THE KOSOVO BANKER - TOWARDS INCULSIVE BANKING by envinion

T H E

K O S O V O

BANKER 2 0 2 4

TOWARDS INCLUSIVE BANKING SECURE, MODERN AND SUSTAINABLE FINANCING

P U B L IC AT ION OF KO S OVO BA N K I NG A S S O C IAT ION

EDITORIAL

by Global Business Magazine

by World Economic Magazine

by Global Banking and Finance

T H E

K O S O V O

BANKER 2 0 2 4

Member Banks

Kosovo Banking Association (KBA) supports the development of the banking sector and is the representative voice of the banking industry in the Republic of Kosovo. We support member banks to achieve their objectives by providing a platform for advocacy, capacity building and public relations. The banking sector is key to the economic development and prosperity of Kosovo and we help advance this cause. Our main objectives are to create optimal conditions for an innovative, stable, safe and comprehensive banking sector in Kosovo. Disclaimer: The views expressed in the articles are those of the authors and do not necessarily reflect the positions or policies of the Kosovo Banking Association. KBA is not responsible for the content of the authors’ articles and the authenticity of the authorship of the articles published in “The Kosovo Banker” magazine.

The Kosovo Banker is a Publication of Kosovo Banking Association; St.Lidhja e Pejës, Industrial Zone 10000, Prishtina, Republic of Kosovo; +381 38 246 171; www.bankassoc-kos.com; contact@bankassoc-kos.com

CONT Editorial

Petrit Balija

Chief Executive Officer Kosovo Banking Association

Interview

Suat Bakkal Chief Executive Officer of BKT and Chairman of the Board of Directors of Kosovo Banking Association

Dardan Fusha

Sponsored article: Sustainable education on fraud prevention, detection, and managing strategies

Budgeting and managing personal finances Iliriana Nreca

The journey toward financial independence: The importance of financial education Vesë Gashi Vesa Vuçitërna

Opportunities and challenges of implementing sustainable economic policies in Kosovo Nafi Ibrahimaj

Musa Bajraktari

What are green loans? Fatmire Imeraj Berisha

Interview Driton Hetemi

41 CHAPTER III Cybersecurity and data privacy

CHAPTER I

Building a secure financial life 13

Costumer awareness of financial fraud

Sustainable finance for individuals, businesses, and corporations Vesa Paca

Ferid Gjonbalaj

Alexander Albertine

Veranda Gashi Kryeziu

Deputy Governor of the Central Bank of the Republic of Kosovo

A quarter-century of progress: USAID’s impact on Kosovo’s development

The importance of saving and having an emergency fund

27 CHAPTER II

Banking innovations for a greener world 28

Integrating ESG criteria in the banking sector: A pathway to sustainable finance Jeton Shatri

Cybersecurity challenges from service providers in the financial industry Valdet Shehu

Emerging technologies and trends in cybersecurity Ermal Gashi

TENTS 50

Protection of data and privacy

Kastriot Jëlliqi

Awareness of employees and the ethical use of customer data

Adonis Bllacaku

Korab Osmanaj

Internet banking platforms security Shpetim Hajzeraj

Interview

Besnik Berisha

Interview Krenare Sogojeva Dërmaku

61 CHAPTER IV

Financial inclusion and access to banking services 62

Sponsored article: Women’s financial empowerment initiatives: ProCredit Bank’s commitment Albina Metaj

Promoting access to basic banking services Suna Zeqiri

Contactless payments and digital wallets

Electronic payment preferences in Kosovo: Consumer behaviour postpandemic evolution Yll Gashi

Sponsored article: Trends and challenges in digital banking Eneida Thomaj

Access to credit and financing for startups Lulzim Tahiri

Sponsored article: Digitalization, transparency and ethics in banking: A legal perspective Mentor Hajdaraj Klit Shala

Fitim Tasholli

Sponsored article: Kosovo embraces cashless future: 50% adopt digital payments and mobile banking VISA

81 CHAPTER V Trends and challenges of digital banking

Collaboration between fintech and banks: A partnership for the future

Interview Valon Canhasi

EDITORIAL PETRIT BALIJA CHIEF EXECUTIVE OFFICER KOSOVO BANKING ASSOCIATION

“The Kosovo Banker 2024” offers a unique platform for information, education, and development. With structured content and chapters rich in valuable information, the magazine covers topics directly related to financial education, sustainable business practices, cybersecurity, financial inclusion, and the latest developments in the digitalization of financial services.

n addition to in-depth articles on important financial topics, „The Kosovo Banker“ also features exclusive interviews with leaders and experts from the financial sector and other relevant fields. These interviews bring unique perspectives and firsthand insights from professionals who share their experiences and provide opinions on trends, challenges, and opportunities in the economy and finance. Readers benefit from these viewpoints, which add value and deepen the discussion and understanding of the topics addressed in each chapter of the magazine. The first chapter of the magazine is dedicated to the basics of financial education, which are vital to helping individuals build a sustainable financial future. Through important topics such

as budgeting and personal finance management, this chapter offers practical guidance on the best ways to manage one‘s finances. Kosovo Banking Association has been organizing educational and informative activities for the citizens of Kosovo for years, with a particular focus on marking Global Money Week and International Savings Day. Through campaigns on our social networks, informational sessions at educational institutions, and business network engagements, we reach various age groups and a significant portion of the citizens, preparing them for unexpected financial challenges and improving their overall well-being. The second chapter explores topics related to sustainable business practices and the role of the financial sector in

protecting the environment. The inclusion of environmental, social, and governance (ESG) criteria in the banking sector is one of the key themes of this chapter, helping readers understand why sustainable financial practices are essential for financial institutions and society. Kosovo Banking Association, in collaboration with the International Finance Corporation (IFC), part of the World Bank Group, and supported by the State Secretariat for Economic Affairs of Switzerland (SECO), organized the Inter-institutional Workshop “Exploring opportunities for adopting ESG Voluntary Guidelines in the Banking Sector,” where officials from the banking sector and the Central Bank of the Republic of Kosovo gathered to

EDITORIAL

discuss key green agenda issues and opportunities for sustainable growth. In the third section of the magazine, readers will be informed about cybersecurity and data privacy, two essential areas for a secure financial system in the digital age. Due to rapid technological developments and the increase in cyber threats, this chapter provides an overview of the latest technologies and trends in the field of cybersecurity, including measures to protect customer data. Articles on the security of online banking platforms offer advice to users of digital banking services, thus raising awareness about security and responsibility in using these services. This year, Kosovo Banking Association has been engaged throughout October – Cybersecurity Awareness Month, organizing a series of activities dedicated to raising awareness about cybersecurity. On October 1, 2024, KBA officially launched activities for this important month with the „Banking Cybersecurity Forum 2024,“ organized in collaboration with Mastercard. These activities were further complemented by an informational campaign and meetings with business representatives, led by professional

trainers in the field, supported by the European Fund for Southeast Europe (EFSE). The fourth chapter focuses on the importance of financial inclusion and access to banking services for everyone. In an ever-changing financial ecosystem shaped by technology, including everyone in banking services, it is a priority to create a more equal and fair economy. The topics covered in this chapter include initiatives for the financial empowerment of women and promoting access to basic banking services for marginalized groups in society. Articles on access to credit for startups and the role of financial institutions in supporting new businesses help readers understand how an inclusive approach can drive economic growth. The final section of the magazine focuses on the digital transformation of the banking sector and the latest trends reshaping the way individuals and businesses interact with financial institutions. Through topics such as contactless payments and digital wallets, this chapter provides readers with a clear view of the innovations that are directly impacting the daily lives

of users of financial services. Kosovo Banking Association, in collaboration with VISA, has conducted the Survey on Consumer Behavior and Preferences for Digital Payments in Kosovo, based on which the three-month campaign “Be Part of the Future: Pay Digitally” was launched. The campaign, held during July, August, and September, aimed to inform citizens about the advantages of digital payments. In an era where flexibility and speed of services are increasing, this chapter informs readers about trends that are transforming the banking sector and how financial institutions are addressing the challenges and opportunities of digitalization. „The Kosovo Banker“ is an informative source for all those who wish to deepen their knowledge of finance, sustainable practices, digital security, and economic inclusion. With diverse content and interviews with leaders and experts, the magazine helps readers make informed financial decisions. „The Kosovo Banker“ contributes to the overall growth of financial knowledge in Kosovo and helps strengthen the financial culture at the national level.

SUAT BAKKAL CHAIRMAN OF THE BOARD OF DIRECTORS OF KOSOVO BANKING ASSOCIATION CHIEF EXECUTIVE OFFICER OF BKT

I am proud to highlight the immense potential of Kosova’s economy and the dynamic landscape of our banking sector.

ow would you describe the current economic and financial landscape of the banking sector in Kosovo. What are the main challenges and opportunities facing banks in Kosovo today? More importantly, what can the regulator and public authorities do to support the banks? Despite various challenges, Kosova‘s economy has shown resilience and promise, presenting numerous opportunities for growth and development. Kosova has not only maintained its upward growth trajectory but has outpaced its neighboring regions over the past decade. This period has witnessed a commendable push towards financial inclusivity, marking the financial sector‘s commitment to fostering a robust and inclusive economy. In the ever-changing economic and financial landscape of the banking sector, a combination of challenges and promising opportunities emerges. Even in the context of rising inflation, consumers and businesses are innovating, exploring creative strategies to strengthen financial stability and cultivate greater economic resilience.

The rapid pace of technological advancements is driving growth. This is driving substantial investment in digital infrastructure and robust cybersecurity measures, which is paving the way for a more resilient and innovative future. Digital transformation, embracing digital banking solutions, will continue to enhance the customer experience, improve operational efficiency, and drive financial inclusivity. Banks are courageously embracing evolving regulatory requirements, transforming compliance into a strategic advantage through substantial investments in cutting-edge systems and processes. However, it would be more beneficial for regulatory authorities to provide a more balanced framework that ensures stability while allowing room for banks to operate freely within the free market economy, to further support the banks in these endeavors. We believe that such an approach will enable banks to innovate, expand, and contribute more effectively to economic development of the country. In conclusion, banking sector will continue to drive Kosova‘s economic progress and enhance financial stability

INTERVIEW

by leveraging proactive support from regulators and public authorities. The banking sector is well-positioned to overcome any challenges and to contribute positively to the country‘s economic future. Its unwavering focus on innovation and strategic investments will undoubtedly ensure it achieves concrete results in a way that is beneficial to all.

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Why do you think it is important for modern banks to take on the responsibility of financial education? Modern banks have a responsibility to promote financial education. It serves two purposes: it empowers customers and fosters an even healthier banking ecosystem. Financially literate customers are better equipped to manage their finances and make more informed decisions for their financial well-being.

Furthermore, well-informed customers are more likely to engage in savings and deposit activities, which contributes to their financial security and growth. Financial education fosters trust and transparency between banks and customers, which is essential for long-term relationships. This mutual understanding and confidence will cultivate a more robust and resilient banking community.

INTERVIEW

How do banks in Kosovo ensure that banking services are accessible and relevant to all customer demographics, including the elderly, youth, and those with limited financial information? Banks in Kosova are committed to providing accessible and relevant services to their customers. They ensure that every segment of the population can benefit from their offerings. For the elderly, personalized assistance

and simplified banking procedures are available to ensure ease of access, allowing them to manage their finances with confidence and convenience. Youth-focused digital solutions cater to the tech-savvy generation, offering innovative tools and platforms that resonate with their digital lifestyles and support their financial aspirations. Furthermore, banks offer basic accounts and comprehensive financial literacy programs to address the needs of those with limited financial information, fostering greater financial inclusion. These initiatives include educational workshops, online resources, and one-on-one counseling to empower individuals with the knowledge and skills necessary to make informed financial decisions. Additionally, specialized services for small business owners and entrepreneurs provide crucial support for economic growth and job creation, contributing to the overall prosperity of the community. Banks in Kosova are meeting the diverse needs of their customers by tailoring their services. This not only enhances customer satisfaction but also plays a vital role in building a more inclusive and resilient financial system. Their unwavering commitment to accessibility, education, and innovation ensures that all members of society can participate fully in the financial landscape, driving sustainable development and economic stability across the region. How do banks ensure that digital transformation benefits all customers, including those less tech-savvy? Digital transformation must be inclusive. It must ensure that even those less tech-savvy can access banking services conveniently. Banks achieve this by investing in user-friendly technology and providing digital literacy training.

Furthermore, maintaining traditional banking channels like branches and ATMs ensures that customers have alternatives. Banks offer dedicated customer support for digital banking tools to ensure that no customer is left behind in the digital age. Furthermore, banks continuously run know-how campaigns for their digital services to ensure that everyone is aware of and comfortable with the new tools available to them. How do you see the challenge of addressing financial scams that are often encountered by banking clients? What can banks do to address this issue individually or collectively? In Kosova‘s robust market, banks take proactive measures to effectively mitigate possible financial scams, reflecting their steadfast commitment to transparency and regulatory adherence. This commitment fosters trust and underscores the resilience of the financial ecosystem. A multi-faceted approach, blending cutting-edge technological advancements with human-centric solutions, underscores the industry‘s dedication to fortifying defenses and upholding the utmost security within the financial environment. Such initiatives not only bolster confidence among stakeholders but also pave the way for sustained growth and prosperity in the markets financial landscape. Banks are making technological advancements a top priority. They are committed to continually investing in cutting-edge cybersecurity solutions, implementing robust authentication protocols, advanced fraud detection algorithms, and state-of-the-art data encryption technologies to bolster defenses against unauthorized access and possible fraudulent activities. This commitment must be continued.

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INTERVIEW

However, technology is just one aspect of the equation. It is equally important to empower customers with knowledge. Banks are dedicated to developing comprehensive educational resources, delivered through interactive online modules, workshops, and targeted campaigns. These initiatives equip individuals to confidently identify and resist common tactics like possible phishing attacks and deceptive investment schemes. They l foster a more informed and resilient community. Partnerships with regulatory bodies, law enforcement agencies, and industry peers are crucial. This collaborative approach ensures the seamless exchange of information and intelligence, facilitating a unified response to emerging threats and fraudulent trends. By working together, the collective ability to safeguard the integrity of the financial system and protect stakeholders is strengthened. Banks are committed to regulatory compliance and to safeguarding customers. They adhere to all financial regulations and industry standards related to fraud prevention without exception. What are the key trends in green banking that you believe will shape the future of the industry in Kosovo? Are banks in Kosovo catching up with ESG requirements and what are main challenges in this aspect? Green banking is crucial in Kosovo, in line with global trends towards sustainability. The financial sector in Kosovo is leading the way in sustainable financing and environmentally friendly banking practices, demonstrating strong adherence to ESG principles. Banks in Kosovo are effectively aligning with international standards, raising awareness among stakeholders, and working within a supportive regulatory framework.

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The rapid pace of technological advancements is driving growth.

This is driving significant investments in digital infrastructure and strong cybersecurity measures, which is paving the way for a more resilient and innovative future.

Digital transformation, by embracing digital banking solutions, will continue to enhance customer experience, improve operational efficiency, and promote financial inclusion.

Furthermore, the availability of innovative green products is clear evidence of their commitment to sustainability. The banking sector is making clear progress and showing strong enthusiasm for sustainable practices. This dedication will ensure a greener future for Kosovo‘s banking industry, fostering innovation, and highlighting the sector‘s leadership in environmental stewardship, contributing positively to global sustainability goals.

DARDAN FUSHA DEPUTY GOVERNOR OF THE CENTRAL BANK OF THE REPUBLIC OF KOSOVO

The pace of developments in the field of payments, as a result of technological advancements and new opportunities created by the progress of smartphones and the Internet, has been very fast in recent years. Therefore, changes in the regulatory framework during this period, in the EU and other countries, have been more frequent.

hat are the latest developments in the legislation related to the payment system and how are these changes expected to affect the improvement of payment infrastructure in Kosovo? In our country, recent changes include offering payment accounts with basic services at a reasonable cost, and at no cost for vulnerable consumer categories. We have also implemented limits on interchange fees for card payments and introduced the provision of IBANs for payment accounts provided by non-bank payment service providers. These developments have influenced the expansion of the possibilities for having a payment account with basic services for citizens, the increase in the scope of POS terminals to more businesses increasing the possibility for

card payments, as well as facilitation of interaction between payment accounts that are offered from banks and nonbanks, all of which have contributed to the growth of electronic payments. Other important changes have been implemented through amendments to the regulation on cash operations and the regulatory framework related to prevention of money laundering and terrorist financing. These measures aim to preserve the integrity of financial system and protect consumers. At the same time, crucial changes have been implemented to address informality, emphasizing improvements in the efficiency of payment services and security of both cash and electronic payments for citizens. These changes are designed to enhance financial inclusion by enabling and facilitating access to payment ac-

INTERVIEW

counts with basic services for all citizens. Access to a payment account is also seen as a primary gateway to other financial services, such as credit and insurance. It facilitates personal finance management and helps in building a documented history of transactions. However, the most significant advancements in payment legislation are anticipated with the adoption of the new Law on Payment Services, which is expected to be approved this year. The new law aligns country’s legal framework with that of the EU in the payments sector, thus paving the way for new entrants in payments market. It enhances consumer protection requirements, increases transparency through information disclosure mandates, and regulates implementation of open banking and enhanced customer authentication. These changes will boost competition by creating new opportunities for electronic payments, thereby enhancing the efficiency of payment services. Enhancing the quality and security of services by adopting advanced custo-

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mer identification and authentication requirements for remote access, while also improving reliability and transparency by strengthening market practices and handling customer requests. What are the anticipated impacts on the future of payments in Kosovo from the implementation of SEPA and the advancements in fast payments? As a euroized economy with its geographical position, Kosovo has its place in the Single Euro Payments Area (SEPA). Membership in this zone enables full integration into the European economy, allowing Kosovo to benefit from the most efficient, safest, fastest, and most competitive payment services. This is particularly beneficial given the EU‘s role as our largest trading partner and the concentration of our diaspora in the region. This means that Kosovo is adopting all EU rules and standards, eliminating different treatment of local payments compared to cross-border payments with other member countries. This will lead to a reduction in transfer costs for commercial exchanges

and remittances, which is particularly important for the country and its economic needs. Regarding fast payments, also known as “instant payments,” between various payment service providers, which enable transactions 24/7/365, they have become a necessity of the time and are therefore a part of our strategic plan. These types of payments allow processing even on holidays and outside regular business hours, with the possibility of crediting recipient‘s account within a few seconds. Such systems have been advanced further by enabling interaction between different payment service providers, with the support of various payment instruments and channels, including both local and cross-border payments. This development will be a significant step in the digitalization of payments in Kosovo, supporting the digitalization of other services and country’s economy. Fast payments enable a wider use of electronic payments, which can be easily adapted to different types of transactions and, over the long term, will transform how we make payments. How is the implementation of PSD2 and the concept of open banking expected to influence the development of payment systems and the advancement of financial services in Kosovo? The new Law on Payment Services, which adapts the requirements of EU Payment Services Directive (known as PSD2), regulates implementation of open banking. It facilitates the introduction of new services and entry of new players into the payments market in Kosovo, such as providers of payment initiation services and account information services. These services enable consumers to authorize such institutions to access their payment accounts and, through them, carry out

INTERVIEW

remote payment services. They also allow consumers to receive consolidated information about their various payment accounts held with different institutions. This law increases opportunities for innovation and competition in the payments sector while also strengthening security criteria for remote access to financial services. It also increases requirements for the disclosure of fees and service costs, facilitating their comparison. This provides consumers with more comprehensive information about services and greater opportunities to address their concerns. These developments support the overall goals of increasing financial inclusion and creating an inclusive financial sector that offers more opportunities for all citizens to access higher-quality and more affordable financial services, with positive effects on overall economic growth. However, these developments toward the digitalization of financial services must consider the associated risks, with a focus on cybersecurity and protection of personal data. These issues can only be adequately addressed through close collaboration among all stakeholders in applying the most advanced security standards. Any failure in this area negatively impacts citizens‘ trust and usage of these services. Therefore, new developments must be accompanied by necessary investments in infrastructure and security, as well as user education for the proper use of these services. What is the current situation regarding counterfeit money in Kosovo, and what measures have been taken to address this issue? Regarding the situation with the circulation of counterfeit 2-euro coins, in the last two months of 2023 and the first half of 2024, the Central Bank of

Kosovo has successfully coordinated

We recognize the value of building strong and lasting relationships with our clients, the value of understanding their financial needs, and providing appropriate solutions.

We are unwavering in our commitment to providing exceptional services to our clients and are highly aware of the growing economy of Kosovo.

