Press release of Banco de Portugal on the commercialisation of banking products and services in digital channels in Portugal

The growing digitalisation of retail banking markets brings about recognised benefits to consumers; however, it is necessary to ensure that customers are equally protected, regardless of the channel they use to acquire banking products and services.

Bearing this concern in mind, at the end of 2018, Banco de Portugal addressed a questionnaire to the financial institutions to monitor the digitalisation of retail banking products and services and their development, identify possible constraints to the development of digital channels and assess how financial innovation complies with the regulatory framework in force. It is the second questionnaire launched by Banco de Portugal on this topic; the first was carried out in 2016.

Banking products and services provided by institutions through apps have increased since 2016.

At the end of 2018, approximately 87% of financial institutions – including all the banks – offered banking products or services to private customers online. Approximately 68% of institutions – and 85% of banks – offered banking products and services via a mobile application (app) to their private customers.

The provision of digital channels by the institutions in 2018 was greater than in 2016. Apps presented the most significant increase.

In the majority of financial institutions, over half of private customers already subscribe online channels.

In the majority of financial institutions (58%), over half of private customers have already subscribed online channels. Apps were less popular: only 35% of institutions mentioned adoption rates of this channel by over 50% of private customers.

Despite the expressive adoption of online channels, only 27% of the financial institutions stated that over half of private customers actually used these channels in the preceding three months. In the case of apps, only 19% of institutions communicated usage rates greater than 50%.

Corporate customers use online channels more than private customers. But use apps less.

The adoption and usage rates of online channels were greater among corporate customers: in 75% of the financial institutions, over half of corporate customers had signed up to such channels. In the majority of institutions (54%), over half of corporate customers had actually used online channels in the previous three months. In contrast, apps were little used by corporate customers (only 12% of institutions reported usage rates of this channel of more than 50%).

Institutions estimate that demand for digital channels will continue to grow significantly over the next two years.

At the end of 2018, adoption and usage rates of digital channels were greater than those registered in 2016 in both channels (online and apps) for both customer segments (private and corporate). About half of the institutions estimated growth rates above 50% over the subsequent two years in terms of online and mobile channels, in both customer segments.

Institutions believe that customers’ concerns about security are the main obstacle to the expansion of digital channels.

Customers’ concerns about security were identified by 74% of institutions as an obstacle to the expansion of digital channels. Insufficient knowledge of new technologies and a lack of financial literacy by customers were also indicated as constraints by 66% and 61% of institutions, respectively.

With apps, most institutions already use biometric data for customer authentication.

To ensure customer authentication in online channels, institutions generally use more traditional methods, such as a customer-defined password (82% of institutions), the access code provided by the institution (68%) and a one-time password (68%), i.e. a password allocated for single access. In mobile applications, mechanisms based on customers’ biometric data are also frequently used, such as a fingerprint (57% of institutions) and facial recognition (43%).

In 25% of banks it is possible to open a current account exclusively online.

Some banks already allow current accounts to be opened exclusively via digital channels, that is without the customer having to go into a bank branch. At the end of 2018, this facility was offered by 25% of banks in online channels and by 32% of banks via their apps.

Customers’ personal identification was mainly confirmed through the use of assisted videoconferencing and entities authorised for the purpose (so-called “qualified trust service providers”). Although the digital mobile key is not currently used in Portugal for this purpose, the majority of banks plan to adopt it over the subsequent two years.

It is already possible to enter into credit agreements exclusively online in 19% of institutions.

Around half of the institutions offered functionalities associated with personal loans (56% of institutions) and credit cards (47%) in online channels; approximately a quarter offered such functionalities through their apps.

In Portugal, bank customers can already enter into consumer credit agreements wholly through digital channels. At the end of 2018, approximately 19% of institutions provided this possibility through online channels. Only one institution allowed it via its app.

The most frequently used mechanisms when entering into the credit agreement were the one-time password and the customer-defined password. However, institutions predicted a greater usage of customers’ qualified digital signature and biometric data over the following two years.

The offering of payment services through digital channels is diverse, but there is room for growth.

The majority of institutions allowed transfers and direct debit management through digital channels. About 40% of institutions had already made immediate transfers available online and 39% through apps. Over half of the institutions had provided payment of services through digital channels and around one third allowed for the issuing of virtual cards.

Although no institution offered an account information service or the payment initiation service – regulated, since 13 November 2018 by Decree-Law No 91/2018 – approximately 60% of institutions plan to do so within two years.

Institutions use more security mechanisms simultaneously.

Aiming to mitigate the risks associated with the use of digital channels, most institutions (66%) used five or more security procedures simultaneously.

Phishing attacks were identified by almost all institutions (87%) as one of the most significant risks to security in the usage of digital channels. Phishing consists of sending emails or text messages (SMS) to mobile phones that are apparently trustworthy, with the intention of obtaining bank customers’ confidential information, which can subsequently be used fraudulently to enter into banking products and services.