Bank Pekao S.A., founded in 1929 as a savings bank for emigrants, has grown into one of the largest financial institutions in the Central and Eastern Europe (CEE) region and is among the top two universal banks in Poland with PLN 280 billion in assets. The bank was the first in Poland to launch such innovations as an automated teller machine, a credit card, and a brokerage office. Today, Bank Pekao serves more than 6.3 million customers through the country’s second-largest branch network. As the leading corporate bank in Poland, Bank Pekao counts many of the largest Polish corporations among its clients.
The fundamentals of any universal bank include market-leading private banking, asset management and brokerage operations. Bank Pekao’s diversified business profile has been supported by a best-in-class balance sheet and risk profile reflected in its low cost of risk, strong capital ratios and steady resilience to macroeconomic conditions (the bank finished second in the 2021 European Union-wide European Banking Authority [EBA] exercise). Since 1998, Bank Pekao has been listed on the Warsaw Stock Exchange (WSE) and has been a member of several local (e.g., WIG [Warsaw Stock Exchange General Index] 20 and WIG Banks) and international indices (e.g., MSCI Emerging Markets (EM), STOXX Europe 600, FTSE Developed). Bank Pekao is among the top dividend companies listed in Warsaw, with a total payout of PLN 20 billion over the last 10 years.
Bank Pekao has committed itself to not only following but creating banking trends, with a strong emphasis on leveraging the latest technological developments. It was the first bank in the country to use biometrics in its operations. In 2015, it introduced its innovative Pekao24 platform and PeoPay application, which have become among its most popular offerings. Bank Pekao Private Banking just celebrated its 25th anniversary with a laser focus on its future path.
International Banker was pleased to interview Mr. Jarosław Fuchs, Bank Pekao’s Vice President of the Management Board, who supervises its division dedicated to private banking and investment products. He explained how the bank continues to use technology to complement its central customer-service model.
Mr. Fuchs, welcome…
In the first half of 2022, Bank Pekao generated a net profit for the bank’s shareholders of PLN (Polish Zloty) 1,375.1 million, which was easily more than double the PLN 524.7 million recorded in the same six-month period of 2021. What main underlying factors explain the stellar growth achieved in 2022?
2022 was a good year for Bank Pekao S.A. We recovered well from the pandemic, continued to grow, and managed to keep our customers happy and satisfied. We acted responsibly, driven by our responsible approach to balance-sheet management and the entire financial sector; we set up additional reserves for mortgage loans in CHF (Swiss francs) and lifted the costs of the institutional protection system. We kept our focus on continuous support for businesses, predominantly in corporate banking, where we achieved better results than our competitors. We also attached great importance to digital transformation, which gave us dynamic growth in digital channels and brought measurable results.
Bank Pekao Private Banking just celebrated the 25th anniversary of its establishment. What are some of the key themes, principles and values that the private bank has maintained throughout the past 25 years? And what have been some of the most significant changes the bank has implemented? Do you consider Bank Pekao Private Banking to be stronger today than at any time previously, and if so, what is currently contributing to its success?
Our clients benefit from investment advice, a wide range of investment solutions and numerous tools that improve financial management, including a prestigious multi-currency debit card, currency exchange, and priority hotline. Most importantly, the service is tailored to the client’s needs, as everyone has an assigned financial advisor who works with each client individually. But we also offer many additional services. These include, for example, travel insurance with a medical package of up to EUR 10 million, concierge services, access to airport lounges around the world via the Lounge Key application and free fast track at the Warsaw Chopin Airport. We are currently developing and will provide our clients with an integrated platform for investment services that will offer full digital access to brokerage services from the level of the PeoPay application. We aim to transfer investment advice and capital-market instruments to online channels. We care about the comfort of our customers while designing modern and functional solutions.
Can you briefly describe the process employed by the bank to ensure it is consistently responding to—and optimizing—its clients’ private-banking needs? What have been some of the broad client preferences and trends you have observed recently?
From capital-market and private-banking perspectives, the current situation is not easy. We had two fantastic pandemic years when interest rates were at zero, so it was natural for customers to look for alternatives to deposits. Many clients returned to the stock exchange, and a very large group of new clients started investing in the stock exchange. The situation has changed; we have high interest rates, and there is a big interest in deposit offers. Therefore, investment companies and funds managing clients’ assets must adapt to new challenges easily and quickly.
Given the immense degree of digitalisation in private banking—and other forms of banking—in recent years, do you expect a time during the coming years when face-to-face interaction with clients will become redundant?
No. In private banking, technology development should complement the current customer-service model, which in this case, is mainly based on personal relationships. Of course, today, we must think about how banking will look not in three to five years, but from the perspective of the next 10 to 15 years, because today’s students and future incoming entrepreneurs will be our clients in this timeframe. In mass solutions, digitisation often replaces contact with an advisor or a bank branch. However, in private banking, this is still hard to imagine. We are looking for solutions that support the advisor and the client in building a relationship—often remote processes, but which do not fully replace in-person contacts.
As I understand, the PeoPay mobile application has become the main channel of contact with the client. What are some of the most appealing features of this app? The first half of 2022 saw the number of active mobile customers using the PeoPay application increase by 213,000 (+20 percent year-on-year) to 2.25 million, 48 percent higher than two years ago. What explains such impressive growth?