Our commitment to customer service is not just a strategy, it is the culture of our institutions.

inter-institutional meetings to develop and implement effective strategies to combat counterfeit currency, especially 2-euro coins. Within its mandate, Central Bank of Kosovo has taken several steps, including collaborating with banks to remove fees for depositing coins at the Central Bank and for customers depositing coins at banks. The economy has been supplied with entirely new 2-euro and 1-euro coins through banks to facilitate the identification of counterfeit money by the public. Additionally, regulatory changes have been made regarding the regulation of cross-border coin transport. Through these measures, a significant quantity of counterfeit coins has been withdrawn from circulation. The Central Bank of Kosovo and banks have detected and prevented these coins from entering the financial system, effectively removing them from circulation. In implementing the measure to ensure the supply of economy through banks with brand-new coins, from December 2023 to May 2024, the Central Bank of Kosovo has provided the economy with approximately 7.77 million new euro coins of all denominations, totaling around 3.42 million euros, without applying any fees. This effort has contributed to reducing the circulation of counterfeit coins, facilitating identification, and raising public awareness about the issue. CBK has also made several publications and continues to encourage citizens and businesses to deposit their coins in banks and to report any suspicion of attempts to introduce counterfeit money into circulation to relevant authorities. Businesses are also encouraged to obtain coins only through banks and to avoid unofficial channels. As a result of these actions and effective cooperation among all stakeholders, the current situation is assessed to

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be much better compared to last year. However, the fight against this phenomenon remains ongoing and persistent. In addition to the immediate and short-term measures described above, the Central Bank of Kosovo, within inter-institutional group and with the support of the EU office, is working on developing a legal framework and adequate mechanisms to establish a national system in line with EU standards for combating counterfeit money. We express our gratitude to institutions that have been working and contributing in this regard, to banks, and to all citizens and businesses for their cooperation and direct contribution to these efforts to combat this phenomenon. However, despite positive results, we must remain vigilant and continue to work closely to address this ongoing challenge, which, regardless of whether it appears more or less, constitutes a constant risk and requires a constant careful approach. What steps have been taken to reduce the use of cash in financial transactions in Kosovo, and how is this expected to affect the economy and banking system? Regarding the reduction of cash usage in financial transactions in Kosovo, the Central Bank of Kosovo, in line with objectives of the new Strategic Plan 2024-2028, is taking significant steps to advance legal and technical infrastructure for modernizing the payment system and creating an environment that enables and facilitates the digitalization of payment services, aimed at promoting the use of electronic payments, enhancing competition and developing the market. Moreover, expanding access to finance, financial inclusion, financial education, and consumer protection are ongoing activities and commitments of the Central

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Bank of Kosovo, aimed at advancing financial sector and supporting country‘s economic growth. In this regard, this year the Central Bank of Kosovo has reinitiated the National Payments Council meeting with an expanded membership, including banks, other non-bank institutions, public sector stakeholders, and business and consumer associations. Within this Council, all projects and developments necessary for advancing the digitalization of payment services have been discussed, including the establishment of inter-institutional groups to support these projects, such as the reduction of cash usage. At the same time, recommendations based on examples from other countries have been issued regarding the possibilities for coordinating activities and taking coordinated steps to reduce the use of cash. Among other things, expanding the POS infrastructure network (Physical POS, Virtual POS, Soft POS), providing incentives for digital payment users (tax incentives/rewards), including individuals and businesses, enabling electronic payments for high-volume transactions such as in transportation and public service payments, and facilitating new payment methods (Digital Wallets, recent inclusion in Google Pay, with a focus on expanding to other platforms like Samsung Pay and Apple Pay) are considered some of the key activities for this purpose. Given the nature of a multi-actor network, both from the supply and user sides, close inter-institutional collaboration is essential for modernizing payment services and reducing cash transactions. This includes harmonization of standards and coordination of actions, with a focus on advancing and expanding infrastructure, as well as implementing

legal and regulatory incentives for the use of electronic payments. An extremely important aspect, especially for changing consumer behaviors, is the financial education through joint activities regarding new payment options and access to digital financial services, including their benefits and usage. This need is crucial for avoiding misuse or potential fraud, and for increasing and maintaining users‘ trust in new forms of electronic payments.

ALEXANDER ALBERTINE ECONOMIC GROWTH OFFICE DIRECTOR USAID

A quarter-century of progress: USAID’s impact on Kosovo’s development For over 25 years, the U.S. Agency for International Development (USAID), as the largest contributor of civilian assistance by the U.S. Government, has been a steadfast partner in Kosovo’s journey toward integration into European and Euro-Atlantic institutions and markets, investing over $1 billion. This significant financial commitment underscores the long-lasting relationship between the people of the United States and the people of Kosovo, reflecting a shared vision of progress, prosperity, and stability. This partnership has been instrumental in transforming Kosovo’s economy and building a foundation for a brighter future.

n the early years after 1999, USAID focused on initiatives to transform Kosovo into a modern, productive, and competitive economy. The initial focus was on rebuilding essential infrastructure and establishing strong public and private institutions. From this effort, five major economic institutions emerged: the Central Fiscal Authority, now the Ministries of Finance and Economy, the Tax Administration, the Banking and Payments Authority, which became the Central Bank, the Kosovo Trust Agency also known as the Privatization Agency, and the Kosovo Pension Savings Trust. These entities have become the bedrock of Kosovo‘s fiscal stability and economic growth.

Along with colleagues from across the U.S. Government, USAID has also played a leading role in developing Kosovo’s financial sector. The establishment of the American Bank of Kosovo, the first bank in the country, and the creation of the Credit Guarantee Fund are just a few examples. Since its inception, the Kosovo Credit Guarantee Fund has supported issuing 15,000 loans worth over €650 million to businesses that would otherwise not be able to access finance, many of which are small or owned by women. With this finance, these businesses have created over 25,000 new jobs. Collectively, these initiatives have enhanced macroeco-

nomic stability, improved access to finance, and bolstered tax collection. As these institutions solidified, U.S. Government departments and agencies shifted their focus towards fostering a business-friendly environment. By working on legislative reforms, local government initiatives, and improving business practices, the United States helped make it easier for businesses to thrive, thereby driving Kosovo‘s economic growth. A significant milestone in this journey occurred in April, when Kosovo secured its first sovereign credit rating from Fitch Ratings. This achievement is set to unlock new avenues for financing essential public sector investments

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vital for economic growth. USAID’s Investment Promotion and Access to Finance Activity worked closely with the Ministry of Finance in its efforts to acquire the rating, a process that began in November 2023 with the signing of the memorandum of understanding and will continue for the next two years to maintain the rating. The credit rating is more than just a numerical assessment; it represents an independent, internationally recognized evaluation of Kosovo’s economic status. This rating ensures greater access to finance and investment opportunities for both the public and private sectors. It allows institutions to integrate more seamlessly into international systems. It also signals to investors that Kosovo’s financial sector is strong, robust, and effectively on par with those of Western Balkan countries. Just having a rating places Kosovo on the global financial map, demonstrating transparency and trust to potential investors.

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Many investors require a credit rating before committing to new ventures, and Kosovo now meets this criterion. Furthermore, USAID continues to actively promote Kosovo‘s products and services on the international stage, enhancing its economic visibility. Recently, USAID facilitated the participation of Kosovo’s prefabricated home builders, wood processors, and other producers in the Modular Home Expo in Croatia. The „House of Kosovo,“ a showcase of prefabricated homes, highlighted the quality and capability of Kosovo’s businesses. Such events, along with trade missions and public-private dialogues, have proven successful in promoting Kosovo’s manufacturing and service sectors. Kosovo’s future economic growth hinges on continued investment, particularly from the private sector. While the public sector and banks are already contributing, unlocking private finance for productive, job-creating busines-

ses is essential. USAID is collaborating with the Government of Kosovo, independent institutions, the private sector, and other donors to explore legal frameworks and opportunities for creating such funds. This collaborative effort has already yielded productive results, promising a bright future for Kosovo‘s economy. These examples are but a few of the critical outcomes produced from the U.S. Government’s unwavering support to Kosovo development over the past 25 years. In addition to the work described above, the U.S. Government has brought forward a range of assistance in multiple areas, from energy to education, governance to security, all of which has worked to reinforce the partnership between Kosovo and the U.S. In the years to come, this partnership and collaboration will remain crucial in driving economic progress, prosperity, and stability.

Chapter

Building a secure financial life

CHAPTER 1

Plaketa

Fuqizoni vendimet tuaja za največ prodanih kreditov po znesku v letu 2022, odlična v prodaji karticme NLB financiare

Janija Grlica

Edukimi financiar ju fuqizon të merrni vendime më të zgjuara dhe të siguroni të ardhmen tuaj.

Në NLB, ne jemi të përkushtuar t’ju ndihmojmë të zhvilloni njohuritë tuaja financiare përmes produkteve dhe shërbimeve tona të krijuara për të përmbushur nevojat tuaja dhe për t’ju udhëhequr drejt një të ardhmeje të sigurtë financiare.

Për gjithçka që vijon.

Building a secure financial life

ILIRIANA NRECA DIRECTOR MARKETING AND PRODUCT DEVELOPMENT DEPARTMENT NLB BANK

Budgeting and managing personal finances Budgeting and managing personal finances are two essential aspects of every individual’s life. The ability to effectively manage personal finances helps create financial stability, improves quality of life, and provides a sense of security and control over the financial future.

his article will address the importance of knowledge and practices in personal finance, including but not limited to budget planning, prioritization, and the use of banking products for effective financial management. Budgeting, as a critical process, helps individuals plan and monitor their income and expenditures. A well-structured budget can help identify areas where money can be saved and invested more wisely. Managing personal finances involves creating short-term and long-term financial goals, as well as planning for the unexpected. Additionally, managing personal finances involves using financial products and services such as savings accounts, credit cards, and investments to maximize income and manage risk. Financial education is key in this process, as it helps individuals make informed choices and avoid impulsive decisions that have an adverse impact on personal finances. Knowledge of basic personal finance concepts such

as budget management, savings, investments, and credit gives individuals the ability to safely navigate the complex world of finance. Through financial education, individuals learn to identify and assess financial risks, make wise investment decisions, and plan for their own future. It also helps build a stable and disciplined mindset towards money management, improving quality of life and ensuring long-term financial stability. The Importance of Budgeting and Financial Planning Budgeting is the process of creating a plan for managing personal income and expenditures. An effective budget helps individuals control their finances, reduce debt, and achieve their financial goals. Financial planning includes: Identifying Income and Expenditure: This includes determining income sources and categorizing expenditures. Knowing your monthly income and expenditure is essential for creating a balanced budget. By breaking down

expenditures into categories, individuals can better understand where their money is being spent and identify areas where they can make improvements. Setting Financial Priorities: Prioritizing expenditure is key to spending funds wisely. This includes allocating funds for basic needs, such as housing, food and health, and for long-term goals, such as savings and investments. Setting financial priorities helps avoid unnecessary expenditure and focus on what is most significant to financial well-being and security. Creating an Emergency Fund: An emergency fund helps cover unexpected expenses and prevents excessive debt. This fund should be able to cover living expenses for three to six months. It will provide a crucial support system in case of job loss, unexpected medical expenses, or other unplanned situations. Budget Monitoring and Review: Regularly reviewing the budget and adjusting it according to needs helps maintain control over personal finan-

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ces and adapt to changes in income or expenditures. Using Technology for Financial Management: Nowadays, technology offers many tools that help manage personal finances. Budgeting applications and online banking platforms facilitate financial management, making it simpler and more efficient. The Role of Financial Institutions in Personal Finance Management Financial institutions play an essential role in personal finance management, offering a wide range of services and products that help individuals achieve financial stability and security. These institutions include banks, microfinance institutions, insurance companies, and other financial organizations that improve individuals’ financial lives. Some of the basic services offered by banks that help manage personal finances are: Bank Accounts: Checking and savings accounts help individuals save and manage their income. Checking accounts allow quick and easy access to cash for everyday transactions, while savings accounts offer interest on deposited funds, encouraging savings. The combined use of these accounts can help maintain financial discipline and provide a stable foundation for managing personal funds. Loans and Credit Cards: Banks offer loans and credit cards to finance large purchases or manage day-to-day expenses. Personal loans can be used for various purposes, including furnishing, renovating a home, or financing educa-

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tion. On the other hand, large purchase loans are used for buying a house, apartment, commercial real estate, or land. It is imperative that individuals carefully examine the terms of these loans and choose options that suit their ability to pay. Prudential credit management ensures financial stability and avoids excessive financial stress. Financial Advice: Banks offer financial advisory services that help individuals create financial plans and invest wisely. Financial advisors can offer personalized guidance based on an individual’s financial situation and long-term goals. In conclusion, budgeting and managing personal finances are essential for financial stability and improving quality of life. Careful planning, prioritization, and effective use of banking products are key elements of successful personal finance management. Financial education and trust in financial institutions play a crucial role in individuals’ ability to manage their finances. To achieve sustainable financial management, individuals must create a balanced budget, set clear priorities, and use banking products carefully. Establishing an emergency fund and regularly monitoring the budget ensures stability and adaptability to changes. Using technology for financial management makes the process easier and more efficient. A balanced approach that combines financial education and technology helps make informed and wise decisions, ensuring long-term financial stability and a higher quality of life.

“Budgeting, as a critical process, helps individuals plan and monitor their income and expenses. A wellstructured budget can help identify areas where money can be saved and where investments can be made more wisely.”

Building a secure financial life

VERANDA GASHI KRYEZIU HEAD OF INDIVIDUAL AND PREMIUM CLIENTS, PRODUCT DEVELOPMENT, MARKETING & CUSTOMER CARE DEPARTMENT PRIBANK

The importance of saving and having an emergency fund Financial education is a critical component of personal development, equipping individuals with the knowledge and skills necessary to navigate the complexities of financial decision-making.

inancial education from an early age is essential for building a foundation of financial literacy and security, while banks play a crucial role in this educational journey by offering products and services that promote savings and financial literacy. By fostering a culture of financial education, we can ensure that future generations are better prepared for financial success and resilience. The Case for Early Financial Education Starting financial education early has numerous benefits. Children who learn about money management from a young age are more likely to develop

healthy financial habits that last a lifetime. By understanding concepts like budgeting, saving, and investing early on, they can make informed decisions that lead to financial security and independence. One of the key reasons for early financial education is the development of a savings mindset. Children who are taught the value of saving understand the importance of delaying gratification for long-term benefits. This mindset helps them prioritize their spending and focus on accumulating wealth over time. Schools and parents play an essential role in this educational process, incorporating practical lessons into everyday activities. Simple tasks like

saving a portion of their allowance or setting goals for larger purchases can instill valuable financial principles. Financial education helps individuals prioritize essential expenses over discretionary spending, ensuring that savings goals are met. Learning about different types of savings accounts, interest rates, and the power of compound interest can also motivate individuals to start saving early and consistently.. The Role of Banks in Financial Education Banks play a crucial role in promoting financial education, providing individuals with the knowledge and resources needed to navigate the complexities of

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CHAPTER 1

personal finance. Through workshops, online resources, youth programs, and personalized counseling, banks empower individuals to make informed financial decisions, reduce financial stress, and build long-term wealth. To effectively promote their products such as saving accounts and term deposits, banks should focus on highlighting the benefits and advantages they offer. This could include emphasizing the safety and stability of savings accounts, ensuring customers understand that their funds are protected and easily accessible when needed. Additionally, banks should showcase the potential for growth through competitive interest rates on savings accounts and guaranteed returns on term deposits, illustrating how these products can help customers grow their wealth over time.

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As technology continues to evolve, banks must innovate to meet the changing needs of consumers and ensure that financial education remains relevant and effective. Banks often engage in community development initiatives that promote financial education. By partnering with schools, non-profits, and community organizations, banks can extend their reach and impact. These collaborations can lead to a more financially literate community, enhance individual financial well-being, fostering economic development and improved quality of life.

The significance of savings and emergency funds In today‘s fast-paced world, managing personal finances can often feel overwhelming. Many people are uncertain about their financial future. However, cultivating good saving habits is a fundamental step toward financial security and independence. Saving isn’t just about the money. It’s about the security and freedom it provides. It’s knowing that you’re prepared for the unexpected and that you have the means to pursue your dreams, whether that’s starting a business, traveling, or simply retiring comfortably.

Building a secure financial life

Why it is essential to prioritize savings in financial planning? Financial Security: Savings act as a safety net in times of unexpected financial emergencies, such as medical expenses, job loss, or urgent home repairs. Having an emergency fund can prevent you from going into debt or disrupting your longterm financial plans.

Future Goals: Whether it’s buying a home, starting a business, or planning for retirement, savings are crucial for achieving major life goals. By setting aside money regularly, you create opportunities for growth and investment in your future.

Peace of Mind: Knowing that you have money saved up can significantly reduce financial stress. This peace of mind allows you to focus on other aspects of life without the constant worry about finances..

Financial Independence: Saving money empowers you to make choices based on preference rather than necessity. It gives you the freedom to take calculated risks, such as changing careers or investing in opportunities that might not offer immediate returns.

How to Save Money Set Clear Goals: Define what you are saving for - whether it’s an emergency fund, a vacation, or buying a new house. Clear goals help in staying motivated and focused on saving. Create a Budget: Track your income and expenses to understand where your money goes. Categorize your spending and identify areas where you can cut back. A budget is a fundamental tool for managing your finances and ensuring that you allocate a portion of your income to savings. Automate Savings: Set up automatic transfers to your savings account. By automating your savings, you ensure that a portion of your income is saved regularly without the temptation to spend it. Reduce Unnecessary Expenses: Differentiate between wants and needs. Cut down on non-essential expenses like dining out frequently, subscription services you don’t use, or impulse purchases. Small savings on everyday expenses can accumulate significantly over time.

Build an Emergency Fund: Aim to save up to six months worth of living expenses in an easily accessible account. This fund should be used only for genuine emergencies to avoid financial strain during unexpected situations. Invest Wisely: Beyond regular savings, consider investing your money to grow your wealth over time. Research different investment options, such as stocks, bonds, or real estate, and choose those that align with your risk tolerance and financial goals. Review and Adjust: Periodically review your savings goals and budget. Life circumstances change, and it’s essential to adjust your savings plan accordingly. Stay flexible and make adjustments to ensure your savings strategy remains effective. The Long-term Benefits of Saving Money Compound Interest: Saving money in accounts that offer interest, such as savings accounts and term deposits, allows you to earn interest on your savings. Over time, this compounding effect can significantly

increase your savings. Consistent saving can maintain your standard of living and one can enjoy financial independence in later years. Financial Growth: Regular saving habits can lead to substantial financial growth. By investing wisely, your savings can multiply, providing a solid foundation for wealth accumulation. Opportunities: Having savings opens up opportunities that would otherwise be inaccessible. Whether it’s taking advantage of a business opportunity, making a significant purchase, or funding education, savings provide the flexibility to seize opportunities as they arise. Saving money is a vital aspect of financial health and well-being. By implementing practical saving strategies and understanding the importance of savings, you can build a secure and prosperous future. Start small, stay consistent, and watch as your savings grow, providing you with the financial freedom and peace of mind to live life to its fullest.

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CHAPTER 1 SPONSORED ARTICLE

FERID GJONBALAJ SECURITY EXPERT

Customer awareness of financial fraud

Introduction In an era where card payments have become universal and are seamlessly integrated into our daily lives, ensuring the security of these transactions has become vital for cardholders and businesses. The convenience of paying with cards, whether in busy retail stores or from the comfort of our homes through online platforms, is undeniably tempting; however, this modern payment method brings with it a significant risk of fraud that can lead to financial loss and emotional distress. As technology advances and more people embrace cashless transactions, the need for strong security measures, such as encryption and multi-factor authentication, has never been more critical to safeguard sensitive information and maintain trust in the financial system. As card payment experts operating in a rapidly evolving digital landscape, it is our firm responsibility to raise awaren-

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ess among consumers and businesses alike, while implementing robust and effective measures designed to protect cardholders from the ever-increasing threat of fraud. This article will cover the critical importance of fraud prevention, exploring the roles of various stakeholders—including financial institutions and regulatory and law enforcement agencies—and examining the cuttingedge technologies and innovative strategies available to combat card fraud in today’s interconnected world. By adopting collaboration and leveraging advanced solutions, we aim to create a safer environment for all card users, empowering them to navigate their financial transactions with confidence and security. Security Technologies and Measures Several technologies have been developed to enhance the security of card

transactions. EMV chip technology, a major leap forward from magnetic stripe cards, provides a dynamic authentication process that is nearly impossible to replicate. Another vital technology is 3D Secure (3DS), which adds an additional verification step for online transactions. The latest version, 3DS 2.0, offers a more seamless and secure experience by incorporating biometric authentication and reducing friction during the checkout process. Tokenization and encryption are vital for securing card data. Tokenization involves replacing sensitive card information, such as the card number, with a unique identifier or token. This token does not reveal any actual card details, making it useless if intercepted. It acts as a placeholder that only authorized systems can use, ensuring that sensitive information remains protected. Encryption, on the other hand, converts card data into a coded format during

Building a secure financial life

transmission, making it unreadable to unauthorized parties. This process ensures that even if the data is intercepted, it cannot be deciphered without the appropriate decryption key. By implementing both tokenization and encryption, organizations create multiple layers of security, significantly reducing the risk of data breaches and unauthorized access to card information. These techniques are essential components of a comprehensive security strategy, protecting both the integrity of transactions and the privacy of cardholders. Card schemes such as Visa and Mastercard set the foundation for secure trans-

Several technologies have been developed to enhance the security of card transactions. Chip technology

EMV, a huge leap forward from magnetic stripe cards, it offers a dynamic authentication process that is nearly impossible to replicate.

actions through established standards. The EMV (Europay, Mastercard, and Visa) standard, for example, has been instrumental in reducing counterfeit card fraud. By requiring the use of chip technology, EMV makes it significantly harder for fraudsters to clone cards. The Payment Card Industry Data Security Standard (PCI DSS) complements these efforts by mandating stringent security measures for handling cardholder data. Compliance with PCI DSS is crucial for protecting sensitive information and ensuring a secure payment environment.

