Financial Services Seen as East Europe Bonanza

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Web operators are showing increased interest in East European markets after years of neglect. Online banking is seen as a potential growth area.

Speakers at a recent conference on Middle and Eastern Europe held in Frankfurt, Germany, noted that in some parts of the region Web penetration matched that of Western Europe and occasionally exceeded it.

Slovenia, the northernmost country of the former Yugoslavia, has an Internet penetration of 23 percent, well ahead of Greece and Italy. On the other hand, Slovenia is a tiny market of 2 million people.

Even Slovakia's 13 percent penetration is higher than that of some of the slower Internet movers in the European Union, such as Portugal. Slovakia, once a partner with the Czech Republic in Czechoslovakia, ranks at the bottom of Eastern Europe's "fast movers."

The fast movers include Poland, Hungary, the Czech Republic and Slovenia. But even Romania, which is mired in perpetual economic crisis, has quietly developed a significant software industry and trained personnel to go with it.

Major German banks such as Commerzbank and Dresdner Bank see potential in online banking and other financial services in the more advanced countries, though they are not ready to invest in a network of local bank branches.

Poland is clearly the most interesting market, given its rapid economic growth. Deutsche Bank 24, the online service of Germany's largest financial institution, has included Poland in its European strategy.

But the bank is not yet willing to merchandise some of its more sophisticated online brokerage services there.

What has kept Americans largely out of the region, analysts said, was the still shaky and expensive telecom system. Investments in land lines have lagged far behind mobile phones, which now dominate Eastern Europe.

German bankers see some potential in exploiting that network but not until wireless Internet access vehicles become more user-friendly, possibly when the third generation of mobile phones reaches the region.

Finally, they see a niche market among wealthy people in many of these countries, a richer resource than many have thought.

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