Bank Pekao offers the PeoPay mobile application, which enables clients to have easy and convenient access to accounts and cards, where they can pay bills, pay for their purchases, withdraw cash with “Blik” or even take out a loan—all done remotely, online. This application has been constantly improved. A novelty that all customers also received in 2021 was the option to purchase public-transport tickets and pay for parking fees with the PeoPay application.
We try to make the PeoPay application as intuitive as possible, and we propose innovative solutions. We are extremely pleased that clients appreciate the Pekao24 website’s high quality of service—primarily the PeoPay application—and recommend it to others. The PeoPay application is our champion!
Bank Pekao also provides access to a wide range of capital-market services and products via a separate organisational unit of the bank: Biuro Maklerskie Pekao (BM Pekao). What are some of the most significant and/or unique capital-market products and services currently available to customers? And do you have any plans to broaden the range of capital-market offerings accessible to customers in the near future?
The Pekao Brokerage House challenges the competition and seeks to become the market leader in Central and Eastern Europe (CEE) among domestic and foreign institutional and individual investors. We recognise the present competition but believe that our potential is high. We are seeing the changes in our clients’ perceptions of our brokerage office, and whereas before, we may not have had the product that could capture most of the market, now we certainly do. We work with national institutions and receive a lot of positive feedback from them. We also have good relations with individual investors. Today, we aim to build strong exposure to foreign clients. We attract customers by offering them the possibility to invest in the stock market and buy bonds—recently Polish treasury bonds—while providing them with insightful analytical reports. We are constantly expanding our team of analysts, who follow many companies on the Warsaw Stock Exchange (WSE).
What is PekaoID? And does biometrics play a significant role in its successful functioning?
PekaoID is a free electronic method of confirming “who you are”, thanks to which customers can settle a number of official, administrative and consumer-related matters online. This tool enables online access to official data (registration, tax, health, social security). Using PekaoID, clients can pay for certain online services, such as energy bills, insurance, telecommunications and medical services. With it, our clients can also create a “trusted profile”, with the help of which they can electronically submit a trusted signature in contacts with e-administration. Biometrics is crucial to identifying clients using the newest possible identification methods.
Bank Pekao has recently entered the world of non-fungible tokens (NFTs) by tokenising art. NFTs with elements of Rafał Bujnowski’s painting composition will be associated with 440 unique payment cards introduced jointly with Mastercard. Why did you decide to enter this particular space, and can you provide more details on the role being played by Mastercard? The project is being promoted using the slogan “When art creates business”. Please provide more information on what this means.
The metaverse, the virtual world of the future, may have its own community, its own currency and its own digital assets. It probably won’t replace relationships in the real world, but it will certainly expand investment opportunities. We already see a growing interest in the non-fungible token, which is treated as a unique digital asset representing high investment value. From our perspective, the growth potential is a factor that may be of particular interest to a group of young customers focused on modern technologies or wealthy clients.
Given the recent controversies that have plagued the world of digital currencies within the past year (including the FTX bankruptcy and the collapse of stablecoins), are you concerned that such events could lead to contagion risks permeating the NFT space? And how are such events influencing your approach to expanding within the NFT space, if at all?
Bank Pekao does not close itself off to new trends. On the contrary, we are fascinated by them and want to explore new forms of expression both in the changing world of finance and also linked to art. An NFT with elements of Rafał Bujnowski’s artwork has been linked with 440 unique payment cards offered jointly with Mastercard. Each individual card is customised with a unique fragment of the painting “Studio Wall” printed on the card and linked with a non-fungible token. The tokenized version of the painting is available on the Polish Mintiq (mintiq.io) platform, specifically dedicated to art. For our bank, this is about promoting art and investing in it; expanding these opportunities is a trend we pursue and see developing as part of the contemporary world of finance.
As I understand, tokens of artist Kaja Renkas’s works were created for the 25th anniversary of Bank Pekao S.A. Private Banking and displayed in the PeoPay Gallery—a virtual space located in ESKA World, the first Polish metaverse environment. What does this project say about the bank’s outlook for the metaverse’s ongoing development and evolution? And do you anticipate further investment in metaverse projects going forward?
We were the first among all the universal financial institutions in the world to tokenise art. Our entry into the metaverse world, inseparable from NFTs, is a natural continuation of this activity. Now we feature an NFT linked to the work of Kaja Renkas as part of celebrating the 25th anniversary of Bank Pekao S.A. Private Banking in its natural digital environment. With this, we prove that we understand both the changing world of digital products and our clients, who will certainly explore this new metaverse space for communication purposes. Our presence in the metaverse results from our consistent pursuit of the latest trends that fit well into our strategy.
What will be Bank Pekao’s most significant challenge over the next one to two years? And how do you intend to address it?
We want to be open to new foreign investors. In the future, the private banking sector will be focused on creating modern products in the area of investments, from classic to alternative—e.g., in wines or collector’s items. Banks will also adapt their offerings to new technologies as we head toward the virtual world and will certainly not turn away from it. Bank Pekao S.A. is ready for this transition; however, we should remember that the foundation of private banking has always been and always will be the relationship with the customer. The pandemic has certainly accelerated the process of digitalisation in the market. Today, virtually everything is digital. Of course, there were always players who were a few steps ahead of the market because they introduced very modern solutions at the time, and sometimes even revolutionary ones. We at Pekao not only observe the trends but also want to create them. Who could have imagined the scale and outcome of the marriage of mobile telephones with banks? We want to be as creative and open to new opportunities as possible.
It’s clear that Bank Pekao is creating revolutionary new trends in private banking, Mr. Fuchs. Thank you very much for your time.