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CHAPTER 1 SPONSORED ARTICLE

Types of Card Fraud Despite these significant advancements in technology and security measures designed to protect consumers, card fraud continues to persist in various crafty forms. Phishing schemes and social engineering tactics remain alarmingly predominant, with fraudsters employing a range of deceptive emails, persuasive messages, or even phone calls to trick unsuspecting individuals into revealing their personal and sensitive information. These crafty criminals often design accurately planned communications that appear legitimate, creating a facade of trust that can easily deceive even the most cautious of cardholders. In this ever-evolving landscape of digital threats, educating consumers about these sophisticated tactics and warning signs is absolutely crucial to empowering them and preventing them from falling victim to such fraudulent schemes. By fostering awareness and vigilance, we can collectively work towards a safer financial environment for everyone. Card skimming, although less common due to EMV adoption, is another method used by criminals. Skimming devices capture data from a card‘s magnetic stripe, which can then be used to create counterfeit cards. The use of chip technology has significantly mitigated this threat, but vigilance is still necessary. The Role of Banks and Financial Institutions Banks and financial institutions play a pivotal role in the crucial fight against fraud, which is essential for maintaining the trust and security of the clientele. This comprehensive effort begins with educating and training the staff to recognize, understand, and respond swiftly to various

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fraud threats that may arise in an increasingly digital world. Awareness starts from the first contact with customers, whether it is a bank teller, a personal banker, or a branch manager, as they equip cardholders with debit or credit cards. During this initial interaction, staff members have the opportunity to educate customers about best practices for card usage and security. Experienced staff members, equipped with the right tools and information, can better guide customers in effectively safeguarding their personal and financial information while also identifying potential risks present in everyday transactions. Furthermore, the institutions must place a strong emphasis on customer education, actively providing a wealth of resources and guidance that empower clients to recognize fraudulent communications, protect their card details from unauthorized access, and make full use of advanced security features such as two-factor authentication, ensuring a robust defense against the ever-evolving landscape of financial fraud. Collaborative Efforts and Industry Initiatives Fighting card fraud is not the responsibility of a single entity; rather, it requires a comprehensive and collaborative approach that brings together multiple stakeholders in the financial ecosystem. Banks, card networks, and law enforcement agencies which in our country are up to the duty and very active. All the institutions must engage in an intensified level of collaboration, sharing vital information and developing unified strategies to combat this universal issue effectively. Additionally, joint public awareness campaigns play a crucial role in educating the general public about the im-

portance of implementing strong security measures and highlighting practical steps individuals can take to protect themselves against potential card fraud. By promoting a community-wide effort, we can create a safer environment for consumers and significantly reduce the rate of card fraud. Conclusion Card payments offer unparalleled convenience, but this must be balanced with robust security measures and heightened awareness. By fostering a culture of vigilance and education, we can protect cardholders from fraud and maintain trust in the payment system. We call on all stakeholders—banks, card issuers, and consumers—to take proactive steps to enhance security and awareness. Together, we can ensure the safety and convenience of card payments for everyone. References 1. PCI Security Standards Council. (n.d.). PCI Security Standards Overview. Retrieved from https://www.pcisecuritystandards.org 2. Federal Trade Commission. (n.d.). Credit Card Fraud. Retrieved from https:// www.ftc.gov 3. National Institute of Standards and Technology. (n.d.). Cybersecurity Framework. Retrieved from https://www.nist.gov 4. European Central Bank. (n.d.). Payments and Market Infrastructures. Retrieved from https://www.ecb.europa.eu 5. Visa. (n.d.). Visa Security Resources. Retrieved from https://www.visa.com/ 6. Mastercard. (n.d.). Mastercard Security Resources. Retrieved from https://www. mastercard.us/en-us/

Building a secure financial life SPONSORED ARTICLE

MUSA BAJRAKTARI LL.M, CAMS, CERTIFIED FRAUD EXPERT FOUNDER OF RISK SMART PROFESSIONAL L.L.C HEAD OF LEGAL AND COMPLIANCE DEPARTMENT KOSOVO RURAL CREDIT

Sustainable education on fraud prevention, detection, and managing strategies

Introduction This article outlines an overview towards a comprehensive approach to sustainable education on fraud prevention, detection, and response strategies. The goal is to create a culture of awareness and resilience within the organization to combat fraud effectively. The anti-fraud awareness initiative has been somewhat underestimated and has not received sufficient attention from institutions in Kosovo. Therefore, it aims to spark a necessary discussion and raise awareness on this important issue. What do we benefit to prevent fraud? The occurrence of fraud in an organization could be a catastrophic risk. In a world where fraud risks are continuously evolving in scale and sophistication, financial institutions and non-bank fi-

nancial institutions must not be complacent or take superficial measures. They should actively work to prevent fraud and implement meaningful actions. By taking these actions, the institutions demonstrate their commitment to protecting their customers‘ financial interests from fraudulent activity.

Sustained awareness of anti-fraud issues enhances an organization‘s protective measures against financial, regulatory, and reputational risks. It also strengthens the organization‘s ability to maintain customer trust and confidence in the face of fraud threats.

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Key Understanding of Fraud Prevention1 Convincing fraud prevention to governing body of the institution is often indeed a challenge. Governing body may be resistant to invest in fraud prevention measures for various reasons, and one should understand those justification before attempting to convince management to invest on your suggested preventive measures. Management‘s focus is often on areas other than fraud, leading to a lack of awareness that fraud is typically hidden, and losses can go undetected. There is also, a common misconception that their own employees would never engage in theft, despite studies indicating that as many as one-third of employees might steal.2 Because fraud is often concealed, managers may be reluctant to acknowledge its existence. When an employee is caught committing fraud, management might dismiss it as an isolated incident, believing it doesn‘t warrant further attention. It‘s crucial for management to understand that once fraud is detected, the damage has already been done, and proactive measures are essential. Additionally, management might fear that discussing fraud could alienate the workforce. However, it‘s important to remind them that employees generally appreciate working for an honest company. Emphasizing the potential financial losses can also help convey the importance of addressing fraud prevention seriously.

Some of the following points may be useful for management to consider when investing in fraud prevention:

• Understanding the occurrence of fraud and its impact on net income, as it can be very costly in terms of lost profits. It is less expensive to take preventive measures than to later be forced to spend far more resources on detection, investigation, and subsequent legal action.

• Understanding the impact of negative publicity, which can have a devastating effect on net income, even on a small scale. Therefore, implementing proactive and preventive fraud programs can eliminate or at least significantly reduce negative publicity.

Key step to fraud prevention As many experts agree, it’s much easier to prevent than to detect it. At fraudster’s mind the increase of the perception 1 Fraud Examiners Manual: 2024 Edition, ACFE. 2 Occupational Fraud 2024: A Report to the Nations (ACFE) 3 Occupational Fraud 2024: A Report to the Nations (ACFE). 4 CFEs are experts in detecting fraud and helping organizations prevent it in the future. 5 ACFE Fraud Prevention Check-up

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that someone is watching out and might be detected, is one of the most effective methods3 to prevent fraud. This can be accomplished in several ways, such as through proactive audit policies, employee anti-fraud education, enforcement of mandatory-vacation and job-rotation policies, strong management oversight, and effective reporting programs. To enhance awareness and prevent fraud, a practical approach is to conduct an initial fraud prevention assessment or as it is known as “fraud prevention checkup”. This checkup can help safeguard your finances, potentially saving you money and protecting your financial stability from costly losses. Otherwise stated, this is the very first step before it’s too late to be an expensive drain of your finances. Before initiation of a fraud prevention checkup, it should be a great collaboration with independent fraud specialists such as Certified Fraud Examiners,4 and the people who know very well operations of the company. The determination of this fraud prevention checkup is to identify risks of fraud and gaps in your internal controls which will be focused in seven major areas such as: fraud risk oversight, fraud risk ownership, fraud risk assessment, fraud risk tolerance and risk management policy, process -level anti-fraud controls, environmental-level anti-fraud controls, and proactive fraud detection.5 In short, a quick fraud prevention check-up offers a comprehensive overview of how well your organization is performing in terms of fraud prevention.

Building a secure financial life

Significance of Managing Fraud Risk The greatest risk of fraud risk management is the tendency of management professionals to underestimate the role or even taking as something as light risk from their scope of risk management duties, instead of at least recognizing it as a significant challenge to manage, detect, deter and prevent fraud from occurrence. Every organization is susceptible to fraud—no entity is exempt from this risk.6 The key to mitigating this vulnerability lies in being fully aware of and realistic about the organization’s weaknesses. Only with this understanding can management implement effective measures to prevent or detect fraudulent activities. In fact, organizations that negate the reality of potential fraud are the ones most at risk. Effectively managing fraud risk at your organization indeed increases the organization’s profit and decreases costs. Every institution must anticipate that even the most honest and trusted employees may one day change their behaviors and become dishonest and fraudsters. In this aspect, translating the fraud triangle is that lives of employees change, and their needs change due to various pressures, motivation change when finding an opportunity to cut shorter reaching their goals by stealing, and their behavior might be rationalized to conclude his dishonest act against its employer’s. A logical question might be, who is responsible for managing fraud? A good definition at this point of discussion is that “personnel at all levels of the organization—including every level of

management, staff, and internal auditors—have responsibility for managing fraud risk.”7 Although everyone in the organization has a role in combating fraud, the practical execution of fraud risk management must begin with a specific starting point. The organization needs to establish a team of designated individuals—or a dedicated department—explicitly tasked with executing, monitoring, and ensuring the success of its fraud management efforts. The Board of Directors responsibility must recognize the real risk of fraud, as well as its potential impact and know how to respond to it. Senior Management has four primary responsibilities to promote anti-fraud culture, which include designing, implementing, monitoring and improving anti-fraud programs. All levels of staff, at minimum from them is required to have basics understanding of fraud and have some level skepticism that fraud might occur any time anywhere to anyone, read and understand internal acts of the organization’s fraud policy, participate

actively in creating anti-fraud culture and report incidents of fraud. Basically, everyone in the organization an ant-fraud culture should have in mind three objectives: prevent and detect fraud and respond when you see or know about occurrence of fraud. Conclusion Support on education on fraud prevention, detection, and response is essential for building a resilient and aware organization. By continuously updating and improving our strategies, we can better protect our assets and maintain the trust of our stakeholders.

6 ACFE Report of Nations 2024, organization loses an estimated 5% of its annual revenues to fraud. 7 Fraud Risk Management Guide (FRM 2016)

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CHAPTER 1

VESË GASHI

VESA VUÇITËRNA

COMMUNICATION & MARKETING OFFICER KOSOVO BANKING ASSOCIATION

The journey toward financial independence: The importance of financial education In today’s modern world, financial education is a key pillar for economic development and individual well-being. Countries around the globe recognize the importance of financial literacy and are implementing initiatives to enhance the financial knowledge of their citizens. For the Kosovo Banking Association (KBA), financial education is not just a commitment; it is a vital mission that directly impacts the country’s economic development and the well-being of its citizens, especially the youth. Young people represent the future of every nation, and investing in their financial knowledge and skills is essential for building a more sustainable and secure economy. First, it empowers individuals to manage their personal finances more effectively including savings, investments, debt, and budgeting. In a world where consumerism and credit are common, understanding these concepts helps avoid financial difficulties and build a secure future. Second, financial education contributes directly to economic stability. When individuals make sound financial

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decisions, they help reduce bad debts and increase savings, strengthening the banking system and improving the overall economy. With the increasing complexity of the global economy, the ability to manage personal finances becomes ever more critical, both for individuals’ well-being and for the stability of the national economy.

KBA’s History in Organizing Global Money Week activities and advancing the educational plan over the years The Kosovo Banking Association has cultivated a deep-rooted tradition of promoting financial education, demonstrating dedication and vision since 2005. Over these continuous years of effort, KBA has developed and supported a variety of educational activities,

Building a secure financial life

“Financial education is a key factor for a sustainable and secure financial life.”

reaching various age groups and backgrounds across the country. Through these initiatives, KBA aims not only to raise financial awareness but also to develop citizens‘ practical financial management skills, thereby contributing to the creation of a more responsible society equipped with knowledge for a safe and prosperous future. KBA’s beginnings and dedication (2005-2012) Since 2005, the Kosovo Banking Association embarked on an important journey to strengthen the financial sector in the country by organizing dedicated training for employee capacity building. With the establishment of the Training Center, KBA created a sustainable platform that continues to operate successfully today, supporting the professional development and ongoing preparation of banking staff. Furthermore, KBA has played a sig-

nificant role in raising awareness and informing state institutions about financial security challenges. In collaboration with the Kosovo Judiciary, the organization held informative sessions with judges and prosecutors, addressing sensitive issues such as card fraud and money laundering. This commitment has helped increase awareness about protecting the financial system from the threats of financial crime. In 2009, KBA joined the European Banking and Financial Services Training Association (EBTN) as an associate member, linking KBA to the most advanced financial training networks in Europe. In 2012, KBA gained the right to offer the European Foundation Certification in Banking (EFCB) program, which aims to equip students with advanced financial knowledge and prepare them for employment in the banking sector.

Launch of Global Money Week activities and lectures at the University of Pristina (2013-2015) In 2013, KBA participated for the first time in Global Money Week, initiating activities focused on elementary schools, which have continued annually. During these initial years, KBA organized visits and workshops with educational games and practical activities to help children learn the basics of financial education and saving from an early age. In parallel, to be as inclusive as possible, KBA organized lectures with University of Pristina students, conducted by members of KBA’s professional committees. Expansion of activities and collaborations (2016-2018) Following the success of initial activities, KBA intensified its efforts through a series of new collaborations with educational institutions and non-go-

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vernmental organizations. This period was marked by a strong spirit of collaboration and innovation, with KBA organizing essay contests and themed projects for students. These initiatives encouraged young people to explore financial topics in depth, fostering their analytical and creative skills while actively engaging them in discussions on personal finance management and economic sustainability. Innovation and technology in financial education (20192021) During 2019-2021, KBA took significant steps to make financial education more accessible by adapting it to modern technology. By successfully integrating digital platforms and organizing webinars and online courses, KBA created a new, more inclusive and timely approach. This shift toward technology not only expanded access but also enabled wider participation from young people, who benefited from new forms of interactive and accessible learning, making financial education an easier and more relevant experience for the times.

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Focus on advanced education and higher education institutions (2022-2023) After a successful history with primary and secondary schools, KBA intensified efforts to elevate financial education at higher education institutions. During this period, KBA developed comprehensive campaigns and in-depth training at universities, forming partnerships with prominent financial experts and industry professionals. This close collaboration offered students access to advanced knowledge of financial management and best practices in the industry, preparing them for the challenges of the financial market and equipping them to make responsible and sustainable decisions in their future careers. The Saving Game As certified trainers by Sparkassenstiftung for the implementation of the educational „Saving Game,“ we have had the privilege of engaging with a diverse group of young people from various cities across Kosovo, who have impressed us with their enthusiasm and ability to deeply understand financial management and the importance of saving. In this innovative game, participants engage in a realistic simulation of

everyday life challenges, where they practice making responsible financial decisions and face situations such as economic crises, debt management, saving, and spending. This unique activity enables young people to develop essential life skills for the future. KBA aims to involve young people from all regions of Kosovo in these activities to be as inclusive as possible and to contribute to an active and informed youth. Future plans and expansion of educational activities KBA plans to continue and expand its activities in financial education. In addition to training and educational activities, KBA aims to develop awareness campaigns through social media and other platforms to raise awareness about the importance of financial education for all ages. Special focus will be given to efforts to reach diverse communities and provide educational programs tailored to their specific needs. With a continued commitment to improving citizens’ financial knowledge, KBA aims to create a more informed and financially sustainable society. Through dedicated activities for children, students, and young adults, as well as awareness campaigns, KBA will continue to play a key role in financial education in Kosovo in the coming years.

Banking innovations for a greener world

2 Chapter

Banking innovations for a greener world

CHAPTER 2

JETON SHATRI HEAD OF RISK MANAGEMENT SECTOR & ESG COORDINATOR NLB BANK SH.A.

Integrating ESG criteria in the banking sector: A pathway to sustainable finance The integration of Environmental, Social, and Governance (ESG) criteria in the banking sector is crucial for promoting sustainable practices and enhancing long-term financial stability.

y adopting ESG principles, banks can better manage risks, comply with evolving regulations, and meet the growing expectations of stakeholders for responsible and ethical business conduct. In recent years, Environmental, Social, and Governance (ESG) criteria in the banking sector has emerged as a crucial component for promoting sustainable finance. ESG principles help banks align their operations and investment strategies with broader sustainability goals, ensuring long-term financial stability and ethical responsibility. As financial intermediaries, banks are in a unique position to influence various sectors by directing capital towards sustainable projects and practices. This article explores the importance

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of integrating ESG criteria in banking, highlights the role of ESG in risk management, and examines the challenges and future outlook from the perspective of banks and regulators. The importance of ESG in Banking The integration of ESG criteria in the banking sector is driven by several compelling factors. Firstly, environmental degradation, social inequality, and corporate governance failures pose significant risks to the stability and sustainability of the financial system. According to Harvard Business Review article „The Investor Revolution,“ investors are increasingly demanding transparency and accountability regarding ESG performance, reflecting a growing awareness of the interconnectedness

between sustainability issues and financial outcomes. Moreover, incorporating ESG criteria enables banks to mitigate risks associated with climate change, regulatory non-compliance, and reputational damage. ESG integration goes beyond traditional financial metrics, emphasizing the importance of responsible business practices and their impacts on society and the environment. Environmental Considerations focus on the impact of banking operations and their clients‘ activities on the planet. Banks are increasingly assessing carbon footprints, energy consumption, waste management, and investments in green projects. By prioritizing eco-friendly practices, banks not only contribute to environmental preservation but also address the risks associated with clima-

Banking innovations for a greener world

te change, which can have significant financial implications. Social Criteria pertain to how banks manage relationships with employees, customers, suppliers, and communities. This includes fostering diversity and inclusion, ensuring fair labor practices, enhancing community engagement, and protecting customer rights. Strong performance in social criteria helps banks build resilient and trustworthy relationships with their stakeholders, ultimately contributing to social stability and economic growth. Governance Criteria involves the structures and processes for decisionmaking, accountability, and control within the bank. This includes board diversity, ethical behavior, transparency, and shareholder rights. Effective governance practices reduce the risk of mismanagement and corruption, enhancing the bank‘s reputation and operational stability. Integrating ESG in Risk Management Risk management is a critical aspect of banking operations and the integration of ESG criteria significantly enhances this function. The integration of ESG considerations into risk management is no longer an option but a strategic imperative for banks seeking to thrive in a rapidly changing environment. Environmental Risks: Environmental risks include physical risks from climate change (e.g., extreme weather events, temperature changes, sea-level rise etc) and transition risks associated with the shift to a low-carbon economy (policy and regulatory changes, technological changes, market shifts etc). Banks must assess the environmental impact of their financed portfolios and develop strategies to mitigate these risks. For instance, adopting exclusion lists which would abandon financing

any exposure to fossil fuel industries or toward carbon-intensive industries whereas support investments in renewable energy projects. Social Risks: Social risks encompass issues such as labor practices, human rights, and community relations. Banks need to evaluate the social impact of their investments and operations. This can involve conducting due diligence on potential investments to ensure they adhere to fair labor practices and do not violate human rights. Governance Risks: Governance risks relate to the internal practices and policies of a bank, including board diversity, executive compensation, and ethical conduct. Strong governance practices reduce the risk of fraud, corruption, and mismanagement. Banks can enhance their governance by implementing transparent reporting mechanisms and ensuring accountability at all levels.

The integration of ESG criteria in the banking sector is driven by several important factors.

Environmental degradation, social inequality, and failures in corporate governance present significant risks to the stability and sustainability of the financial system.

Challenges and Future Outlook Despite the growing momentum towards ESG integration in the banking sector, several challenges persist, including lack of proper legislation, data availability and data quality, market readiness and regulatory fragmentation. Moreover, the lack of harmonized ESG standards and disclosure requirements complicates comparability and benchmarking across banks. The European Central Bank (ECB) and the European Banking Authority (EBA) have established several key requirements regarding Environmental, Social, and Governance (ESG) principles that banks must adhere to. These requirements aim to integrate sustainability into the core of banking operations. EU Regulators are increasingly emphasizing the integration of ESG factors into risk management frameworks, the European Central Bank‘s (ECB) guide on climate-related and environmental risks, underscores the importance of considering ESG in ICAAP and ILAAP preparation. Similarly, the EBA Pillar 3 on ESG disclosure includes Quantitative Disclosure (reporting on climate-related transition and physical risks; Green Asset Ratio, Banking Book Taxonomy Alignment) and Qualitative Disclosure (integration of ESG risks into governance, business model, strategy and risk management). On the other side, the Central Bank of Kosovo has been actively pursuing its Green Agenda to enhance ESG integration within the banking sector. By collaborating closely with the World Bank and joining the SBFN, the CBK is intensifying efforts to advance sustainable finance practices and strengthen the financial system’s resilience to climate-related and environmental risks. Independently, banks have been

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proactively adopting ESG principles, mainly pushing different green initiatives through Kosovo Banking Association, banks with EU parent banks have been aligned with the ESG principles for some times thereby accumulating considerable experience, nevertheless, other banks are also following dynamic transformation in this regard. At NLB we have been committed on incorporating ESG principles in our business model. Embarking on a path of more intensive integration of sustainability from 2020 with the UN PRB signation, joining the Net-Zero Banking Alliance Initiative and receiving the first ESG rating in 2022 all the way to the issuance of the NLB Green Bond (EUR 500M) in 2023. Our Sustainability Policy at the core of it addresses the ESG matters through three main pillars:

30 THE KOSOVO BANKER • 2024

Sustainable Operations, Sustainable Finance and Corporate Responsibility. The bank has aligned its Lending Policy, Risk Appetite and implemented a robust ESMS (environmental and social management system) as part of the Risk Management, our green products and initiatives have been greatly increased and we remain committed on serving the best to our customers while remaining ESG compliant. Conclusion The integration of ESG criteria in the banking sector represents a paradigm shift towards a more sustainable and responsible approach to finance. By embracing ESG principles, banks can mitigate risks, drive innovation, and create long-term value for shareholders and society.

Furthermore, integrating ESG criteria can drive innovation and foster competitive advantage, Harvard Business Review’s article „Competing on Social Purpose“ underscores the role of purpose-driven organizations in attracting talent, fostering customer loyalty, and accessing new markets. By aligning the business strategies with ESG principles, banks can enhance their brand reputation and unlock new growth opportunities. Addressing the challenges associated with ESG integration requires concerted efforts from all stakeholders to foster transparency, accountability, and collaboration. As the banking sector adapts to growing sustainability demands, proactive engagement and leadership will be crucial to unlocking the full potential of ESG driven finance.

