on banking accounts before the mentioned events and after them was that of 30,4% compared to 24,8%.

As for the other ways of investing money the author plans to expand the information about the research results in the articles following.

How do they choose a bank to use?

Our respondents were asked about their motivation in choosing the banks for everyday usage. The variation of answers was wide but still most part of them concerned the bank’s reliability and low riskiness of its’ continuation of existence. That is obvious while taking into account the current economic situation in the country. Persons declaring themselves to be professionally connected with the sphere of economics and/or finance showed their intention to carefully study banking reports especially balance sheet. They are interested in the banks’ assets volume, current reliability ranking place, long-term presence in the market. Those connected professionally with economics also answered that it would be more important for them to study bank’s reliability than to get extra interest.

But the other very often answer was its’ interest rates on deposits: the higher, the better. In Russia usually smaller private banks offer higher interest than bank giants with governmental participation. E.g. in the peak of crisis some regional banks offered 18,5% of yearly interest for the deposit in comparison to 7-8% on average in state-owned Sberbank [4]. Logically thinking those who were more interested in extremely high interest rates were those of other than economic professions. We should say that they oftener were people of the services sector, not technicians or producers.

Next popular point was the wide network of offices throughout not only Russia but other countries as well. Many respondents indicated that they travel much due to business or personal reasons. They also desire less paperwork and documents. If a bank is transnational they will not be obliged to sign up contract several times if, as was said, they wish to have a mortgage for a house in Croatia, money transfer in Great Britain or salary matters in Moscow.

Both motivation “guaranteed state-owned” and “better internationally owned” were present in same numbers. That shows the obligatory segmentation of the clients is needed in Russia. Unexpectedly low number of variant “recommendation of friends” was fixed. Usually this factor is distinctly used in Russia concerning financial matters. We associate such situation with the growing individualism in banks’ client strategies. Some interviewed mentioned the need in more professionalism in banking officials work. The lack of professional knowledge of the front office of banks executing their service in Russia is a rather often problem of both Russian and foreign banks. Corporative education is more effectively executed in small private transnational banks (e.g. First Czech-Russian bank, Asia-Pacific bank, Kedr bank, etc.) rather than banking giants or financial-industrial groups.

For the aims of this article we do not mention all the results concerning which type of property of the banks was chosen, that information will be published in other articles on the results of the current study. But it is necessary to say that 12,4% of the respondents unambiguously would choose international bank for their assets to be kept with.

As for the negative information for the transnational and particularly foreign transnational banks that can’t be skipped, we should tell the following. Some 8% of our respondents declared that they never had the need in use of foreign banks’ facilities and do not intend to do so, or have not enough budget to manage and they are not regarding foreign banks as proper provider of services.

If transnational bank than which: motivations to become a client.

We also studied the topic for transnational banks specially situated abroad. The respondents were asked firstly if they would rather use the services of a transnational or national bank abroad in case of need. That also meant operations with their accounts, credit cards, currencies abroad. Most part of interviewed declared that they would prefer internationally operating bank not a small regional/national institution. 67,6% of respondents ticked out that they would use transnational banks’ services for payments, money transfer, short-term deposits and currency exchange both as individuals and legal entities if they are abroad. The remaining 25,7% decided that local banks with no subsidiaries in other countries would do better.

More than a half of those preferring transnational banks for their external financial operations motivated their choice by personal experience and preference. Some positive examples were marked, such as BNP, RZB, Raiffeisen bank. About 10% of respondents marked that even if they use banking services abroad their actions can have consequences afterwards and they need to have the opportunity to decide questions in Moscow and most part of top-20 transnational banks have their subsidiaries (representative offices) in Moscow.

As for the country of origin of the TNB Russians are quite conservative [5]. They have strong opinion about some countries as financially-sound and some too risky. Among the countries of origin of the banks there were none other than European, mostly Western European countries. Exceptionally popular answer was the banks of Germany, Austria and Great Britain. Many respondents want to cooperate with the banks originating from France and Switzerland. Several times they mentioned different Scandinavian countries and Italy. As for Central and Eastern European countries our respondents mostly believe in the soundness of Czech, Bulgarian and Estonian banks. Again it should be mentioned that many of those who answered the question marked that there motivation was mainly driven by personal experience.

Other motivations also exist. Some 10 people marked out that they would prefer the bank from the country which is more loyal and friendly to Russia and its’ government. The political factor is very important for Russian investors. Several people also said that the bank should originate from Russia and be transnational or should be affiliated with the Russian bank.

Many people are very interested in fixed transaction costs, they would prefer the transparent system of fixed fees other than number of hidden and obvious payments in terms of percentage of the sum that should be counted each time.

While choosing a bank for international operations abroad (not for day-to-day use) Russians are less scrupulous in scrutinizing banking documents such as balance sheet or cash flow statements. They would rather be subject to advertisement, people’s opinion, information availability, local popularity and other psychological factors other than economic benefit or better service implementing conditions. Not alike expats driven to use local banks due to the lack of international options, often choose to send their savings abroad, while maintaining a small Russian account for daily living purposes [1], Russians (those who are deeply involved in banking services) are rather familiar with using the services of foreign banks.

Main conclusions

Russia is becoming more and more interesting and promising market for transnational banks even after the economic disturbance of 2014-2015. Still about a quarter of those economically active in the most desirable “solvent” age of 25-40 are ready and actively invest their money both in production and financial instruments, mostly using banking deposits. 23,8% of respondents in our research declared they would prefer deposit in euro to any other currency. While significant growth in the number of those using banking services is observed: 61% of Russians use payment cards and have banking account for salary/social payment [3] compared to 24% in 2008 [1], more and more people are becoming familiar with other than simply current account management banking services, 13% of Russians use internet banking [4], most part prefer this to traditional “office-coming” way.

Russians’ interest in transnational banks’ services in Europe is constantly growing owing to cheap (but recovering) national currency, governmental promotion for export and import substitution, still buying real estate abroad is very popular way to invest money. Moreover Russians still believe those countries of Central and Eastern Europe with their growing markets to be more loyal and friendly to them. The positive experience of the Hungarian OTP bank, the Czech J&T, PChRB banks and others shows that their services are demanded not only by expats or bilateral entities, but also by native citizens. The most competitive rivals (concerning foreign banks) for CEE TNBs on the Russian market are Turkish and Cyprian banks.

While choosing a strategy for Russian clients one should take into account strong conservatism of the population in financial matters, sharply segment those who are familiar with economic terms and those who are not and provide services and terms for them with different marketing strategy. It should be remembered that clients in Russia would prefer soundness to benefit in current terms of economic development.

Bibliography

1. Banking guide for expats in Russia. URL: http://www.expatarrivals.com/russia/banking-money-and-taxes-in-russia.
2. Scousen Mark. What Drives the Economy: Consumer Spending or Saving/Investment? URL: http://policydialogue.org/files/publications/GDP.pdf (addressed April 2015).
3. Statistical data of Central bank of Russia. URL: www.cbr.ru.
4. 4Statistical and data portal Banki.ru. URL: www.banki.ru.
5. Минчичова В. С. Зарубежная экспансия банков в странах ЦВЕ. // Евроинтеграция: влияние на экономическиое развитие Центральной и Восточной Европы = Eurointegration: impact on economic development of Central and Eastern Europe. – М. : Ин-т Европы РАН , 2014. (Reports of the Institute of Europe / Ин-т Европы РАН ; № 303). С. 85-90.
6. Россияне начали скупать бытовую технику на фоне дешевеющего рубля. URL: http://www.gazeta.ru/business/news/2014/12/16/n_6748901.shtml (addressed April 2015).