The Diffusion of Non-banking Services in the Bulgarian Banking Market

Traditional banks in Bulgaria are gradually shifting towards a more diversified service offering, incorporating features such as mobility services, investment options, leasing services, insurance offerings and other lifestyle related features, incorporated in digital channels predominantly. Digitalization of core banking products has emerged as a key enabler of this transformation, providing platforms for seamless service integration and enhanced customer experiences in an emerging ecosystem landscape. Analysis of this trend on the Bulgarian banking market is not currently available.

These developments reflect the ecosystem business development approach, described in the literature, as a broader digital transformation shaping the financial industry worldwide. The new EU legislation related to open finance (FIDA and PSD 3), the Digital Euro and the strengthened IT risk management with DORA, creates and additional pressure to incumbent banks to innovate and offer value added financial services to remain relevant.

The study analyzes the diffusion of non-banking services in the Bulgarian banking market. The findings reveal different behavior regarding digital adoption and introduction of non-banking services. Market leaders are leveraging advanced digital functionalities to enhance customer experiences, while mid-level and lagging performers have opted out for other strategic differentiators, however, they are confronted with challenges in terms of market performance and customer satisfaction. Alongside the digitalization market leaders implement non-banking services.