Banking innovations for a greener world

VESA PACA SUSTAINABILITY & ESG MANAGEMENT LEAD RAIFFEISEN BANK KOSOVA

Sustainable finance for individuals, businesses, and corporations In recent years, sustainable finance has gained considerable traction worldwide. In the face of ever-increasing environmental challenges and growing awareness of climate change, this type of finance appears as a critical tool in promoting environmental protection practices and encouraging economic sustainability.

his approach integrates Environmental, Social, and Governance (ESG) criteria into financial decision-making processes, ensuring that projects and businesses will not only have financial benefits, but also contribute to sustainable development. Even in Kosovo, a country with developing economic structures and industries, sustainable finance has become necessary. Banks play a crucial role in Green Finance for individuals For Kosovo residents, sustainable finance generally means green loans and mortgage loans. These financial products are designed to support environmentally friendly projects, such as home refurbishments with a focus on increasing energy efficiency, solar

panel installation, or investments in other environmentally friendly products, such as replacing fossil-fuel burning vehicles with hybrid or electric vehicles, and many other investments. By offering more favorable interest rates or even by simplifying the application process for such loans, banks can encourage individuals and businesses to adopt sustainable practices. In this context, it should be noted that there is a growing trend of individuals increasingly relying on banks and financial

institutions that prioritize ESG criteria for financial backing and offer support for such investments. Also, there is an increased interest in information and advice to understand and integrate efficient devices as much as possible and to transform business activity, paying attention to their social and environmental impacts. Supporting Businesses through Sustainable Finance Sustainable finance for small and medium-sized enterprises (SMEs) involves the provision of financial products that encourage the adoption of sustainable business practices. In addition to funding for energy efficient equipment, this funding also extends to waste management systems, manufacturing products with environmentally friendly

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CHAPTER 2

materials, and many other sustainable practices. Companies that integrate sustainability into their financial operations and practices are better equipped to manage risks, attract investors, and build long-term business value. As for corporations, sustainable finance includes more complex financial instruments, such as green bonds, sustainability-related loans, and ESGfocused investment portfolios. These instruments are designed to finance large-scale projects that have a significant positive impact on the environment and society. In Kosovo, corporations are beginning to realize the benefits of inclusiveness and sustainability in their core operations. By integrating ESG into their overall corporate strategy and capital distribution decisions, these companies can improve their market positioning and ensure long-term financial benefits. A key role in supporting businesses and individuals towards sustainability is also played by state institutions and regulatory bodies. These bodies, with support from organizations such as the European Bank for Reconstruction and Development (EBRD) and the Kosovo Credit Guarantee Fund (KCGK), crucially contribute to promoting sustainable practices. These entities provide financial subsidies for encouraging investment and promoting sustainability in all sectors of the economy.

32 THE KOSOVO BANKER • 2024

Overcoming Challenges and Leveraging Opportunities The focus on sustainable finance will only continue to grow as more individuals, businesses, and corporations realize the significance of aligning their financial activities with sustainable development goals. By investing in education and awareness campaigns, thematic fairs or events focusing on ESG, both financial institutions and the

government can promote a sustainability culture among all actors. In conclusion, sustainable finance is an essential pillar for the future of Kosovo’s economy and should be seen as a powerful catalyst for positive change. As we move towards a greener future, sustainable finance will be a crucial pillar in achieving our ambitions. Together, we can pave the way for a stable and prosperous future for Kosovo and beyond.

Banking innovations for a greener world

NAFI IBRAHIMAJ CHIEF RISK OFFICER ISBANK

Opportunities and challenges of implementing sustainable economic policies in Kosovo Kosovo, a developing nation in the Balkans, stands at a pivotal point on its journey towards sustainable economic and fiscal development. In attempting to address such issues, significant challenges as well as great opportunities are nevertheless presented.

o tackle these issues, a multifaceted approach that utilizes monetary and fiscal policies, fostering economic growth, and ensuring financial stability, all while attempting to mitigate the factors leading to financial malfeasance, is effectively required. This article explores these issues and provides insights into how Kosovo can navigate the complex landscape of such a new state. Monetary and Fiscal Policies Governmental monetary and fiscal policies are fundamental tools for regulating the economy and fostering sustainable growth. Kosovo government institutions, working in conjunction with the Central Bank of Kosovo, must implement prudent monetary policies to control inflation while at the same

time addressing the inequality between the import and export and developing forward thinking strategies rather than the present reactionary method. Concurrently, fiscal policies that promote investment in sustainable sectors such as tax incentives for green investments, allocating budgetary resources towards renewable energy sources, sustainable agriculture, and vitally needed infrastructure regeneration, would significantly bolster the environmental progress aligning Kosovo even closer with the existing European strategies. Accelerating Economic Growth Fostering economic growth in Kosovo requires an accelerated and strategically minded transition to modern processes. Policies that get rid of bureaucratic hurdles

and streamline regulatory frameworks will vastly combat the existing endemic corruption and attract foreign investment. Simplifying business registration and licensing procedures, reducing red tape, and enhancing the transparency of government services can create a more conducive environment for business operations especially for foreign companies and investment. Furthermore, investment in education and vocational training will equip the workforce with the necessary skills to thrive in a sustainable economy. Since the Pandemic, there has been a fundamental shift in workforce practices throughout Europe and in order to stop Kosovo from falling behind its neighbours and the world at large, it is essential that Kosovo adapt to the labour market in order to prevent the exodus of its most valuable and talented resource.

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Unlocking Access to Liquidity and Funds Ensuring the steadiness of liquidity is crucial for economic stability. Kosovo must unlock the potential of access to the liquidity of its populace by strengthening its financial institutions and aggressively promoting a free market economy. Enhancing the capacity of banks to provide credit to businesses, is vital for economic growth. Developing a robust secondary market for financial products such as investments in the international exchanges will provide businesses and individuals with more options for raising capital as well as educate the populace on alternative forms of investment and revenue streams, thus fostering economic resilience.

Leveraging Youth Forces Kosovo‘s youthful population is a significant asset in its pursuit of sustainable development. Harnessing the potential of the youth requires targeted policies that promote education, entrepreneurship, and innovation. Programs that provide young people with access to finance, mentorship, and training in sustainable business practices can sti-

34 THE KOSOVO BANKER • 2024

mulate economic growth and foster a culture of sustainability. Environmental, Social, and Governance (ESG) Standards Adopting ESG standards is crucial for sustainable development. Kosovo must encourage businesses to integrate ESG principles into their operations. This involves not only adhering to environmental regulations but also ensuring social responsibility and robust governance practices. By promoting ESG standards, Kosovo can attract international investors who are increasingly prioritizing sustainability in their investment decisions. Developing the Capital Market A well-developed capital market is essential for mobilizing resources and financing sustainable projects. Kosovo should focus on developing its capital market by enhancing regulatory frameworks, improving market infrastructure, and promoting transparency. This will

attract both domestic and international investors, providing the necessary capital for sustainable initiatives. Embracing Financial Technology (Fintech) Fintech innovations can revolutionize Kosovo financial sector by improving efficiency, reducing costs, and enhancing access to financial services. Embracing fintech solutions such as mobile banking, digital payments, and blockchain technology can increase financial inclusion and support sustainable economic activities. Fintech can also facilitate the development of a secondary market for selling and buying financial products, thus providing more opportunities for investors. Inclusive Banking and Easy Access to Funding Making the banking process more inclusive and ensuring easy access to funding is vital for sustainable development. Financial institutions should

Banking innovations for a greener world

Conclusion

adopt user-friendly models that cater to all segments of the population. Simplifying the process of obtaining loans and providing clear and transparent information about funding options can encourage more people to participate in the formal financial system. Financial Crime Prevention The prevention of financial crimes is critical to maintaining the integrity of Kosovo financial system. Implementing stringent regulatory and criminal codes will stem the flow of such actions. Increasing the capacity of law enforcement agencies in detecting and preventing such crimes is essential. Strengthening of the judicial penal code will also deter all but the most ardent criminals. The adoption of standard international practices and technologies to monitor and analyse financial transactions, ensures compliance with Basel recommendations and EU taxonomy policies.

Sensitive Analysis and Monte Carlo Analysis Sensitive and Monte Carlo analysis are essential tools for assessing and managing risks associated with sustainable investments. These analytical methods can help policymakers and investors understand the potential impacts of various economic scenarios on their projects. By incorporating these analyses into decision-making processes, Kosovo can enhance the resilience and sustainability of its investments. Stress Testing Stress testing is a crucial practice for ensuring the stability of financial institutions. By conducting regular stress tests, Kosovo banks and other financial institutions can assess their ability to withstand economic shocks and make necessary adjustments to their risk management strategies. This will contribute to the overall stability and resilience of the financial system.

Kosovo faces a complex set of challenges and opportunities in its quest to implement sustainable policies. By leveraging monetary and fiscal policies, fostering economic growth, ensuring liquidity stability, preventing financial crimes, and embracing technological innovations, Kosovo can pave the way for a sustainable and prosperous future. Collaboration between the government, financial institutions, businesses, and the youth is essential to achieve these goals. Through concerted efforts and strategic planning, Kosovo can transform its economy and set a benchmark for sustainable development in the region.

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CHAPTER 2

FATMIRE IMERAJ BERISHA SENIOR ESG EXPERT TEB

What are green loans? Internal In Kosova, amidst its breathtaking landscapes and busy cities, people are becoming more aware of the need for environmental action. The country faces environmental challenges, from air pollution to limited access to clean energy, rapid urbanization, outdated infrastructure, and reliance on fossil fuels pose significant obstacles to environmental progress. In the face of these challenges, a new opportunity has emerged: Green Loans.

s Kosovo works towards a more sustainable future, Green Loans pay a vital role in supporting environmental initiatives and projects. In a country where access to financing for environmentally friendly projects has traditionally been limited, the introduction of green loans by banks is a game changer that is reshaping the landscape of sustainable finance in Kosovo. Green loans, also known as eco-loans or sustainable loans, are a specialized financial product designed exclusively for individuals or business that want to fund projects that have a positive impact on the environment and are aligned with the Sustainable Development Goals (SDGs) set by the United Nations in 2015 and the commitments outlined in the Paris Agreement. The SDGs are a set of 17 global goals established to address various social, economic and

36 THE KOSOVO BANKER • 2024

environmental issues with the aim to achieve more sustainable and equitable world by 2030, while the Paris Agreement adopted in 2015, is an international treaty aimed at limiting global warming to well below 2 degrees Celsius above pre-industrial levels, with a target of 1.5 degrees Celsius. The agreement sets out commitments from countries to reduce greenhouse gas emissions and to enhance their efforts to adapt to the impact of climate change.

These loans support variety of environmentally friendly initiatives. Such as the production of the renewable energy, including solar panels, wind turbines and hydroelectric plants as well as energy efficiency upgrades for buildings, improvements in insulation, lightning, heating and cooling systems, and investments in clean transportation, such as electric vehicles and charging stations. Other environmentally friendly projects include waste management, water conservation, sustainable agriculture. Green loans are instrumental in supporting initiatives that reduce carbon emissions, conserve natural resources, and promote sustainability in Kosovo. Accessing these loans involves a structured process starting with eligibility criteria set by the lender, which often includes presenting a viable green project proposal and demonstrating financial stability. Green loans can contribute

Banking innovations for a greener world

significantly to the circular economy as well by financing projects that prioritize resource efficiency and waste reduction such as recycling infrastructure, circular product design and sustainable supply chains, driving economic growth while reducing environmental impact. The importance of green loans in the Kosovo market cannot be overstated. With the country facing environmental challenges such as air pollution, waste management issues, and water scarcity, the need for sustainable finance solutions has never been more pressing. By offering favorable terms and incentives, green loans incentivize businesses and individuals to invest in projects that not only benefit the environment but also contribute to a more sustainable economy. One of the key advantages of green loans is their potential to drive cost savings and financial benefits for borrowers. For businesses looking to invest in energy efficiency improvements or renewable energy projects, green loans offer a way to lower operating costs, reduce energy consumption, and increase profitability in the long run. By financing these projects with green loans, businesses can align their Internal financial

goals with their sustainability objectives, creating a win-win scenario for both the bottom line and the environment. Cooperation with supranational entities in Kosovo plays an important role in facilitating easier access to green loans. These entities offer sustainable risk-sharing funds or funded funds that collaborate with banks to provide clients with sustainable financing solutions. Through these collaborations, banks can extend more favorable terms particularly benefiting clients without collateral support, or new entrepreneurs, woman in business. This partnership enables greater access to green loans for underserved segments of the population, empowering them to pursue environmentally friendly projects and contribute to sustainable development in Kosovo. By providing access to financing for green projects, banks are empowering businesses and individuals to take meaningful action towards a more sustainable future. From small businesses to large corporations, green loans offer a pathway to sustainable growth and prosperity that benefits both the economy and the environment.

In Kosovo, the banking sector has been quick to embrace the concept of green loans as a means of promoting sustainable finance. By offering green loans, banks in Kosovo are not only supporting the transition to a greener economy but also positioning themselves as leaders in sustainable finance. Through education campaigns, marketing efforts, partnerships with stakeholders and innovative products development, banks are actively increasing awareness and promoting the adoption of green loans among customers. Of course, the road to sustainability is not without its challenges. Kosovo‘s journey towards a greener future is marked by hurdles such as limited resources, regulatory barriers, and cultural norms. Yet, with each challenge comes an opportunity for innovation and collaboration. Through partnerships between government, civil society, and the banking sector, the country is moving toward a greener tomorrow. Together, with the support of the banking sector and initiatives like Green Loans, Kosovo aims to lead the way in sustainable finance and environmental stewardship in the region.

2024 • THE KOSOVO BANKER 37

ntervie

DRITON HETEMI MANAGING DIRECTOR KOSOVO FUND FOR ENERGY EFFICIENCY

What are your main goals as Managing Director of KEEF in the field of energy efficiency? As the Managing Director of the Kosovo Energy Efficiency Fund (KEEF), my main goals revolve around improving the uptake and implementation of energy efficiency measures across various sectors in Kosovo. This includes promoting energy efficiency as a vital component of sustainable development, underscoring its benefits for both the environment and the economy. Another KEFF key objective is to facilitate energy efficiency financing and execution, especially in residential and public buildings. This includes ensuring that sufficient funds are available, and projects are implemented effectively and efficiently. Another key goal is to develop local expertise and technical skills, which are essential for the sustainable implementation of such initiatives and sustained energy efficiency efforts. Furthermore, we seek to work closely with government bodies, donors, and strategic partners to advocate and develop policies that support energy efficiency and sustainability, ensuring that these policies are conducive to the growth and success of energy efficiency measures in place. Finally, establishing robust sys-

tems for monitoring and evaluating the effectiveness of our initiatives is essential to ensure sustained improvement and accountability in our efforts. How do you find the financial incentives or programs that support investments in energy efficiency in Kosovo? Incentives and financial programs that support investments in energy efficiency in Kosovo have shown significant achievements, although there is still room for improvement and development. These programs have been instrumental in reducing energy consumption and greenhouse gas emissions, particularly in the public sector, providing much-needed financial support for energy efficiency projects. However, easy access to finance remains a significant issue, as many small residential projects and private enterprises still find it difficult to secure the necessary financing. This highlights the need for more comprehensive financial mechanisms developed in cooperation with more partners, be they international institutions, governments, or independent financial institutions. Furthermore, there is a pressing need to increase awareness and education about these incentives. Many potential beneficiaries are either unaware of these

Banking innovations for a greener world

“My advice is that the sooner you start the digital transformation, the better, because we cannot escape global trends, and today, it has become essential to succeed.”

programs or lack knowledge of how to use them effectively. Integrating technical assistance with financial incentives can significantly increase the overall impact of these programs. Ensuring their long-term sustainability is also critical, including securing ongoing funding and adapting to evolving market conditions and technological advances. What challenges do Kosovo companies face when seeking sustainability and how can they overcome them? Kosovo faces multiple challenges in its efforts to implement energy efficiency measures. Financial constraints are an obvious barrier, as energy efficiency projects can be prohibitively expensive, especially in the residential sector and small businesses. This issue is compounded by limited financial resources and relatively high loan interest rates, which may hinder investments in energy-efficient technologies. Additionally, the country’s aging infrastructure and outdated building standards pose significant barriers to modern

energy efficiency technologies. Another critical challenge is the lack of awareness and education among the general population and key stakeholders about energy efficiency benefits and methodologies. This knowledge gap can lead to resistance to change and slow energy efficient practices uptake. Furthermore, there is often a lack of technical expertise and capacity to design, implement, and sustain energy efficiency projects. Overcoming these challenges requires a concerted effort to improve financial mechanisms, update infrastructure, enhance outreach, and build local capacity.

What are the current trends in renewable energy adoption globally and locally? Globally, renewable energy adoption is accelerating, driven by technological advances, policy support, and growing environmental awareness. There is a significant focus on solar and wind energy, which are becoming increasingly cost-competitive with traditional fuels. Innovations in energy storage and grid management also play a crucial role in increasing renewable energy systems’ reliability and efficiency. At the local level, Kosovo has begun to successfully embrace these global

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Energy efficiency practices in industrial environments offer numerous benefits, both economically and environmentally.

trends. The country has made progress in integrating renewable energy sources into its energy mix, particularly through small solar projects and initiatives to harness wind power and energy storage. However, the adoption rate is still limited by regulatory and financial challenges. There are more supportive policies and incentives to encourage renewable energy investment. Furthermore, increasing public awareness and education about renewable energy benefits is essential to drive wider acceptance and implementation. What are the main benefits of energy efficiency practices in industrial and residential settings and what is their economic impact for Kosovo? Energy efficiency practices in industrial settings offer numerous benefits, both economically and environmentally. By optimizing energy use, industries and service providers can significantly reduce operating costs, increasing their competitiveness and profitability. This is particularly relevant for Kosovo, where the services sector, including the public sector, plays a vital role in the economy. Improving energy efficiency can also lead to better quality

40 THE KOSOVO BANKER • 2024

products and services through increased production efficiency, and reduced maintenance costs. Environmentally, energy efficiency practices contribute to lower greenhouse gas (GHG) emissions and a reduced environmental footprint, which aligns with global sustainability goals and improves the country’s reputation on international markets. Economically, widespread energy efficiency measures can stimulate job creation in construction, manufacturing, and energy services. These practices can also attract foreign investment by presenting Kosovo as a country with a stable economy and a progressive mentality. Overall, energy efficiency practices contribute to economic growth, but also support the country’s transition to a more sustainable energy system. How aware is the public of the benefits of energy efficiency and renewable energy and what strategies could be used to increase awareness? Public awareness of energy efficiency and renewable energy (EE&RE) in Kosovo is increasing, but there is still a significant need for increased educational and informational efforts.

Many people know the basic concepts but lack detailed knowledge of the practical benefits and implementation methods. To raise awareness, a multidimensional approach is needed. This includes comprehensive public outreach campaigns that highlight energy efficiency and renewable energy benefits. Using different media channels, including social media, television, radio, and various community events, can help reach a wider audience. Additionally, partnerships with financial institutions, schools, universities, and community organizations can foster basic education and engagement for everyone. Providing incentives for the adoption of energy efficient practices and renewable energy technologies can also promote awareness and participation in this journey. Furthermore, showcasing successful local projects and case studies can demonstrate the tangible benefits and feasibility of these measures. By implementing such strategies, we can motivate and inform the public. This will encourage greater uptake and implementation of energy efficiency and renewable energy measures at the private level as well.

Cybersecurity and data privacy

3 Chapter

Cybersecurity and data privacy

CHAPTER 3

VALDET SHEHU SENIOR INFORMATION SECURITY OFFICER NLB BANK

Cybersecurity challenges from service providers in the financial industry As the financial industry of Kosovo continues to digitize and evolve rapidly, the reliance on utilizing third-party service providers has become increasingly important.

hile these partnerships offer numerous benefits, they also introduce new cybersecurity risks that must be carefully managed, as one of the key concerns remains the management of risks from using the third-party service providers. Cybersecurity challenges in the financial industry are not unique to Kosovo, but the country‘s position as a developing economy and its growing reliance on digital technologies make it particularly vulnerable. Financial institutions face a complex landscape of threats, including data breaches, unauthorized access, malware attacks, and service disruptions, all of which can have serious consequences for both the financial industry and the customers.

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The Role of Third-Party Service Providers The role of IT third-party service providers in Kosovo‘s financial industry has evolved significantly over the last decade. In the previous decade, they were primarily seen as auxiliary support partners, providing routine maintenance for IT systems. However, as digital transformation has moved quickly through the financial industry, their status has transformed to that of strategic partners and enablers of innovation, offering a wide range of services such as electronic and mobile banking, payment processing, card personalization, cloud computing etc. These services enable the financial industry to operate more effectively, improving operational resilience, promoting innovation, gaining market advantages, as well as achieving cost reductions.

Operational Resilience, Innovation and Cost Efficiency Operational resilience refers to the ability of financial institutions and their service providers to absorb shocks from operational risks, such as cybersecurity threats while continuing to deliver critical operations through such disruptions. By using external resources, financial institutions in Kosovo can improve their operational resilience, particularly in maintaining secure communication channels, transaction processing, and ensuring business continuity during a cybersecurity incident. Innovation is highly important for the success of the financial industry, and service providers play a key role by bringing new capabilities, enabling the development of modern digital banking platforms, which ultima-

Cybersecurity and data privacy

tely enhance customer experience and drive competition. Additionally, outsourcing certain functions

to specialized providers allows financial institutions to reduce their reliance on legacy systems, reduce

operational costs, thereby optimizing performance and internal resource planning.

