Overview 1
Catalyst 1
Summary 1
Key Messages 2
Despite the downturn, structural and economic fundamentals remain strong for long-term growth 2
The financial crisis has hit the region stronger that many had foreseen 2
Decreasing profitability is driving a shift to cost-cutting strategies 2
The financial crisis has polarized 2009 IT growth plans 2
Focus on branch development, driven by need for deposits, is a top IT priority 3
IT vendors' landscape remains largely unconsolidated across the CEE banking market 3
Vendors need to investigate relationship between headquarters and centers of excellence 3
Table of Contents 4
Table of figures 5
Market Opportunity 6
CEE and CIS markets need to be distinguished 6
Western European banks have increased their operations significantly in CEE 7
Foreign banks' entry has significantly influenced the economic environment in CEE 7
Positive effects of foreign banks' entry for the local market: 8
Negative effects of foreign banks' entry for the local market: 8
CEE countries are on the road to maturity of their banking sectors 8
Macroeconomic factors in the CEE region shape strong long-term growth potential 9
Low inflation rates a necessity to join the eurozone 11
The credit market is still far from saturation 11
Euro adoption still in progress 12
The financial crisis has hit the CEE harder than many had foreseen 12
The financial crisis reduced competitiveness for new lending 13
The financial crisis has created a vicious cycle between the consumer and commercial banking sectors 13
The behavior of foreign-owned banks will influence the development of the crisis 14
Stabilization is a necessity to join the eurozone 14
Technology Opportunities and Threats 15
Focus on revenue growth continues despite the risk of cost cutting requirements 15
The financial crisis has polarized 2009 IT growth plans 17
Focus on branch development, driven by need for deposits, is a top IT priority 19
The centralization of banking operations is changing the technology landscape 22
CEE technology spending will be shifting progressively toward Western Europe 24
Core systems, payment processing and branch technology expenditure will grow at a healthy rate 24
Technology Market Overview 26
Centralization efforts drive reduction and re-engineering of existing platforms 26
Payments technology expenditure driven by investments in anti-fraud and the mobile channel 27
Investments into middle office are driven by anti-fraud technology 29
Sales focus increasingly drives further investments into CRM systems 29
Vendors bet on analytic CRM technology 30
Channels are in the center of interest for banks 30
Branch expansion dominates channel investments 31
Online technology consolidation underway 32
The ATM world is a three horse race but outsourcers are catching up 33
Contact centers are still immune to centralization efforts 33
The product vendor landscape remains unconsolidated 34
Local software vendors will continue to be niche players 36
IT services landscape largely diversified 36
Both local and western vendors have managed to significantly penetrate the market 36
IT services companies are looking for the 'hot spots' of banks 39
Go to Market 40
Recommendations for technology vendors 40
Vendors need to investigate the relationship between headquarters and centers of excellence while analyzing the decision making process 40
Vendors need to reach a critical mass before the crisis passes by in CEE to make SaaS up-take successful 40
Local language skills are not critical but local domain expertise is 41
Now is the time to buy as economic turbulence creates bargains 41
Local vendors should analyze their exporting options 41
Recommendations for banks 42
Western banks should evaluate local vendors' offerings that pose a low risk to operations 42
Banks should watch out for under-investing during the economic recovery 42
APPENDIX 43
Definitions 43
Methodology 44
Further reading 44
Ask the analyst 44
Datamonitor consulting 44
Disclaimer 44
List of Figures
Figure 1: Central and Eastern Europe vs. rest of Europe 6
Figure 2: International banks have widely spread across Central and Eastern Europe 7
Figure 3: Banking development in transformation economies 9
Figure 4: Gross domestic product based on purchasing-power-parity per capita GDP in selected countries 10
Figure 5: Personal credit saturation level in CEE 12
Figure 6: CEE Banks' objectives to IT investment strategy in 2009 16
Figure 7: CEE banks' major strategic goals for 2009 17
Figure 8: Direction of IT budgets changes has diverged 18
Figure 9: Crisis effect on IT budgets in the banking sector 19
Figure 10: Expansion plans drive branch technology investments 20
Figure 11: Raiffeisen's branch expansion plans by 2010 21
Figure 12: Centralization and expansion efforts drive investments in infrastructure 23
Figure 13: Retail banking technology spending by country through 2013 ($m) 24
Figure 14: Retail banking technology spending by business function through 2013 ($m) 25
Figure 15: Centralization efforts drive reduction and re-engineering of existing platforms 26
Figure 16: Anti-fraud and mobile payments drive technology spending 28
Figure 17: Expansion efforts drive investments into channel technology 31
Figure 18: Selected product vendors with footprint in the CEE banking sector 35
Figure 19: Selected IT services companies active in the CEE banking sector 38