Petia Dimitrova: Investments in Developing the Digital Ecosystem Are the Future of the Banking Sector


12 November 2021

An interview with Petia Dimitrova, CEO and Chairperson of the Management Board of Postbank for Bulgaria On Air.


Ms. Dimitrova, the profits of Bulgarian banks in the first seven months have increased by almost 35% on an annual basis and are now not so far from the results before the pandemic. Is it safe to say that its effects are already fading away for the banking sector in the country?

Bulgarian banks dealt very well with this situation and demonstrated once again that they are resilient and stable institutions. Results show that the banking system has been through minimal stress in this critical period. And although the pandemic has had its effect and we all work in an unusual environment with many restrictions, the Bulgarian banking sector is still stable, profitable, with high levels of capital adequacy and liquidity.


In times of record low interest rates, banks across the world are obliged to search for other profit sources, most of all from tariffs. How do customers react to this?

For years, banks kept the prices of many banking services very low by subsidizing them with the interest income. Unfortunately, in the conditions of record-breaking low rates, this is no longer possible, and banks have to set fair values for their services. Tariffs and rates of commissions reflect the costs we incur in covering the increasing legal regulations and norms.

However, we give our customers the opportunity to pay lower banking fees when using our services online. The pandemic accelerated the digitalization processes of banking services and we invested a lot of efforts and funds in guaranteeing maximum security and reliability. Our customers appreciate what we do, and the share of digital channel transactions is constantly growing.


The past year and a half was a significant impulse for digitalization in payments and financial services. Postbank was among the first institutions in Bulgaria to go down this path, long before the Coronavirus. What benefits did this early start give you?

We started the digitalization processes in Postbank years ago when we created a special unit with specific tasks related entirely to this mission. This group developed a complete strategy, along with its implementation, it outlined the priority fields for investing in creating new products with the main aim of digitalization.

This prescient policy brought its results and in 2020 we were prepared, we quickly redefined our business models and made them more digital, and swiftly reorganized work processes, thus responding to customers’ expectations. Proof of the timely decisions we made is visible in the data – once again, we at Postbank showed a significant increase in customers choosing to bank online, with now 70% of operations carried out that way. We are happy that our customers appreciate the advantages of digital banking channels, and the speed and security with which they can manage their funds online. Naturally, this is a process and we expect it to continue, and we will be by their side throughout, meeting their expectations for faster and more convenient banking.


Digitalization opens the sector to companies that not only aren’t banks, but were never before even in the financial sector – tech giants, even social media. What are the advantages of traditional banks in this new competitive environment?

On one hand, banks must achieve the speed and flexibility that are typical for tech companies. On the other hand, however, we must continue developing, keeping high security standards and meeting the regulatory requirements we abide by as big and traditional financial institutions, because that is what customers expect from us. Just as technologies develop at the speed of light, we banks have also proved that we can develop just as fast. Furthermore, we proved that we really are high-tech institutions, ready to provide services to our customers entirely digitally. Innovative decisions have become an integral part of our business development strategies.

It is of strategic importance to us to partner with non-banking financial institutions. Just days ago, Postbank and pension assurance company Doverie, part of Vienna Insurance Group – one of the leading international insurance companies, signed a contract for large-scale strategic partnership to offer our customers access to the most innovative banking, insurance and pension assurance solution on the market. Our partnership will provide all users who are mindful of their future with the option to join a voluntary pension fund to ensure a higher living standard after retiring. Alongside all benefits, supplementary pension assurance gives the opportunity for return on investment with a moderate risk level.


Just days ago, you announced the start of the Smart POS service, which practically turns smartphones into POS terminals. What are your expectations for it?

With this service, we continue contributing to the development of the digital ecosystem and we are rightly happy to be the first bank in Bulgaria offering a convenient and simple solution for contactless payments to all retailers. This innovative service that contributes to mobility – which is key for the effective growth of many industries – is attractive not only to the smallest niche businesses, but to large corporate customers as well. Smart POS by Postbank is coming to further build on the established POS business model and to make contactless payments much more accessible and convenient to retailers. This itself will broaden the access of end customers to contactless payments, which is not only convenient, but also extremely important in the pandemic situation. Using the capabilities of modern technologies in banking, we once again meet our customers’ need for speed, ease and accessibility of the services we provide. Smart POS by Postbank has an excellently developed intuitive analytic module that facilitates activities and allows for every retailer to immediately access the full information and status of each of the carried out operations, data on the complete amount and volume, as well as on the daily, monthly or weekly turnover from the app. Thus, the software POS provides more successful business and sales management and easier planning through accessible reporting.