Cybersecurity Risks and Challenges in Kosovo‘s Financial Industry A recent survey of professionals in Kosovo‘s financial industry 8 revealed that cybersecurity is an important concern when partnering with service providers. Insufficient security measures, potential data breaches, and compliance issues were cited as the most pressing challenges. Figure 1: T he top 3 concerns of financial industry when partnering with third-party service providers

Cybersecurity challenges faced by financial industry when working with third-party service providers

74% Insufficient cybersecurity measures

62% Data breaches

56% Non-compliance issues

IN FACT,

50% OF RESPONDENTS BELIEVE THAT SERVICE PROVIDERS POSE A HIGH LEVEL OF RISK TO THE FINANCIAL INDUSTRY, WITH AN ADDITIONAL

41%

RANKING THE RISK AS MEDIUM.

50+41+63N

Figure 2: T he perception of risk by the service providers to the financial industry

In you opinion, what is the current level of risk posed by service providers for the financial industry?

50%

41%

High

Medium

Low

Not sure

8 The extended survey was part of an academic research project that the author worked on while studying as a Chevening Western Balkans Cybersecurity fellow in 2023/24. The fellowship was hosted by Cranfield University in the United Kingdom, which was delivered over a 10week period in partnership with the Defence Academy of the UK Ministry of Defence and fully funded by the UK Foreign, Commonwealth, and Development Office.

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Among many other issues researched, the survey also highlighted the services that are perceived to have the highest cybersecurity risks, with online banking, payment processing, and IT infrastructure management topping the list. Despite the few benefits mentioned above, the involvement of service providers in financial institutions‘ operations introduces various cybersecurity risks. The main risks include possible data breaches, unauthorized access, malware attacks, and service disruptions. Data Breaches Data breaches are one of the most alarming cybersecurity risks associated with service providers. These breaches can occur when cybercriminals exploit vulnerabilities in the provider‘s systems, leading to the exposure of sensitive information. Our financial industry had a

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glimpse of this severity as we witnessed a widely publicized data breach in 2020, which was initiated by a compromise of a service provider and impacted confidential financial information, thus highlighting the unexpected impact that such incidents can have on reputation and trust. Unauthorized Access and Malware Attacks Unauthorized access and malware attacks can severely impact the operations of financial institutions. These risks are often amplified by insufficient cybersecurity measures, therefore by ensuring that these providers implement well-designed security protocols is essential to mitigating such risks and protecting sensitive data.

Service disruptions Cyberattacks on service providers can lead to service disruptions that impact financial industry and the customers. For example, a distributed denial-ofservice (DDoS) attack on an electronic banking provider could render critical services inaccessible, causing significant financial losses and customer dissatisfaction. On September 2020, several banks in Western Balkans suffered DDoS attacks against their public facing infrastructure as several services were rendered inaccessible for a period. Regulatory and Best Practice Frameworks Effective management of cybersecurity risks from service providers requires a solid regulatory framework and adherence to best practices. In Kosovo, the current regulatory framework does not

Cybersecurity and data privacy

“Our financial industry briefly faced this significant risk when we witnessed a data breach with wide-reaching consequences in 2020. The breach originated from the compromise of a service provider’s security, and as a result, it exposed confidential financial information, highlighting the sudden impact such incidents can have on an institution’s reputation and trust. This incident serves as a stark reminder of how vulnerable our digital infrastructures can be to external threats.”

fully cover resilience requirements for the financial industry. However, there are opportunities to leverage international best practices and frameworks to improve cybersecurity risk management. Proposed Strategies To address these challenges, the financial regulatory bodies in Kosovo should consider the following context-specific strategies: Establish a Third-Party Risk Management (TPRM) framework. By adopting a TPRM framework which would be based on modern best practices (DORA regulation – Chapter V: Managing of ICT Third-Party Risks; and/or NIST Supply Chain Risk Management framework) it could help to regulate business relationships with third-party service providers, ensuring that they adhere to a defined set of approved cybersecurity requirements. By means of contractual arrangements, the financial industry should require their service providers to engage with independent parties for performing

regular security testing (penetration testing, security audits etc.) as that would help in identifying and addressing vulnerabilities quickly and more efficiently. Focus on close cooperation with service providers in the domain of incident response and recovery procedures to respond to cybersecurity incidents efficiently and minimize damage. As learned from the survey responses, transparency and communication are an important area to be improved upon. Therefore, the financial industry and service providers should establish clear lines of communication, share information about potential or imminent threats, and collaborate more on their joint mitigation strategies. Similarly, a platform for sharing threat intelligence data between the financial industry entities would also provide a new dimension for staying proactive. Prioritize discussions about cybersecurity insurance coverage from all stakeholders to provide a solid alter-

native for covering potential losses from a cybersecurity incident. While the cybersecurity challenges are significant, these are also opportunities for Kosovo‘s financial industry to further improve its cybersecurity posture by building more resilient partnerships with service providers. By adopting these approaches while leveraging financial industry best practices, the financial industry can navigate the growing complexities of the cybersecurity landscape while managing risks. Cybersecurity is a shared responsibility that requires the active engagement of all stakeholders in financial industry. The contribution from each of us in identifying and mitigating the risks would enable the financial industry and service providers to improve toward a more secure and resilient digital ecosystem that supports innovation, growth, and financial inclusion for all citizens of our country.

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CHAPTER 3

Cybersecurity and data privacy

When Identity and Security Are Certain, Anything Is Possible

What We Do

How We Do It – PSD2 certified

Who We Serve

according to EN1143 standards.

CHAPTER 3

ERMAL GASHI HEAD OF THE INFORMATION SECURITY DEPARTMENT BKT

Emerging technologies and trends in cybersecurity In the digital age, our lives are closely intertwined with technology. From managing our finances and communicating to controlling our homes with a few clicks, technology offers immense convenience. However, alongside these benefits, we must be aware of the cyber threats that accompany them.

he rapid pace of technological development not only enhances our daily lives but also equips cybercriminals with new tools to exploit potential system vulnerabilities. This ongoing evolution makes cybersecurity a constantly changing battlefield.

highly convincing phishing emails that deceive even the most cautious users or develop malware that learns and adapts to bypass security measures. The ongoing challenge is to ensure that AI defense systems evolve faster than offensive ones, aiming to maintain a defensive advantage.

Artificial Intelligence and Machine Learning: Artificial Intelligence (AI) and Machine Learning (ML) are making significant strides in cybersecurity. These technologies can quickly analyze vast amounts of data, identifying unusual patterns that might indicate a cyberattack. For example, AI can detect suspicious network activity that might go unnoticed by human eyes, enabling a swift response to potential threats. However, there is a downside. Cybercriminals are also leveraging AI and ML to their advantage. They can create

Zero-Trust Architecture: Trust No One, Verify Everything Traditional cybersecurity models focus on protecting the network perimeter, assuming that threats come from outside. The Zero-Trust Architecture overturns this idea. It operates on the principle that no user or device, whether inside or outside the network, should be automatically trusted. This approach is increasingly important as remote work and Internet of Things (IoT) devices become the norm. Every access request is scrutini-

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zed, ensuring that only authenticated and authorized users and devices gain entry. By continuously verifying every access attempt, zero-trust architecture minimizes the risk of unauthorized access and data breaches. The strict nature of this model might seem cumbersome and complex, especially in the Cyber Security – IT and Infrastructure relationship, but it is always necessary to protect against increasingly sophisticated cyber threats. Blockchain: A New Fortress for Data Integrity Blockchain technology, widely known for supporting cryptocurrencies, also offers significant potential for cybersecurity. Blockchain functions like a digital ledger that records transactions, ensuring they cannot be altered. In the future, in the financial system, this transparency and immutability could

Cybersecurity and data privacy

be a powerful tool for protecting and maintaining data integrity. Blockchain can be used to secure sensitive information in various fields, from supply chains to healthcare. By creating an immutable record of transactions, blockchain helps prevent data manipulation and fraud, adding an extra layer of security. Its decentralized nature also means there is no single point of failure, making systems more resilient against attacks. Quantum Computing Quantum computing is poised to revolutionize many fields, including cybersecurity. These extremely powerful machines can solve complex problems beyond the capabilities of today’s computers. However, if misused, this power has a dark side: the potential to break the cryptographic algorithms that currently protect our data. To stay ahead of this imminent threat, researchers are developing post-quantum cryptography. These new encryption methods are designed to withstand the capabilities of quantum computers, ensuring that our digital communications and transactions remain secure. The development of these algorithms is a race against time, driven by the rapid pace of new technological advancements, aiming to establish encryption solutions before quantum computing becomes mainstream. Collaboration and Innovation: Cybersecurity is a constantly evolving field that requires a collaborative approach among stakeholders interacting with end-user systems/devices. Governments, businesses, and security experts must work together to share information about new threats and develop effective defense strategies at a higher level than just within small groups. Cyber threats are a global is

Human Factor: Our Greatest Weakness Despite global technological advancements, people remain one of the biggest vulnerabilities in cybersecurity. Social engineering attacks, such as phishing, exploit human psychology to gain unauthorized access to systems and data. These attacks are particularly dangerous because they bypass technological defenses and directly target individuals, especially those with high privileges in computer systems. To combat this, organizations must prioritize the education and periodic training of employees and other actors within the organization. Raising awareness helps employees recognize, stay informed about current scenarios, and respond to potential threats. Regular training sessions and simulated scenario exercises can help build a culture of vigilance and security awareness. It is also important to create an environment where employees feel comfortable reporting suspicious activities without fear of punishment, understanding that reporting is a crucial step for improvement, prevention, and system fortification in the future.

sue, and international collaboration is essential. Investment in research and development is also crucial. New technologies like AI, Blockchain, and Quantum Computing offer new ways to improve cybersecurity, but they must be used responsibly. By encouraging innovation and collaboration, we can build a safer digital future. Public-private partnerships can play a significant role in driving these advancements, ensuring that resources and knowledge are effectively combined. As our world becomes increasingly digital every day, the importance of cybersecurity cannot be underestimated. The rapid pace of technological progress presents both opportunities and challenges. By embracing new technologies, adopting proactive security models, and focusing on human-centered approaches, we can enhance our defenses and build a safer digital environment. The future of cybersecurity lies in our ability to adapt, innovate, and collaborate, ensuring that we stay one step ahead of those who seek to exploit our digital world.

2024 • THE KOSOVO BANKER 49

CHAPTER 3

KASTRIOT JËLLIQI SENIOR LEGAL OFFICER, LEGAL DEPARTMENT CREDINS BANK

Protection of data and privacy Rules for protection of data and privacy are not simply legal requirements; they are fundamental rights for every citizen.

he process of data protection and privacy is an important standard both at the local and international levels, considering the rapid development of technology as the primary tool to collect, process, and store personal data. The banking sector continuously takes measures for technology development and employee awareness on processing personal data with the highest accuracy and security, applying strict and rigorous rules to guarantee the protection of data and privacy. This is necessary to maintain trust and comply with legal requirements, given that the banking sector is entrus-

50 THE KOSOVO BANKER • 2024

ted with large amounts of personal and financial data. In today’s world of digital innovation, data is an essential asset for banks, including customer data such as employment data, information on

selected channels on digital platforms as well as the nature of entities connected to individuals, to provide the most advanced and most convenient services to customers. Certainly, with prior consent from the client for the processing of personal data. Data processors, especially financial institutions, collect and process a wide range of personal data of their customers. These include financial details, transaction history, and identification information. The sensitivity of this data makes it a prime target for cybercrime, considering that online banking platforms have become indispensable for transactions and finan-

Cybersecurity and data privacy

cial management. However, with the convenience of e-banking comes the heightened responsibility of protecting personal data from cybercrime. Financial institutions must implement strict cyber security measures to ensure customers’ safety and privacy. Unauthorized access or misuse of such information can expose the banking institution to significant financial loss, reputational damage, and penalties by the relevant authorities based on applicable law. Therefore, robust data

protection measures are essential to minimize such risks. These measures protect sensitive information but also strengthen the confidence and stability in the financial system. The Republic of Kosovo, while aligning national legislation with the acquis communautaire, improved the legal framework for the protection of personal data. In addition, protection of personal data and privacy are constitutional rights. Article 36 of the Constitution of the Republic of Kosovo stipulates the

right to privacy by guaranteeing the right to respect private and family life, whereas the Law on the Protection of Personal Data governs the protection of personal data in detail, which is in broad compliance with the General Data Protection Regulation (GDPR) of the European Union, in effect since May 2018, setting the highest standards for data privacy, requiring data processors to ensure confidentiality, integrity, and availability of customer data.

2024 • THE KOSOVO BANKER 51

CHAPTER 3

The Law on the Protection of Personal Data, in line with GDPR, governs some of the most significant issues, including:

“RIGHTS OF DATA SUBJECTS” Customers, as data subjects, have the right to access their data, request data correction, or deletion under certain conditions;

“LAWFUL PROCESSING OF PERSONAL DATA” Data processors must obtain consent from customers before processing their data;

“DATA PROTECTION OFFICERS” Data processors must designate a person to oversee data protection activities within the organization;

“REPORTING VIOLATIONS TO THE INFORMATION AND PRIVACY AGENCY” Personal data breaches should be reported within 72 hours;

“TRANSFER OF PERSONAL DATA OUTSIDE THE REPUBLIC OF KOSOVO” Establishing rules for data transfer outside Kosovo in line with EU decisions.

cy Agency (IPA) has issued a manual on protection of personal data as well as guidelines for personal data processing, for surveillance cameras and direct marketing. All this to clarify the mandatory norms related to the processing of personal data. However, the desired level of awareness of citizens about their legal rights has not yet been reached in Kosovo. Banks build customer relations on trust. Effective data protection practices reinforce this trust, showing customers that their personal and financial information is safe. This commitment increases customer loyalty but also differentiates the bank in a competitive market. Several by-laws have been issued for the purpose of implementing the

52 THE KOSOVO BANKER • 2024

Law on Personal Data Protection. In addition, the Information and Priva-

Cybersecurity and data privacy

SHPETIM HAJZERAJ MANAGER, INFORMATION SECURITY SECTOR BPB BANK

Internet banking platforms security With the exponential growth in the use of the Internet and information technology, online banking platforms have become a critical component of the global financial system.

n this article we will examine the security aspects of these platforms. We will include main threats, protection mechanisms, and best practices to ensure transaction and user data security. Online banking platforms have transformed the way consumers and businesses manage their finances, providing fast and convenient access to banking services. However, as the use of these platforms increases, so does the exposure to cyberthreats.

2024 • THE KOSOVO BANKER 53

CHAPTER 3

Online banking platforms are often targets of cyberattacks due to the sensitive and valuable nature of the information they hold. Some of the most common attacks on these platforms include:

Phishing: These are attempts to trick users into revealing their personal information and banking credentials through emails or messages that appear to come from their bank. Phishing can also include fake pages spoofing genuine bank pages.

Most common techniques: P hishing by email: Attackers send emails that appear to come from a trusted source (such as banks, popular online platforms, or work colleagues). These emails contain

Malware: Malicious software such as banking Trojans (e.g., Zeus, Dridex, SpyEye, Emotet, TrickBot) are designed to steal financial information from users’ devices. Such malware is often installed through compromised websites, infected emails, or direct downloads.

54 THE KOSOVO BANKER • 2024

fake links that direct users to fake sites that spoof legitimate sites. When users enter their information on these fraudulent sites, the attackers acquire their data.

target specific individuals, usually by gathering information about them in advance. The messages are personalized and seem more believable to the intended victims.

P hishing by SMS messages (Smishing): This includes sending text messages that contain fake links or require the user to call a specific number and provide personal information. Messages often contain urgent messages prompting users to act immediately.

P hishing on Social Media: Attackers create fake profiles or use compromised profiles to send fraudulent messages. They may pretend to be friends or colleagues and ask for personal information.

P hishing by Phone (Voice Phishing or Vishing): Attackers call victims posing as representatives of banks, law enforcement, or other institutions and ask for confidential information. They use sophisticated techniques to spoof the phone numbers that appear on victims’ phone screens, making such calls appear legitimate.

P harming: In this technique, attackers manipulate legitimate websites or DNS (Domain Name System) services to redirect users to fake pages without their knowledge.

S pear Phishing: This is a more targeted attack where attackers

Keylogging: This is a type of malware that records everything users type on the keyboard to steal passwords and other sensitive information.

Man-in-the-Middle (MitM): In these attacks, an attacker intercepts communication between the user and the banking platform to steal information or modify transactions. Such attacks are often conducted on unsecured networks, such as public Wi-Fi.

Cybersecurity and data privacy

Credential Stuffing: Attackers use combinations of passwords and usernames stolen from other security breaches to gain access to bank accounts. They exploit the fact that many people use the same credentials for multiple services.

Brute Force Attacks: These attacks try to find passwords by trying many combinations until the correct one is found.

Denial of Service (DoS) dhe Distributed Denial of Service (DDoS): These attacks disrupt banking services by overloading servers with heavy traffic, rendering them unusable for legitimate users.

Social Engineering: These attacks exploit human psychology to manipulate individuals into providing confidential information. This can include phone scams where the attacker poses as a bank representative.

SQL Injection: This is a database attack where the attacker injects malicious code into an application that uses SQL to manipulate the database. This allows access to sensitive information.

Cross-Site Scripting (XSS): In these attacks, malicious scripts are injected into bank websites to steal information from users visiting those sites.

To protect themselves from these attacks, users must be aware of the risks and follow security best practices. This includes using complex passwords, enabling two-factor authentication, and avoiding clicking on suspicious links. Banks must also continue to improve security measures and educate customers about potential threats.

2024 • THE KOSOVO BANKER 55

CHAPTER 3

Secure online banking platforms are crucial to protecting customers’ personal and financial data. Banks and financial institutions take many measures to ensure their online platforms are secure and protected from cyberthreats. Some of the key measures that include but do not limit protection methods are:

1 2 3 4 5 6 7 8 9

ENCRYPTION: The information transmitted between the client and the bank’s server is encrypted to prevent unauthorized parties from reading or

modifying it. Protocols such as SSL/TLS are widely used for this purpose.

TWO-FACTOR AUTHENTICATION (2FA) OR MULTI-FACTOR AUTHENTICATION (MFA): P In addition to using a username and password, banking institutions should apply a second

authentication step, such as a code sent by SMS or an authenticating application. This will increase account access security.

FIREWALLS AND INTRUSION DETECTION SYSTEMS: Banks should use firewalls (NGFW) to protect their networks from unauthorized intrusions

and intrusion detection systems to monitor and identify suspicious activities.

TRANSACTION MONITORING: Advanced algorithms that monitor transactions to identify

unusual patterns that may indicate fraudulent activity.

REGULAR UPDATES AND SECURITY PATCHES: Banks must constantly update their software and systems to fix discovered vulnerabilities and ensure

protection against emerging threats.

CUSTOMER EDUCATION: Banks should provide guidance and advice to customers on how to

protect their personal information.

SECURITY CERTIFICATIONS AND STANDARDS: Banks must follow recognized international standards for information security, such as PCI-DSS

(Payment Card Industry Data Security Standard), which ensures that their security practices comply with the most stringent requirements.

INDEPENDENT PENETRATION AUDITS AND TESTS: At least on an annual basis, banks

must undergo external audits and independent penetration tests.

MONITORING AND INVESTIGATION of Logs and Security Information and Event Management (SIEM) systems, integrating Artificial Intelligence

(AI), to facilitate prompt identification, analysis, and response to potentially malicious threats.

Online banking security is an area that is constantly evolving, due to cyberthre-

56 THE KOSOVO BANKER • 2024

ats’ dynamic nature. Therefore, banks must remain proactive and adaptable to

protect customers and their information.

Privacy protection in Kosovo in the digital age faces numerous challenges. However, there are also significant efforts towards improvement and compliance with the Law on Personal Data Protection and international standards that govern personal data protection.

How would you describe the current state of privacy protection in our country considering the digital age we live in? Privacy protection in Kosovo in the digital age faces numerous challenges. However, there are also significant efforts towards improvement and compliance with the Law on Personal Data Protection and international standards that govern personal data protection. The Information and Privacy Agency, as the responsible body for monitoring implementation and enforcing the law, monitors the situation and educates the public about their rights. Kosovo is experiencing an increased use of digital technologies, including the Internet, social media, and online services. This development creates significant opportunities, but also risks for individuals’ privacy, therefore our continuous efforts are directed towards

educating institutions and citizens as a whole about the importance of personal data and its protection. In this regard, the current state of personal data protection in Kosovo is one of efforts to improve the state of play and address the ongoing challenges that the Agency has identified while monitoring the implementation of the law. While the legal framework is in accordance with international standards, and considering the fact that Kosovo has established an independent institution for monitoring the implementation of the Law on Personal Data Protection, effective implementation and public awareness are still areas where progress is required. To overcome the challenges of the digital age, Kosovo must continue to invest in its institutional capacities. It must also strengthen cyber security measures and raise public awareness about personal data protection.

ntervie

KRENARE SOGOJEVA DËRMAKU COMMISSIONER INFORMATION AND PRIVACY AGENCY

CHAPTER 3

Are Kosovo citizens informed about their privacy and access to public documents rights? In order to inform citizens about the protection of personal data and access to public documents, the Information and Privacy Agency over the years has engaged in a series of activities addressing both public and private institutions regarding the importance of these two rights. The agency has conducted its outreach activities through round tables, discussions, workshops, trainings, lectures, distribution of brochures, and public appearances in the media. Through such activities, the Agency always aims for inclusiveness and works in cooperation with stakeholders. For informing the public, the Agency cooperates closely with NGOs, our inseparable partners. However, it also cooperates with international organizations accredited in Kosovo. We have also been blessed with the continuous support of various donors. In addition to ongoing workshops and training, for the purpose of informing the public, the Agency organizes two larger events every year. These are Personal Data Protection Week (January) and the Access to Official Documents Week (September). During these two weeks, the Agency, through various activities, focuses on promoting these two rights that are crucial to fostering a democratic environment in our country. To ensure the implementation of the law, namely the protection of personal data of citizens, in the first half of this year, in addition to other activities, in the framework of raising awareness among institutions, we are close to completing a round of meetings with the mayors of Kosovo municipalities regarding the fact that municipalities, in addition to being the first service provider to citizens, also accept and

58 THE KOSOVO BANKER • 2024

process a large amount of citizens’ personal data. In our efforts to ensure the protection of citizens’ personal data, after a series of meetings and consultations held with the management of Public Enterprises, the Agency called for the protection of personal data in utility bills distribution. The Agency urged institutions to take appropriate precautions as part of service delivery to citizens (distribution of utility bills) and establish the appropriate technical and organizational measures to ensure an adequate level of security against the potential risks of abuse of citizens’ personal data. Due to the fact that the monthly consumption presented in the bill indirectly enables the disclosure of the household’s financial data, the identification of unoccupied residences in certain periods, etc., and as a result, the indirect disclosure of this information potentially endangers the

With the aim of informing citizens about the protection of personal data and access to public documents.

The Agency for Information and Privacy has carried out a series of activities over the years, addressing both public and private institutions regarding the importance of these two rights.

physical safety of the individual and their property. However, public awareness remains a constant challenge as many individuals are unaware of their privacy rights and the ways they can protect their personal data. In addition, they are unaware of their right to access public documents. What advice would you give businesses about complying with privacy regulations and protecting customer data? Respecting privacy and protecting customers’ personal data is an extremely critical issue in building trust and success of any business that processes personal data. In the time of technological developments, every business processes personal data and in order to instill confidence in customers to entrust their data to us, we advise businesses to at least have adequate knowledge regarding the legal requirements for data protection enforced in our country and applicable to them, then take appropriate technical and organizational security measures by implementing strong encryption measures, operating system firewalls, and appropriate measures against cyberattacks. Businesses must acquire from their customers only the data necessary to achieve the goal. I.e., they must adhere to data minimization principles and also give customers more control over their own data. This is done by arranging procedures that are clear to customers to exercise their rights such as access, correction, deletion, objection, etc. Awareness and training of staff is an issue that businesses must take care of. This is in order for employees to know the importance of data protection and legal regulations, and to foster a culture of privacy within the organization.

Cybersecurity and data privacy

Transparency and communication with customers is another piece of advice businesses must understand. This is also their legal obligation to inform customers in a clear and understandable way about how they collect, process, and store their data. Conducting regular monitoring and audits of processes to ensure compliance with data protection rules and identify and address potential weaknesses. Such measures will help businesses comply with privacy regulations and protect customer data effectively, increasing customer confidence and avoiding potential legal penalties. What strategies does the IPA use to raise public awareness, counter data breaches, and protect citizens’ personal information? To raise public awareness, the Agency for Information and Privacy Agency organizes awareness campaigns, trainings, workshops, lectures, media appearances, distribution of brochures, and publication of awareness materials on its official website, including publication of various videos, etc. As for recording violations, through its monitoring mechanism, the Agency conducts ex officio inspections at public and private institutions. These inspections are planned at the beginning of each year in the inspection plan for different sectors, where we consider that it is more pressing to conduct inspections and checks, to create a picture regarding the implementation of the law. In certain cases, for some violations that have occurred, the Agency has also imposed fines on those entities that failed to protect our citizens’ personal data. Awareness on the one hand, but also inspections on the other hand, are how the Agency works to foster an environment where the right to privacy and the protection of personal data are

respected by those public and private institutions that process our citizens’ personal data. What are the biggest challenges facing Kosovo in privacy and data protection? Privacy and personal data protection are global issues that face complex challenges, often linked to technological developments, legal changes, and social dynamics. Some of the biggest challenges that Kosovo also faces are new technologies, the digitalization process, artificial intelligence is now being used by our citizens but also by businesses, then we have cyberattacks targeting both public and private institutions, so we have a lot of challenges that not only Kosovo faces, but these are broader global challenges. Cyberattacks are a major challenge. Kosovo must strengthen its cyber security

measures to protect personal data from online threats. Raising institutional capacities, both in public and private institutions, remains a challenge, as these institutions often face a lack of human resources and adequate infrastructure for data protection. As the volume of data grows, the application of security measures and their maintenance becomes ever more costly and complex. How do you find the legal and regulatory aspects of information and privacy in Kosovo considering the fast-paced nature of today’s technological development? The legal framework related to privacy and access to public documents is initially regulated by the Constitution (Article 36 Right to Privacy and Article 41 Right of Access to Public Documents). Furthermore, these two rights are also governed by laws, such as Law No. 06/

2024 • THE KOSOVO BANKER 59

CHAPTER 3

L-081 on Access to Public Documents and Law No. 06/L-082 on Personal Data Protection. In terms of legal data protection in Kosovo, we can proudly say that we are one of the first countries in the region to have adopted legal regulations in line with the European General Data Protection Regulation (GDPR), i.e., Law No. 06/L-082 on Personal Data Protection adopted in 2019 is in full compliance with GDPR. On the other hand, the Law on Access to Public Documents, likewise adop-

ted in 2019, is based on best European practices and standards and the Tromso Convention. In summary, Kosovo’s legal and regulatory framework is satisfactory.

However, witnessing how the rapid development of technology has also affected the way we work, facing the challenges of privacy and information at this time requires an integrated approach. This includes the improvement of the legal framework, the enhancement of institutional capacities, and the education of the public. Kosovo needs to continue to develop and improve its policies to effectively protect citizens’ rights in this area.

Cybersecurity and data privacy

4 Chapter

Financial inclusion and access to banking services

CHAPTER 4 SPONSORED ARTICLE

ALBINA METAJ HEAD OF THE HUMAN RESOURCES AND TRAINING DEPARTMENT PROCREDIT BANK

Women’s financial empowerment initiatives: ProCredit Bank’s commitment

t is a fact that in today‘s global economy, the financial empowerment of women is not just a social justice issue but also a catalyst for economic growth. Women present significant untapped business potential in the worldwide market. Yet, even today, despite some progress, gender inequality remains a challenge as we still face a significant gender gap. As of 2022, the global gender gap has been closed by 68.1%, and at the current rate, it will take 132 years to achieve full parity (World Economic Forum). The cause is inevitably historical injustices and societal norms, leading to systematic unequal treatment throughout decades. As such, this injustice needs immediate and proactive measures now.

62 THE KOSOVO BANKER • 2024

This is precisely what ProCredit Bank is doing. By recognizing the critical role women play in the financial ecosystem, we commit to closing the gap faster and supporting their economic empowerment through a range of targeted initiatives.

Promoting Gender Diversity in the Workplace At ProCredit, our people are our key strength. Our carefully selected and well-trained staff and managers feel a strong commitment to the bank‘s impact-oriented approach, which is palpable at every level. We implement policies to ensure equal opportunities for women in hiring, promotions, and leadership roles. By fostering a work-

place culture that values diversity, ProCredit Bank not only sets an example but also benefits from the diverse perspectives and talents women bring to the table. This is reflected locally as well, in each of the countries ProCredit operates in. According to the results of the 2023 Labor Force Survey (National Statistics Agency of Kosovo), 77% of women in Kosovo remain as inactive workforce. ProCredit stands tall in the Kosovan community with 61% of all staff being women, marking important milestone and setting a strong example for the organizations in the area (statistics from PCB Kos).

Financial inclusion and access to banking services

ProCredit Bank Kosova TOTAL EMPLOYEES:

61%

39%

FEMALE

MALE

36% OF THE STAFF HAVE PROCREDIT AS THEIR FIRST EMPLOYEE

MIDDLE MANAGEMENT:

47%

53%

FEMALE

MALE

172h AVERAGE TRAINING DURATION PER EMPLOYEE PER YEAR

AVERAGE OF,

9YEARS

OF SERVICE FOR ALL EMPLOYEES AVERAGE OF,

WHILE,

12.5

OF SERVICE FOR WOMEN IN MIDDLE MANAGEMENT

OF SERVICE FOR MEN

YEARS

60,000 TOTAL HOURS OF STAFF TRAINING DURING 2023

GRADUATES AND CURRENT ATTENDEES OF THE PROCREDIT ACADEMY:

51%

49%

FEMALE

MALE

NO GENDER-BASED SALARY DIFFERENCE IN COMPARABLE POSITIONS & SENIORITIE

2024 • THE KOSOVO BANKER 63

To us, gender equity is essential for creating a fair and people-oriented work environment. Our commitment to gender diversity is based on the values and principles set out in our Code of Conduct and is reflected in how we work with each other and our clients. We do not have quotas or targets; instead, our focus is on developing individuals, regardless of their gender. We achieve this through:

A candid and inclusive approach to recruitment. A remuneration structure based on fixed salaries with no incentive bonuses, promoting a long-term thinking culture instead of short-term rewards.

Fully transparent performance management and long-term career development opportunities.

Equal access to training and leadership development through our ProCredit Academy and other professional trainings.

Strong support for all staff to recognize and address unethical behavior.

Consistent and unbiased investigation of all indications of violations.

Cultivating Minds: Diversity and Inclusion As an agent of change, the bank is committed to promoting gender equity and raising awareness among our colleagues. We believe that unconscious biases can sometimes interfere with our decisions, so we have implemented a gender sensitivity training program to highlight this issue. This training program embodies the values that we as an institution want to promote, empowers women in the financial industry and contributes towards our goals to being a fair and equal employer. As a next step to achieve these goals, we have trained our entire staff to understand the roots of gender inequality in society. This serves as a solid foundation for building a healthy future of work and a team spirit that fosters fairness, one where the gender gap is an ancient problematic.

64 THE KOSOVO BANKER • 2024

OUTLINE OF 2023 GENDER TRAINING UNMASKING MYTHS AND STEREOTYPES: THE NORMALISATION CHALLANGE UNDERSTANDING GENDER, SEX, AND SECUAL ORIENTATION COMBATTING GENDERBASED VIOLENCE NAVIGATING GENDER BIASES

On the other hand, the three-year training program for our middle managers, the ProCredit Academy, is not just a training center but also a strategic hub where we align our values, ideas, and business model to deliver the best service to our clients while increasing impact and sustainability. Our comprehensive courses cover a wide range of topics, including history, philosophy, management skills, business and retail banking, digitalization, and AI. In 2023, we introduced a week-long management course on diversity and inclusion for our future decision-makers. This course is instrumental in narrowing the gender gap, as it equips leaders with the skills to promote equal opportunities and create a more balanced workplace, where women professionals have the space to bloom.

Financial inclusion and access to banking services

100% OF EMPLOYEES TRAINED ON GENDER EQUALITY

43%

57%

FEMALE

MALE

business opportunities for women-led companies. One of the clear examples of this commitment is our credit line Women in business window, designed to support women owned business in Kosovo, through a special guaranteed scheme. Recognizing the importance of alliances to achieve greater impact and advance gender equity, in 2023, we joined 2X Global, an international

organization dedicated to advancing women‘s economic empowerment. Through this partnership, we will accelerate capacity-building, adopt international practices, and build networks to strengthen women‘s representation in the economy.

MANAGEMENT ACADEMY GRADUATES BY GENDER PROPORTION OF MSMEs WITH AT LEAST 50% FEMALE OWNERSHIP IN OUR 2023 BUSINESS LOAN DISBURSEMENTS

28%

20%

18%

MICRO

SMALL

MEDIUM

MORE THAN

21,000 HOURS DECIDED TO HUMAN RIGHTS IN 2023

Our Gender Action Plan Women-led companies often face obstacles due to societal norms and discriminatory practices in the business environment. As a collective that continuously cherishes the uniqueness and innovation that our female leaders bring to the team, we recognize the vital role that women‘s upliftment plays in overcoming these challenges. Our Gender Action Plan contains detailed steps through which we aim to increase access to finance, reduce gender-based barriers in business, and create

MORE THAN

81,000 WOMEN SUPPORTED THROUGH JOB CREATION BY OUR MSME CLIENTS

2024 • THE KOSOVO BANKER 65

CHAPTER 4

TOTAL EMPLOYEES: KEY STATISTICS OF PROCREDIT GROUP

62%

38%

FEMALE

MALE

MANAGEMENT BOARD: MIDDLE MANAGEMENT:

54%

46%

FEMALE

MALE

35%

65%

FEMALE

MALE

SPECIALISTS: NO GENDER-BASED SALARY DIFFERENCE IN COMPARABLE POSITIONS & SENIORITIE

64%

36%

FEMALE

MALE

GRADUATES OF THE PROCREDIT MANAGEMENT ACADEMY IN THE LAST 5 YEARS SUPERVISORY BOARD:

43%

57%

FEMALE

MALE

66 THE KOSOVO BANKER • 2024

47%

53%

FEMALE

MALE

Financial inclusion and access to banking services

Key Achievements of the ProCredit: Defined Gender Action Plan within ProCredit Group in 2023 A strategic roadmap to enhance gender equity within and outside the bank. Participation in institutions promoting women J oined 2X Global in 2023: This partnership helps accelerate capacity-building and adopt best practices for women’s economic empowerment. J oined Financial Alliance for Women in 2024- Expanding our commitment to financial inclusion and support for women. U N Women Empowerment Programs (WEP): Participation in these programs underlines our commitment to global standards of gender equity. W omen on Boards Adria (WOBA): Several banks joined this initiative to promote female representation in leadership. Training and awareness G ender-related Training in 2023: Included in our Code of Conduct and at the Management Academy Program (Diversity and Inclusion). Financial Incentive S pecial Credit Lines for Women: Offering tailored financial products with special guaranteed schemes designed to empower women. Events/ Projects P rojects for Women Empowerment: Numerous initiatives across countries, including the “Free of Gender Violence” certification. Academies M iddle Management program: Of the 136 people who have graduated from the ProCredit Management Academy (in the last five years), 43% are women and 57% are men Onboarding Program O ur International Talent Program selects and develops young female graduates with high growth potential.

Salary Gap N o gender-based salary difference in comparable positions and seniority.

ProCredit Bank‘s commitment to the financial empowerment of women is evident in its comprehensive approach, which combines access to financial services, education, support for entrepreneurship, and internal gender diversity initiatives. By empowering women financially, ProCredit

Bank enhances the lives of individual women and contributes to the broader economic and social development of the communities it serves. Our ongoing efforts in promoting gender diversity, cultivating an inclusive culture, and implementing our Gender Action Plan proves our dedication to making a

meaningful impact on gender equity. Through these initiatives, we strive to create a more equitable and prosperous world for all. Our goal is beyond financial success; it‘s about making a meaningful difference in the lives of our customers and our society.

2024 • THE KOSOVO BANKER 67

CHAPTER 4

SUNA ZEQIRI HEAD OF THE COMPLIANCE DEPARTMENT BPB

Promoting access to basic banking services A key principle of consumer protection is the right of access to finance.

he significance of financial inclusion is increasing worldwide, especially in developing countries. This is because in a digital world, access to finance and the possibility of using financial services is critical for economic growth and poverty reduction. This result is achieved if financial intermediation benefits are sufficiently distributed throughout the population. Therefore, today, states design strategies and undertake initiatives that ensure comprehensive financial inclusion, enabling a non-discriminatory approach, where all citizens have the right to access basic financial services. These initiatives have been transposed into mandatory directives and regulations

68 THE KOSOVO BANKER • 2024

for implementation by banks. Therefore, banks play a critical role, enabling access to bank accounts for vulnerable groups, positively influencing their economic independence, and promoting economic and financial stability. Financial inclusion promotion focuses on marginalized populations, who have been excluded historically from the financial system due to low or irregular income, their status, or bad credit history, by offering simplified access to banking services, at affordable costs, to meet their basic needs. For this purpose, banks have created “payment accounts with basic features” with minimum requirements for opening such accounts. Such bank accounts are the same as standard bank accounts but

with limited access to products and services.

Why is promoting broader financial inclusion so crucial? Financial inclusion is crucial for many reasons. Some key reasons include: Financial inclusion is intended to remove obstacles and limitations that have led to individuals’ exclusion from accessing financial services. By allowing banking transactions at affordable costs, namely by offering payment accounts with basic features, the formal financial system is also promoted. In addition, cash is eliminated.

Financial inclusion and access to banking services

Financial inclusion reduces poverty and inequality. By empowering low-income individuals to manage their personal finances through banks, economic inequality is reduced, and economic growth is stimulated. One of the challenges of enhancing financial inclusion is the lack of awareness and knowledge about formal financial services offered by banks. Tradition, cultural influence, and social norms, especially in rural countries, can affect the extent of financial inclusion. In this case, banks play a crucial role. By opening payment accounts with basic features, regardless of income, status, or credit history, banks enable such groups to receive salaries or social benefits through their bank account, positively influencing personal financial management. Moreover, by enabling transfers, banks reduce cash use and

related risk as well as costs. In any case, before opening an account, banks apply regulatory anti-money laundering and terrorist financing requirements. As a result, the bank may deny the opening of an account if this is in violation of the anti-money laundering and terrorist financing framework and if the customer already has a payment account with basic features.

What does a payment account with basic features offer? A payment account with basic features offers limitless, free of charge, or with a reasonable monthly fee, services such as: deposit, withdrawal, direct debit, payment transactions through cards in Kosovo, credit transfers within the bank. The monthly fee cannot exceed 0.12% of the average net monthly salary in

Kosovo, published by the Kosovo Statistics Agency. Also, existing customers who have standard payment accounts, upon request, have the right to convert their account into a payment account with basic features. This is if they meet the conditions set forth in the regulation for access to a payment account with basic features. There are no fees for converting payment accounts.

Who is entitled to a payment account with basic features? Access to payment accounts with basic features is available to all Kosovo citizens, regardless of their financial circumstances, employment status, income level, credit history, or bankruptcy.

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Who benefits from free of charge basic features? Free of charge services are available to vulnerable consumers who benefit from the rights provided by the Kosovo pension and social assistance legislation. Promotion of Access to Basic Banking Services in Kosovo, as in many other developing countries, the expansion of access to basic banking services is considered among key drivers for financial empowerment and the promotion of economic stability. Therefore, it is imperative that financial inclusion through the promotion of access to basic accounts is enabled by collaboration between all stakeholders. This includes government, regulatory institutions, and financial institutions. Only in this way, Kosovo can improve financial inclusion and unlock opportunities for its citizens.

As in other countries in the world, in Kosovo, especially in rural areas, a significant part of the population has limited access to the financial system. Consequently, this part of the population remains completely excluded from the financial system, relying on informal financial channels as the only means of managing their money. In order to promote access to payment accounts with basic features and achieve the desired effect, current obstacles such as lack of information about financial products and services and the possibilities of their use and lack of trust in formal financial institutions must be eliminated. Therefore, financial education of the population about banking services benefits and how to use them is crucial. Through financial literacy programs, individuals will be informed about the possibilities of managing their personal finances and the effective use of basic banking products.

Policymakers play a critical role in eliminating these barriers and creating an enabling environment for financial inclusion through supportive policies and regulations. Kosovo Central Bank has published, in line with the European Union Directive on the comparability of fees related to payment accounts, payment account switching, and access to payment accounts with basic features (Payments Accounts Directive), the Regulation on Access to Payment Accounts with Basic Features, which entered into force on August 1, 2023. While commercial banks have already implemented all the requirements of the regulation. They are committed to fulfilling their role in social responsibility by enabling broader and equitable financial inclusion for all citizens.

THE MONTHLY FEE CANNOT EXCEED

0,12% THE VALUE OF THE AVERAGE NET MONTHLY SALARY IN KOSOVO, AS PUBLISHED BY THE KOSOVO AGENCY OF STATISTICS.

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Financial inclusion and access to banking services

LULZIM TAHIRI BUSINESS SUPPORT SECTOR MANAGER BPB

Access to credit and financing for startups As is already known, SMEs (Small and Medium Enterprises) are increasingly considered an essential part of a country’s economy, regardless of whether it is a country with a well-established economy or a developing one like Kosovo.

MEs play a crucial role in Kosovo‘s economic and social development, and are the primary source of creating new jobs, generating income, and boosting competitiveness through the promotion of entrepreneurship and innovation. Among them, startups play an increasingly critical role and can be considered one of the main drivers of economic growth. Startups or new enterprises are indicators of economic continuity. They are drivers of innovation, healthy competition, leveraging alternative resources, and above all, a sign of the many op-

portunities for younger generations and novel business ideas. In a dynamic and rapidly developing environment, the first challenge for such enterprises after the strategic decision to establish them is to secure the resources for establishment, continuity, and sustainable growth. This means the need to secure initial capital and financial stability in a way that is oriented towards business performance, novel approaches, and the creation of a customer base. The most common alternative to initial capital is family, friends, and accumulated funds. Finan-

cial institutions are only considered after these avenues have been exhausted. In relation to the latter, we will focus on financial institutions’ approach to financing startups. There are many reasons why it is difficult and challenging to obtain funding from financial institutions as the traditional method of financing new businesses. Recognizing the difficulties in financing startups is essential for the makers of the necessary policies and strategies. This is in order to design and implement the appropriate measures which will improve access to financing for these enterprises.