Having discovered the advantages of online services, customers then rarely want to go back to services at a desk. Will bank branches survive in the future?

The pandemic proved to be a catalyst, not only of the banks’ digitalization, but also an incentive for the financial literacy of customers after successfully transforming attitudes that under normal circumstances we would have waited for years to change. And although we focus on developing our digital channels, we continue investing in our branch network as well, as there will always be customers who would prefer the pure human interaction and would want personal attention face to face with their private banker, alongside our well-developed digital services.

Therefore, we offered our digital self-service zones for express banking where customers can quickly and easily carry out a major part of the main banking operations themselves, but also seek consultation if they need it. Thanks to the intuitive devices in these zones, our customers themselves can carry out banking operations following identification with a debit or credit card, without the need to have registered for the bank’s online banking.


Bulgaria joined the Banking Union in the sudden striving to implement the euro. Has this already affected the work of Bulgarian banks? Other than the fact that they themselves must pay for the service of being monitored?

The process of joining the Euro Area is the most important one for Bulgaria in the coming years. In July 2020, our country joined the Exchange Rate Mechanism ERM II and the Banking Union as a part of the preparations for accession to the Euro Area. A few months ago, the Coordination Council for Preparation of the Republic of Bulgaria for Euro Area Membership passed a draft National Plan for the Introduction of Euro and the best practices of countries in the Euro Area were followed in the preparation.

Regarding the monitoring on behalf of the European Central Bank, to us this was a natural continuation of the existing regulatory mechanisms and does not lead to any significant change in the previous practice. As an EU member state, we had been abiding by the European regulatory rules well before that.

In fact, the European regulator already knew most of the banks it directly monitors, as they are part of large international banking groups whose activity was monitored by the ECB even before. In this relation, we do not expect any specific challenges we are not prepared to respond to.


The years of unbridled money printing by institutions like the ECB are already having their effect in the form of a growing inflation. Is this a permanent trend or a temporary event in your opinion? What is your forecast for the development of interest rates?

The higher inflation we have been observing during this year is to a great extent due to the strong recovery of the economy and high consumption in many countries, at times even bordering on overheating. During the harshest COVID waves of the past years, the prices of many goods and raw materials decreased, whereas now we are observing the opposite trend, which explains the rapid rise in prices. The global economy and most of all the logistic chains were not ready for such a surge, especially taking into consideration the fact that in many countries the rate of COVID-infected people stays high, which affects manufacturing and supplies of key resources and components.

It will take time for the market to ease and find a balance point. Long-term high inflation is an unwanted phenomenon and we are already witnessing initial actions on behalf of some central banks in restricting it.


At the Future: Money conference, organized by Bulgaria ON AIR, you shared that you see a serious role in the future for blockchain technology in the banking sector. What are its possible implementations?

Indeed, digital currencies are a vast market. A leading positive aspect to us would be the blockchain technology which can be widely implemented in the banking business in various processes such as optimization, lowering costs, and we see the future more in the technology than in cryptocurrencies themselves. We must also add that for commercial banks, cryptocurrencies are a field we are quite attentive towards, since we are a strongly regulated business and we are subject to many procedures. At this widely broadcast conference, I pointed out that lately we have been hearing more and more of an official digital currency. Many central banks worldwide currently discuss this topic, or are carrying out experiments. The European Central Bank launched the project for creating digital Euro in the middle of this year.

The ECB indicated that it does not plan to completely substitute physical money but sees virtual Euro as an alternative form for payments and investments, supplementing the role of banknotes and coins.


Do you think that in 10 more years we will still have physical money? And are there any grounds for those who see a danger of restricting personal liberties in the transition to entirely digital payments?

Cash is still the preferred payment method here, although in past years the share of electronic payments has been steadily growing. With time, however, cash will lose its importance and people will increasingly appreciate the convenience of e-money. Physical money will not completely disappear, but it will be less valued by consumers and retailers, and owning and using it will be more difficult and more expensive than using electronic money.

We are currently focused on instant payments which allow for money to be sent to a counterparty in a matter of seconds. Postbank alongside BORICA have been working hard on implementing this product and we expect it to be available to customers by the end of the year.