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Startups do not have a business history and their financial data history is insufficient. This complicates financial institutions’ current assessments and financial forecasting. Consequently, using standards and assumptions for predicting the business future becomes necessary. This can directly affect financial institutions’ decision-making or reluctance to finance these startups. Rapid startup growth often becomes challenging for financial institutions in terms of predicting financing needs, cash flow, and supporting enterprises at their pace of development. The lack of proper business plans for startups causes uncertainty in financial institutions’ perception of the potential development of these enterprises. At the same time, since new enterprises pose higher risk, financial institutions must seek sufficient collateral to cover the increased potential risk. Collateral is often considered an insurmountable or difficult obstacle for new enterprises. Since startups are small in terms of assets and capital, offering the latter as a guarantee is often considered insufficient. Startups also face market penetration challenges. In many cases, the market is resistant to accepting novel products or services. These uncertainties are related to consumers’ reluctance to try new products or services and the competition already present on the market. In addition, financial constraints often cause startups to be limited in hiring and building the necessary human capacities by concentrating many functions in a small number of staff. In view of the many advantages that make it easier for startups to enter the market and develop their businesses, it is imperative to keep in mind the positive potential of startups. For example, the ability to use novel and innovative models to predict mar-

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ket developments and adapt to changes more quickly than businesses with established organizational structures and processes. Startups are usually flexible in step with emerging technological developments and easily adapt to changes. This is done by leveraging these towards the advancement of the products or services they offer. By introducing novel ideas that challenge traditional industries, startups create opportunities for investment and industry development. This innovation cycle can have positive effects on the economy, such as greater employment opportunities and increased industry competitiveness. Startups are often seen as an alternative to the cycle of business activity for large enterprises, whose initial products or services have previously been imported. This increases the independence of these businesses and the country in general. This causes the capital to be oriented within the state borders, avoiding uncertainties related to international developments. With this, the positive impact on the country’s economy, employment level, demographic development, and financial performance will grow even more. These and other advantages should motivate financial institutions to be close to upcoming business initiatives and startups by lending them full support from the inception of the idea for a business activity, to the implementation of the business plan and its execution. Therefore, financial institutions should focus more on providing preferential treatment with favorable terms for business experience, payment methods (irregular payments), interest rates, and collateral requirements. In addition to the above, another significant aspect is the delivery of nonfinancial services for this category of business. In order to support startups

on their journey to the domestic and foreign markets, providing advice is essential for product and service design, launch, and improvement. By offering such services, financial institutions create sustainable potential for development in the country and make it easier for young entrepreneurs to achieve their goals. This directly affects the further advancement of access to finance, sustainable economic development, gender equality, and the overall development of society.

Financial inclusion and access to banking services

In this direction, state institutions should also play a role in achieving significant impact by offering various facilities for young entrepreneurs. Providing support in guaranteeing credit exposures with higher flexibility and coverage or other forms of support such as grants, subsidies, or various facilities would make startup development easier. The introduction of novel concepts and technologies by such businesses can invigorate markets, promoting healthy

competition and consumer offerings improvements. Through their innovative approaches, startups can significantly affect the economy’s expansion and prosperity, influencing the industry’s development in the future. Such initiatives should be considered an exciting potential for financial institutions and a healthy driver of the economy and society in general. Since this category affects the country’s economic development, state institutions should pay special attention to it. Offering innovative

opportunities and ideas for upcoming generations leads to a work- and lifefriendly environment. As a result, easier access to finance allows these businesses to overcome uncertainties, focus on growth, attract investment, and above all, create a strong base for success in this increasingly competitive and dynamic environment.

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KORAB OSMANAJ CHIEF INFORMATION SECURITY OFFICER PRIBANK

Awareness of employees and the ethical use of customer data Introduction In today’s digital age, the ethical use of customer data is more crucial than ever. Financial institutions handle vast amounts of sensitive customer data daily. This data includes personal identification information (PII), financial transactions, credit histories, and more. The ethical handling of this data is not only a legal requirement but also a moral obligation. Mishandling customer data can lead to severe consequences, including identity theft, financial loss, and reputational damage to the institution.

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The Importance of Data Ethics in Banking Financial institutions are entrusted with sensitive customer data, making ethical data practices paramount. The improper use of this data can result in significant financial and personal harm to customers. Therefore, it is essential to establish robust protocols to ensure data is handled ethically and securely. Data ethics encompass principles such as transparency, accountability, and the respect for customer privacy. Financial institutions must ensure that data collection is necessary and proportionate

to the services provided. They must also guarantee that data usage complies with regulatory standards and respects the privacy and rights of individuals.

Employee Awareness: The First Line of Defense Employees are the first line of defense in protecting customer data. Despite the implementation of advanced technological safeguards, human error remains a significant vulnerability. Phishing attacks, for instance, often exploit employee unawareness to gain unauthorized access to sensitive information.

Financial inclusion and access to banking services

“88% of data breach incidents are caused by employee mistakes.” – Stanford University

Training and Education To mitigate these risks, continuous training and education are paramount. Regular workshops and training sessions should be conducted to educate employees about the latest cybersecurity threats and the best practices to counter them. Topics should include recognizing phishing attempts, safe data handling procedures, and the importance of strong, unique passwords. Training should be interactive and practical, with real-life scenarios to

help employees recognize and respond to potential threats. This hands-on approach ensures that employees are not just aware of threats but are also prepared to act swiftly and appropriately.

Creating a Culture of Security Beyond formal training, fostering a culture of security within the organization is essential. Employees should feel responsible for the security of customer data. This can be achieved by integrating

security practices into the daily workflow and recognizing employees who demonstrate a commitment to data security. Creating a culture of security involves clear communication from leadership about the importance of data protection. Regular updates and reminders about security protocols, along with the encouragement to report suspicious activities, contribute to an environment where security is a shared responsibility.

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Ethical Use of Customer Data

Data Protection Policies

Strategies for Enhancing Employee Awareness and Ethical Practices

Dsign data protection policies with a focus on ethical principles. Practice data minimization, ensuring only necessary data is collected. Inform customers about data collection practices through clear and accessible privacy policies. Policies should outline the steps for data collection, usage, storage, and disposal. They should also include guidelines for data sharing with third parties, ensuring that such practices comply with legal and ethical standards.

Comprehensive Training Programs

Advanced Security Measures

Ethical considerations in data handling extend beyond preventing breaches. It involves the responsible collection, use, and sharing of customer data, ensuring transparency and respect for customer privacy.

Data Minimization and Consent One of the core principles of ethical data use is data minimization. Financial institutions should only collect data that is necessary for their operations. Additionally, obtaining explicit consent from customers before collecting their data is crucial. Customers should be informed about what data is being collected, how it will be used, and with whom it will be shared. Clear and accessible privacy policies help customers understand their rights and the institution‘s obligations. This transparency fosters trust and enables customers to make informed decisions about their data.

Transparency and Accountability Transparency in data practices builds trust with customers. Financial institutions should have clear privacy policies and communicate them effectively to customers. This includes providing easy access to privacy policies and offering straightforward explanations of complex data practices. Moreover, accountability mechanisms should be in place to ensure compliance with ethical standards. This includes regular audits and assessments of data handling practices and having a designated team or individual responsible for overseeing data ethics. Accountability also involves responding to data breaches promptly and effectively. Institutions should have a clear action plan for mitigating the effects of breaches and communicating transparently with affected customers.

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Implementing mandatory cybersecurity training for all employees, with additional specialized training for those in roles that handle sensitive information, is crucial. These programs should be updated regularly to address emerging threats and incorporate feedback from previous sessions. Training programs should cover a wide range of topics, including the identification of phishing scams, the importance of secure password practices, and the procedures for reporting potential security incidents. Advanced training for IT staff should include the latest developments in cybersecurity technology and threat mitigation strategies.

Technological measures should complement training and policies. Use advanced encryption methods to protect data both in transit and at rest. Enforce access controls strictly, ensuring only authorized personnel can access sensitive information. Multi-factor authentication (MFA) and regular software updates are critical components of a robust security framework. Institutions should also invest in intrusion detection systems and regular security audits to identify and address potential vulnerabilities.

Regular Audits and Assessments Conduct regular audits and assessments of data handling practices. This helps identify potential vulnerabilities and ensures practices remain in compliance with ethical standards and legal requirements. Audits should be conducted by independent third parties to ensure objectivity and thoroughness. The findings should be used to improve existing policies and procedures continually.

Financial inclusion and access to banking services

The Role of Leadership in Promoting Ethical Practices Leadership plays a crucial role in promoting ethical data practices and enhancing employee awareness. Executives and managers must lead by example, demonstrating a commitment to data ethics and security.

Setting the Tone from the Top Leaders should communicate the importance of data ethics clearly and consistently. This includes articulating the organization’s commitment to ethical data practices in public statements and internal communications. By setting the tone from the top, leaders can influence the entire organization, ensuring that data ethics and security are prioritized at every level.

Providing Resources and Support Leaders must ensure that employees have the resources and support needed to uphold data ethics and security standards. This includes providing access to training programs, investing in advanced security technologies, and fostering an environment where employees feel comfortable reporting potential security issues.

Conclusion The ethical use of customer data and employee awareness are critical components of a secure and trustworthy financial institution. Prioritizing these aspects not only protects customers but also strengthens their trust in the institution. Financial institutions must recognize the importance of these elements and

take proactive steps to integrate them into their operations. As we move forward in an increasingly digital world, the ethical use of customer data and employee awareness will remain central to the mission of providing secure and reliable banking services. By implementing comprehensive training programs, designing robust data protection policies, and fostering a culture of security, institutions can ensure that their employees are wellequipped to handle customer data ethically and securely. Leadership commitment to these principles will further reinforce their importance, ensuring that ethical data practices are not just a policy but a core value of the organization.

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ntervie

BESNIK BERISHA MANAGING DIRECTOR KOSOVO CREDIT GUARANTEE FUND

The Kosovo Credit Guarantee Fund was established in 2016 through the law adopted by the Assembly of the Republic of Kosovo.

How has the Kosovo Credit Guarantee Fund affected small and medium-sized enterprises (SMEs) since its inception? Could you share a success story with us? The Kosovo Credit Guarantee Fund was established in 2016 through the law adopted by the Assembly of the Republic of Kosovo. From its establishment until today, consistently in compliance with its institutional mission, the Kosovo Credit Guarantee Fund has turned into a success story in itself, precisely based on its contribution/impact over the years, in facilitating access to finance for MSMEs. As a well-capitalized institution with over EUR 90 million capital created by the synergy of domestic and international institutions, i.e., the Government of the Republic of Kosovo, KfW (German Development Bank), and USAID (U.S. Agency for International Development), today we are a robust pillar of the Kosovo economy and contributors to enabling a better environment for doing business in our country. This contribution is always focused on facilitating access to finance for SMEs so that they grow,

develop, and achieve the goals related to the successful implementation of their business plans. Step by step and year after year, covering a considerable part of the credit gap in the Kosovo market, KCGF has achieved significant results with over EUR 700 million of guaranteed loans, about EUR 370 million approved guarantees, and over 11,000 businesses that have benefited from our credit guarantee schemes or were able to access credit owing to the KCGF. To date, we have managed to conclude agreements with seven banking institutions, four micro-finance institutions, and one non-banking institution, which have entrusted us with a portion of their credit portfolio, which constitutes about 95% of the credit portfolio in Kosovo. What efforts has KCGF made to contribute to job creation? Additionality is part of our institutional mission, and we will achieve this mission by encouraging new loans for the target groups, which leads to a figure with a significant increase in new loans, invest-

Financial inclusion and access to banking services

“Based on our calculation methodology, over 25,000 new jobs have been created from the investment activity during all these years, that is, from the establishment of our institution, from the guarantee schemes of FKGK. This leads us even closer to the realization of our mission, which exactly requires and strengthens this aspect.”

ments in the economy, and therefore the creation of new jobs. So, through our credit guarantee schemes, in addition to aiming to increase access to finance for MSMEs, we support the development of entrepreneurship and domestic manufacturing and aim to contribute to the creation of added value in support of general economic development as well as the creation of new jobs. Based on our calculation methodology, over 25,000 new jobs have been created from investment activity enabled by KCGF credit guarantee schemes since the establishment of our institution. This leads us even closer to achieving our mission, which is exactly what is required and strengthens this aspect. What is your assessment of environmental sustainability criteria application by businesses in Kosovo? Sustainable development is crucial to KCGF, and we are fully committed to environmental and social principles. As such, due diligence is implemented to avoid and reduce the adverse environmental impact of investments made possible by the credit guarantee scheme. Our institution has built a system that evaluates the impact of guaranteed loans in environmental and social terms. This is done by taking into account ESG

aspects in our decision-making process, based on the most effective practices and with lesser environmental and social impacts. Now, with a well-structured foundation and processes, where the evaluation system is respected and applied, based

on the international standards of environmental, social, and governance principles, the KCGF decides which businesses to support and directs them to implement mitigation measures to minimize adverse impacts.

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business and young entrepreneurs. At this stage, about 250 women business owners from different sectors have received training. KCGF will continue to implement this initiative, since it was a demand from the participants themselves.

The objectives of the (KCGF) for improving the agricultural sector are primarily through increasing access to financing, by guaranteeing loans for farmers and agricultural enterprises, with coverage of up to

60+40+C 60%

What role does KCGF play in promoting gender equality in the entrepreneurial ecosystem? The entrepreneurship ecosystem in Kosovo still has shortcomings and room for improvement in terms of women’s participation as equals in this habitat. Women in business face the same challenges many businesses have, especially access to finance for businesses with women owners or startups. This is due to reasons already known to everyone such as lack of property ownership, credit history,

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financial knowledge, etc. The Kosovo Credit Guarantee Fund has designed a credit guarantee scheme dedicated to this category that is underserved in the market in terms of financing. It is precisely the Women in Business Window that has greater guarantee coverage and, in addition to the financial component, also includes the non-financial component that encompasses training. Last year, the Kosovo Credit Guarantee Fund piloted the initiative of organizing training related to financial knowledge advancement for women in

How does KCGF intend to improve the agricultural sector in Kosovo and what are the unique challenges this sector faces? Under the framework of credit guarantee schemes, KCGF has also designed a scheme dedicated to agriculture, the AGRO Window. The AGRO Window provides guarantees for registered financial institutions to cover the risk of loans in the agricultural sector for MSMEs, whether they are registered with KBRA or even farmers who possess a Farmer’s Certificate and FIN (Farm Identification Number). KCGF’s goals for improving the agricultural sector are primarily through increasing access to financing, guaranteeing loans for farmers and agricultural enterprises, up to 60% coverage. By supporting capital investments through the AGRO Window, KCGF wants to promote investments in agricultural machinery, technology, and infrastructure. This will help farmers modernize their practices and increase productivity. Additionally, KCGF is committed to providing training and counseling for farmers regarding financial management, advanced agricultural techniques, etc. By focusing on this crucial sector for the country’s economy, we can influence the sustainable development of this sector. This directly contributes to the creation of more jobs and imported food substitution.

Trends and challenges of digital banking

5 Chapter

Trends and challenges of digital banking

CHAPTER 5

FITIM TASHOLLI MANAGER OF PAYMENTS AND OPERATIONS DEPARTMENT BANKA EKONOMIKE

Contactless payments and digital wallets In a world where technology is developing at an extraordinary speed, the way we make payments has undergone a fundamental change.

ontactless payments and digital wallets are gaining ground, offering a safe and easy alternative to traditional payment methods, especially during the COVID-19 pandemic, when safety and personal hygiene became a priority. Globally, contactless payments and digital wallets are experiencing a continuous increase and developed countries are seeing an increase in the use of these technologies. However, this does not exclude the impact on developing countries that are benefiting from the use of these two technologies to modernize their payment system. As the use of digital wallets continues to grow, progress is also being made in the Republic of Kosovo. To

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Trends and challenges of digital banking

keep pace with the latest technological developments, it is essential to adapt the most advanced legal and regulatory frameworks. For this reason, the Central Bank of the Republic of Kosovo, together with all payment service providers, is in the process of preparing for the implementation of the new Law on Payment Services. From this law, regulations and directives will be derived that adapt the directives from the European Parliament and Council for the provision of payment services under PSD2 (Payment Service Directive 2). Law on payment services aims to improve security in processing of payments, strengthen consumer protection, encourage the use of innovative applications, increase competition in the market, and strengthen Open Banking. Since the method of contactless payments is a service that is already provided by payment service providers through debit and credit bank cards, digital wallet is a very attractive and innovative service in Kosovo, based also on the technological innovation introduced by FINTECH IFJBs (NonBanking Financial Institutions) in providing payment services which will play an important role in the modernization of payment system, increasing competition and facilitating access to innovative and attractive financial services for citizens. According to the monthly report on cash and non-cash instruments published by the CBK, in 2021, 88% of all payments made at POS terminals were contactless payments, while in 2023, 91% were contactless payments. The same increasing trend of the number

of payments conducted without contact continued in 2024, where by July it reached 96%. As for the use of digital wallets, there is still a lot of room for the consumer to choose it as a way of managing personal budget, where in 2023 a total of 65,032 payments were made from digital wallets. If we compare the first half of 2023 with 2024 there is a 23% increase in the number of payments made through the use of digital wallets. Crucial to the successful adoption of these two technologies is the creation of consumer satisfaction, as consumers benefit in numerous ways. These benefits range from the increase of transaction speeds and easier payment methods to the secure protection of financial data on digital platforms; these technologies provide users with a more convenient and secure expe-

According to the monthly report on cash and non-cash instruments published by the Central Bank of Kosovo (CBK), in 2021, transactions were made on POS terminals

88%

contactless payments, while in 2023, transactions were made

91%

contactless payments, this trend of increasing the number of contactless payments continues into 2024, where by July, it had reached

rience, eliminating the need to carry physical cash and bank cards. In turn, businesses benefit from reduced transaction time, increased sales volume, improved customer experience and increased operational efficiency. The payments industry is continuously evolving, with new innovations enhancing convenience and security for users. From the development and upgrading of new devices that support the adoption and operation of these two technologies (POS and E-commerce) to the integration of artificial intelligence and block chain, these trends pave the way for a more digitized and accessible economy for everyone.

What are contactless payments and how do they work? Contactless payments are electronic payment methods that enable users to pay for products and services via payment terminals (POS) using either a bank card or a digital wallet on a smart device, such as a smartphone or smartwatch. Contactless payments operate using a technology called NFC (Near Field Communication). This technology enables a device to communicate with a payment terminal simply by bringing it close to the POS, typically within a few centimeters. When a device supporting NFC technology is brought near a payment terminal, the payment information is transmitted over a secure and encrypted connection, allowing the transaction to be completed almost instantly.

96%

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Advantages of contactless payments via digital wallets

What are digital wallets and how do they function? Digital wallets are applications or platforms that enable users to securely and efficiently store, spend, and manage digital funds. Platforms like Apple Pay and Google Pay are increasingly preferred by consumers in Kosovo. Digital wallets operate through a wide range of technologies, including linking payment information to a bank account, credit card, or a specific payment platform. Users can add funds to their digital wallet and use it to make payments via mobile devices or online, utilizing the information stored within the wallet.

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making it a convenient solution for a dynamic lifestyle.

Speed: Contactless payments are significantly faster than traditional methods using bank cards. Users can make payments simply by tapping their bank card or smart device on a terminal, which reduces processing time.

Disadvantages of contactless payments via digital wallets

Convenience: For small payment amounts, there is no need to sign or enter a PIN. Digital wallets offer a quicker and more convenient payment method by eliminating the need to carry physical bank cards or cash. Security. Contactless payment methods include built-in security mechanisms, such as payment amount limits and, in some cases, identity verification. If a smart device (smartphone or smartwatch) with a digital wallet installed is stolen, misusing funds and data is much more difficult compared to a physical bank card. This is because accessing the digital wallet application requires unlocking the device and performing multi-factor authentication, which may involve fingerprint, face, or eye scanning. Additionally, the bank card data linked to a digital wallet is encrypted, with the card number being replaced by a unique, commonly generated number called a token. This method of storing information also reduces the risk of misuse of customer data in the event of a cyber-attack on POS terminals. Flexibility: Users can link multiple bank cards to their digital wallet and choose which one to use for payments at any given time,

Some of them include:

Despite the advantages and benefits of using digital wallets for making contactless payments, there are also drawbacks.

Data security: Although digital wallets and contactless payments are generally secure, there are still concerns about the protection of personal data and financial information if the device is lost or stolen. Acceptance level: Although these two technologies are becoming increasingly widespread, there are still businesses and countries that do not offer this payment option to customers. In some cases, this is due to technological limitations, such as issues with cash withdrawals from ATMs and making payments at POS terminals. Contactless payments and digital wallets are significant innovations in the world of electronic payments, offering users enhanced convenience and flexibility. However, addressing the challenges is crucial to ensure a safe and convenient experience for all users of these technologies. Through continued innovation and improved security, digital wallets can serve as a powerful tool to help further digitally transform the payment systems.

Trends and challenges of digital banking

YLL GASHI HEAD OF CARD AND POS BUSINESS DIVISION TEB

Electronic payment preferences in Kosovo: Consumer behaviour post-pandemic evolution The domain of financial transactions, particularly card payments, has undergone a significant transformation globally and Kosovo is no exception. ‘The way people pay and get paid has changed more in the past 5 years than in the last 50’.

he evolution has been arguably accelerated by unprecedented global events, such as the pandemic outbreak of COVID-19, which has acted as a trigger, causing a shift in consumer behaviours and preferences, especially in the way consumers choose to handle their transactions. The evolving consumer preferences required an adaptation in the financial services sector. Banks and merchants were obliged to enhance their payment solutions to meet new demand in the market, including the deployment of new POS terminals and the expansion of online payment gateways. For Kosovo, perceived to be at the beginning of financial digitalization, the

pandemic increased the urgency and importance of digitalization. Kosovo‘s financial system has experienced growth and progress since declaring independence in 2008. The banking sector, which plays a significant role in the economy has demonstrated resilience and flexibility by embracing technologies for conducting financial transactions. In Kosovo, the adoption and usage patterns of card payments an element of financial systems have varied. While cash transactions have traditionally dominated the Kosovo market there has been a sign of transition towards payments, in recent years.

Cash Predominance Before the pandemic outbreak, Kosovo, like many other countries, was heavily reliant on cash transactions. The preference for cash was rooted in various factors, including habit, a sense of control over personal finances, and sometimes a lack of trust or familiarity with electronic payments. The outbreak of the COVID-19 pandemic had a big impact on consumer behaviour worldwide, in terms of payment methods particularly in countries like Kosovo, where cash traditionally dominated the payment landscape. As the pandemic outbreak, has accelerated the transition towards card usage, the predominance of small and medium-sized enterprises in Kosovo, many of which operate pri-

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marily in cash, stresses the challenges of transitioning to a more digitized economy. For these businesses, cash transactions arguably offer simplicity and flexibility that electronic payment systems have yet to fully replicate. In Kosovo, it is estimated that the number of people who are working but are not registered as employed is high. This is at least what representatives U.S. Department of State argue. Such a situation indicates a significant portion of the workforce is engaged in informal employment where their jobs are not officially recorded, and they do not have formal working contracts. This impacts the workers benefits and affects the Kosovo government ability to collect accurate employment data and related taxes, ultimately hindering economic planning. On the other side, the Kosovo Banking Association emphasized the difficulties in encouraging the use of electronic payments, given the deeprooted preference for cash, which necessitates comprehensive strategies to address both the infrastructural needs and the socio-economic factors that underpin this preference.

Financial Inclusion / Reduction of Cash Usage in Kosovo In Kosovo, the shift towards electronic card payments and digital financial services is part of a larger transition that supports broader goals of financial inclusion, enabling a larger segment of the population to access and benefit from financial services. Moreover, the move towards digital payments has implications for economic efficiency, reducing the costs associated with cash handling and potentially enhancing the transparency and traceability of financial transactions. Globally, the transformation in the domain of financial

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THE OUTBREAK OF THE COVID-19 PANDEMIC HAD A SIGNIFICANT IMPACT ON CONSUMER BEHAVIOR WORLDWIDE, PARTICULARLY IN RELATION TO PAYMENT METHODS, ESPECIALLY IN COUNTRIES LIKE KOSOVO, WHERE CASH WAS TRADITIONALLY THE PRIMARY MEANS OF PAYMENT.

transactions indicates a step towards a more digitalized financial ecosystem. The experience of Kosovo reflects a small-scale version of the global shift. According to the Central Bank of the Republic of Kosovo (CBK) in the publication of the use of bank cards, despite Kosovo having a lower card transaction rate per capita compared to the Eurozone, the card market in Kosovo is rapidly developing. Cards are increasingly used as a preferred alternative to cash, indicating a shift towards electronic payment solutions that offer safe and convenient transaction methods. However, cash remains the predominant payment method in Kosovo, with highlights that the volume of cash withdrawals remains high, indicating a strong preference for cash over digital payment methods among the population. Accordingly, CBK published The Kosovo National Retail Payments Strategy 2021-2026, that provides an extensive plan for de-

veloping retail payment systems, with a focus on reducing cash dependency and increasing the adoption of noncash payment methods. Further, the strategy aims to intensify the use of modern retail payment instruments that are fully electronic, to reduce the circulation of cash significantly.

Conclusion The integration of card payments into daily transactions represents an opportunity to boost economic growth and enhance financial inclusivity. Card payments facilitate a smoother, more efficient transaction process, reducing the reliance on physical cash and the inefficiencies linked with cash handling. Furthermore, card payments play a crucial role in increasing financial inclusion, by providing consumers with access to credit and debit cards, banks can arguably increase the bankable population, as it will enable consumers who were previously excluded from the financial system to participate in the economy. For Kosovo banking sector, understanding the dynamics of card payment preferences is essential. Factors such as transaction fees, the availability of POS terminals, consumer trust in digital payments, and the overall user experience can significantly influence the adoption rates of card payments. Additionally, the role of education and awareness in promoting the benefits of card payments is arguably critical, considering many consumers and businesses may still have concerns about the security and reliability of digital transactions. Addressing these challenges requires a combined effort from financial institutions and technology providers. Initiatives aimed at enhancing digital literacy, combined with the development of userfriendly and accessible digital banking services, can play a pivotal role in overcoming resistance to digital technologies.

Trends and challenges of digital banking

Moreover, tackling the underlying issue of high unemployment, particularly among the youth, is crucial for expanding the bankable population and creating a more conducive environment for the adoption of digital financial services.

References BK (2023). Central Bank of KoC sovo. Use of Bank Cards. [Online]. Available at: https://bqk-kos.org/ repository/docs/SistemiIPagesave/ Use%20of%20bank%20cards%20 in%20Kosovo.pdf [Accessed 11 Nov 23] CBK (2022). Kosovo National Retail Payment Strategy. [Online]. Availa-

ble at: https://bqk-kos.org/wp-content/uploads/2021/07/SKVV_CBK_ EN-1.pdf [Accessed 11 Nov 23] European Commission (2023). Key findings of the 2023 Report on Kosovo. [Online]. Available at: https:// ec.europa.eu/commission/presscorner/detail/en/QANDA_23_5614 [Accessed 14 Oct 23] KBA (2022). Kosovo Banking Association. [Online]. Available at: https://www.bankassoc-kos.com/ [Accessed 11 Nov 23] KBA (2020). [Online]. Available at: https://www.bankassoc-kos.com/ En/video/479/kosovo-banking-association-in-cooperation-with-vi-

sa-launch-informative-campaignto-increase-bank-card-paymentsin-kosovo-and-reduce-cash-transactions-in-the-economy/ [Accessed 11 Nov 23] U.S. Department of State (2023). Investment Climate Statements: Kosovo. Available at: https://www. state.gov/reports/2023-investmentclimate-statements/kosovo/ [Accessed 23 Mar 24] V ISA (2024). Visa Reinvents the Card, Unveils New Products for Digital Age. Available at: Visa Reinvents the Card, Unveils New Products for Digital Age | Visa [Accessed 30 May 24]

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CHAPTER 5 SPONSORED ARTICLE

ENEIDA THOMAJ MANAGING DIRECTOR PAYLINK

Trends and challenges in digital banking Customers in Kosovo and Albania are becoming more and more demanding of the latest trends in the payment system. They look for security and ease of use, resulting in an increase in payment transactions.

ccording to Bank of Albania statistics, in 2023 card payments at POS terminals reached around 14.5 million. This was an increase of 35% over the previous year. In transaction value, card payments last year reached 26.6% more than in 2022. The number of POS terminals in the country reached a record number with about 19 thousand POS. This is an increase of about 18.2% compared to the previous year (Monitor magazine, The number of card payments increased by 35% last year, reaching a historical record, February 2024). Increasingly, we see end customers cherishing personal time and wanting to ‘spend’ as little valuable time as possible in the waiting areas at the bank where they hold accounts. Recently, at PayLink, we have encountered requests from our customers, banks, or payment institutions that clearly convey this change in customer behavior. ‘Tailor-made’ solutions that significantly reduce end customer in-person presence are now sought. At the beginning of 2024, Albanian payment institutions successfully launched the project of digitizing the (physical) payment

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card in globally recognized wallets (e.g., Google wallet, a service also supported by international payment schemas). PayLink has been one of the institutions involved from the beginning in such innovative and successful projects. The same trend will be extended with an upcoming launch in Kosovo as well. What has been noticed since the launch of this functionality in the market, both on the side of retailers accepting the tokenized cards in their terminals, and the issuers of the digitized card was that: a) at the beginning, local retailers were reluctant due to not being familiar with the service, but immediately upon experiencing the simplicity and ease of making payments, it became a welcome service for expansion. Moreover, in Albania, being a market strongly influenced by tourism, the use of this service was supported even more by foreign users adept at using such services; b) it is a functionality which, since it is based on biometric authentication to access the wallet and make payments (through fingerprint or facial recognition) offered higher security and made the end customers feel comfortable with this functionality; c) since

biometric authentication now replaces the use of PINs for making payments, it made payments increase in number (removing the burden of remembering the PIN) – there are still no specific statistics on the effect of introducing this functionality to the local market, but based on BoA statistics, the above effect is clearly positive. This highlights the Albanian customer’s adaptive culture towards evolving trends. In addition, a study conducted by Kaiser Associates for MasterCard in 2021 found that digital services offered by payment programs (e.g., example MC Digital First) will result in an average reduction in service costs by 40%, an increase in customer base by 10-15%, an increase of about 15% in transactions volume (due to the improvement of customer experience), as well as a decrease of 20-25% in digital transaction fraud. Considering these positive trends in the region, international payment schemas themselves support even more such trends. MC recently announced its vision for 100% e-commerce tokenization in Europe by the end of the decade. This commitment comes with the main goal of bypassing card data entry and making e-

Trends and challenges of digital banking

commerce transactions more secure and accessible to everyone. According to a recent article by Payments Cards & Mobile on June 11, 2024, online payment fraud is projected to exceed USD 91 billion by 2028. Such expectations and challenges have caused digital solutions to mix not only the facility of using payment tools but also the security in use (it is exactly card tokenization that makes it possible to replace the 16/19-digit number of the payment card with a secure token exposing the latter in online payments and not the card number itself). In response to new payment digitization trends, as well as due to foreign users/tourists imposing solutions adopted earlier in their countries, local markets are in constant demand for digital payment channels. One such example is the request for certification of acceptance of withdrawals or cash deposits at ATMs via digital cards. This is a way to provide security and convenience through ATM operations that are among the most used services in the country. The end customers themselves are asking their banks (especially the active customer base in mobile applications) for additional functionalities that reduce the physical presence in the branch. Recently, PayLink has offered solutions for end customer payment card devices, since the end customer can make the request via the bank’s mobile application, without the need for an in-person presence at the branch. We have also introduced functionalities such as requesting PINs from the mobile application or changing the PIN of the payment card through added functionality in the mobile application (where the end customers themselves set the PIN to be used, without the need for in-person presence at a bank branch). Such solutions have brought mutual benefits. On the part of the bank, this trims the operational burden at the branch and allows in-depth analysis of

ACCORDING TO A STUDY CONDUCTED BY KAISER ASSOCIATES FOR MASTERCARD IN 2021, IT IS STATED THAT DIGITAL SERVICES OFFERED BY PAYMENT SCHEMES (SUCH AS MC DIGITAL FIRST) WILL RESULT IN AN AVERAGE REDUCTION IN SERVICE COSTS BY

40% AN INCREASE IN THE CONSUMER BASE BY 10-15%, A RISE OF ABOUT 15% IN TRANSACTION VOLUMES (DUE TO IMPROVED CONSUMER EXPERIENCE), AS WELL AS A DECREASE OF 20-25% IN FRAUD RELATED TO DIGITAL TRANSACTIONS.

the customer behavior, especially avid users of the mobile application, to always be in step with the times and offer digital solutions according to the behavior of the portfolio of their customers. From the end customer’s perspective, such solutions offer time flexibility and security. New functionalities are accompanied by extensive preparations concerning the contractual basis with customers and respective promotional materials. Locally, payment institutions are working towards adopting electronic signatures, creating a digital ‘chain’ of access to the bank (in accordance with local legislation and required security measures) both for opening an account and for equipment with cards/payment instruments. In this context, oversight institutions are also working hard towards financial education and equipping all layers of the population with cards/payment instruments, whether the latter are local cards – otherwise

referred to as basic cards – or even cards with advanced functionalities for use even outside the local territory (international payment schemas cards). Digital banking will succeed when there is a broad base of end customers who actively use such services. Being a population that generally works with cash, the challenges encountered (whether in equipping the entire population with a basic card or maintaining security aspects at every step) are significant but not insurmountable. The last two years have shown that the local market learns and adapts quickly to digital payment trends.

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ADONIS BLLACAKU BKT

Collaboration between fintech and banks: A partnership for the future In recent years, the financial sector has experienced a radical change, owing to technological advances and the emergence of fintechs. The collaboration between banks and fintechs has created a new ecosystem, combining the strengths of both parties to provide more innovative and improved services to customers. This article elaborates on how these partnerships are shaping the future of banking and the challenges are inherent to this collaboration.

Benefits of Collaboration between Fintechs and Banks Accelerated Innovation Traditional banks, known for their stable structures, often struggle to quickly adapt to emerging technologies. Fintech enterprises, on the other hand, are known for rapidly inventing and adopting new technologies. Collaboration with fintech allows banks to integrate the latest technological services faster and more efficiently. This results in more advanced products and services that respond to changing customer needs. For example, blockchain technologies and artificial intelligence are areas where fintechs have advan-

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ced significantly. The implementation of blockchain enables safer and faster transactions, while artificial intelligence provides in-depth analysis of customer data to provide personalized services. Improved Customer Experience Fintechs focus on improving user experience through simple and accessible applications. When these innovations are combined with traditional banks’ stability and reliability, the result is better and more complete customer service. Customers benefit from more intuitive UIs and faster and more personalized services. For example, fintech mobile apps offer real-time banking services, making it easier to manage personal finances. This improved ex-

perience also helps increase customer loyalty and attract new customers who demand fast and accessible services. Banks that invest in such partnerships benefit from a better reputation and a robust customer base. Operational Efficiency Integrating fintech technologies into banking processes can lead to major improvements in operational efficiency. Automating routine processes such as identity authentication and payment processing reduces the cost and time of these services. This allows banks to focus on providing added value to customers. In addition, technologies such as artificial intelligence and data analysis help predict customer behavi-

Trends and challenges of digital banking

or and provide personalized services. Improving operational efficiency also means an increase in productivity and a reduction in human error. This is particularly critical in a sector where accuracy and reliability are essential for long-term success. Increasing Financial Services Access Fintechs often develop products intended for population segments traditionally excluded from financial services. Collaboration with banks enhances financial inclusion by offering these products and services to a wider audience. This collaboration can lead to increased access to credit, payment services, and savings tools for individuals and small businesses that previously did not have the opportunity to benefit from these services. A concrete example is the development of mobile applications that offer banking services even in rural areas where brick and mortar bank branches are limited. These technologies make it possible to conduct transactions, obtain loans, and save without an in-person bank visit.

Challenges of Collaboration between Fintechs and Banks Data Safety and Protection While fintech collaboration brings substantial benefits, it also increases cybersecurity and data protection complexity. Banks and fintechs must work together to ensure that all customer data is adequately protected, and that any upcoming technology is safe from cyberattacks. Implementing strong security protocols and educating staff and customers on security best practices is essential. This includes using advanced encryption, constantly monitoring the network for suspicious activity, and

creating emergency response plans. Banks and fintechs must be prepared to address evolving threats and continually invest in improving security measures. Regulatory Compliance The financial industry is one of the most regulated sectors, and any partnership between banks and fintechs must comply with these strict regulations. This includes not only compliance with existing regulations, but also anticipating and adapting to updated regulations that may emerge as a result of technological change. Cooperation with regulatory authorities and setting common standards can help navigate this complex environment. Banks and fintechs must work closely with regulators to ensure their innovations comply with laws and regulations. This cooperation may include the creation

of joint working groups to study the impact of upcoming technologies and develop guidelines that protect clients’ interests. Systems Integration Integrating traditional banks’ technology systems with modern fintech platforms can be complex and challenging. Banks may also have older systems that require significant time and investment to integrate with cutting-edge technologies. This process requires careful planning and commitment to investment in technology and staff training to ensure a smooth transition. Successful integration requires close collaboration between IT and project management departments. Banks can use intermediate solutions, such as API platforms, to facilitate communication and data exchange between different systems.

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Changing the Organizational Culture Successful cooperation between banks and fintechs requires a change in organizational culture. Banks must be open to innovation and adopt a more flexible and agile approach to change,

embracing the innovative mindset of fintechs. Cultural change can be challenging, but it is essential to take advantage of collaboration opportunities. Fostering a culture open to innovation can include regular training for staff on

emerging technologies, encouraging novel ideas, and supporting internal innovation initiatives. Banks can also create internal incubators to test and develop new fintech projects in a controlled environment.

Collaboration Success Stories

1 2 3

Revolut and Lloyds Bank A successful example of cooperation between a fintech and a traditional bank is the partnership between Revolut and Lloyds Bank. Revolut, a fintech known for its digital banking services, has

partnered with Lloyds Bank to offer shared services that combine Revolut flexibility with Lloyds stability. This partnership has resulted in novel products that provide mutual benefits to customers.

BBVA and Simple Another example is the collaboration between BBVA and Simple, a fintech focused on improving customer experience through digital banking. By benefiting from BBVA’s infrastructure and expertise,

simple has expanded its offer and improved services for its customers. This has created a powerful synergy that increases customer engagement and satisfaction.

ING and Payvision A further example is the collaboration between ING and Payvision, a fintech specializing in international payment processing. This partnership has allowed ING to expand its e-commerce offer and provide more sophisticated payment services to its international customers. This synergy resulted in a significant increase in transaction volume and improved customer service. Fintech and banks collaboration represents a significant evolution in the financial industry. By combining forces, these institutions can offer better and more innovative services to their customers. However, to fully leverage these opportunities, it is essential to address challenges related to security, regulations, and technology integration. If managed properly, these partnerships can contribute to a more sustainable, accessible and inclusive financial

sector for all. Partnerships between fintechs and banks have the potential to transform financial services delivery, enabling more people to access advanced financial products tailored to their needs. With a balanced approach to innovation and security, these collaborations can drive economic growth and improve the quality of life for millions of people around the world. Enhancing financial inclusion and access to improved services is a common goal that can only be achieved through close and continuous collaboration between all stakeholders.

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Trends and challenges of digital banking SPONSORED ARTICLE

Kosovo embraces cashless future: 50% adopt digital payments and mobile banking The global economy is experiencing a profound transformation, with the digital economy emerging as a pivotal force in reshaping industries and fueling growth. Digital payments have become a driving catalyst in this shift, facilitating seamless transactions, advancing financial inclusion, and unlocking new avenues of opportunity.

et, the digital economy encompasses more than just payments - it spans ecommerce, digital services, and online platforms. The extensive digitization of various sectors is paving the way for innovation, efficiency, and global connectivity, offering unparalleled opportunities for both businesses and consumers. The anticipated growth in the total value of digital transactions is remarkable, with an expected annual increase of 9.52%, reaching an estimated $16.59 trillion by 2028. Furthermore, FIS forecasts that cash transactions will represent less than 13% of total transactions globally by 2026. Research indicates that consumers in Kosovo are particu-

larly enthusiastic about transitioning to digital payments. Kosovo is rapidly embracing new digital payment methods and is on track to establish a robust and inclusive digital payment ecosystem within the region. Visa, a global leader in digital payments, has partnered with the Kosovo Banking Association to conduct indepth research in this market. This research highlights Kosovo‘s dynamic growth in digital technologies and services, with a notable rise in the adoption of electronic payments. Nearly half of the respondents are actively utilizing digital payment methods - such as cards, smartwatches, and mobile phones - demonstrating a strong shift towards cashless transactions. This

trend underscores Kosovo‘s significant potential for further advancement in its digital payment landscape. Mobile banking is the predominant method, with 80% of respondents using it, while over half rely on bank transfers for secure online transactions. Users cite speed, ease of use, security, and availability as key benefits of these payment methods. Despite the increasing popularity of cards, smartwatch, and mobile phone payments in Kosovo—particularly among younger consumers—there remains notable resistance and a lack of awareness regarding the full range of benefits these methods offer. Key concerns include transaction security and a lack of information about the advantages of digital payments.

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“As a leading company in digital payments, Visa is dedicated to offering cutting-edge technology to guarantee safe and dependable transactions. We are dedicated to educating the market and users about the benefits of these advancements. Our goal is to enhance the efficiency and security of payment processes, making everyday transactions simpler and more convenient. Ultimately, this commitment supports the development of an inclusive digital society, where everyone has access to digital payments and financial services, regardless of their location or financial status,” stated Ana Draskovic, Vice President and General Manager at Visa SEE.

Visa continues to strengthen trust in digital payments through relentless innovation. Over the past five years, Visa has invested over $9 billion globally in fraud prevention, including more than $500 million in artificial intelligence and data infrastructure to bolster security and thwart fraud. Given that cyber-attacks occur approximately every 11 seconds, the direction of the industry is clear. Visa is dedicated to safeguarding personal data and always ensuring a secure payment environment for users. Locally, Visa collaborates with regional partners to ensure its technologies are effectively integrated and tailored to local needs and regulations, providing a high

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level of protection and security for digital payments. Recently, Visa, in partnership with Google and NLB Bank, introduced Google Pay in this market. This new service facilitates quick and contactless payments via the Google digital wallet. As mobile devices become integral to consumers‘ daily routines, Google Wallet enhances the payment experience by offering a more convenient and secure way to conduct transactions. Whether managing daily tasks or shopping online, users can now enjoy a streamlined payment process with a single touch. The research findings confirm that Kosovo is rapidly adopting innovative digital payment methods and is on its

way to developing a strong and inclusive digital payment ecosystem in the region. The market is already vibrant with the use of digital wallets, card payments, and transactions via smartwatches, alongside advanced biometric authentication methods such as fingerprints and facial recognition. While cryptocurrencies like Bitcoin are still emerging, they are set to play a significant role in the future of payments. Furthermore, the growth of AI-driven payments, Peer-to-Peer applications, and advanced payment platforms points to a promising future for financial transactions.

Trends and challenges of digital banking SPONSORED ARTICLE

MENTOR HAJDARAJ PARTNER RPHS LAW

KLIT SHALA SENIOR MANAGEMENT PARTNER RPHS LAW

Digitalization, transparency and ethics in banking: A legal perspective As the banking sector embraces digital transformation, the principles of transparency and ethics have become more critical than ever. In an era of rapid technological innovation, financial institutions must navigate the complexities of maintaining ethical standards and transparency while adopting new digital solutions. This article explores the legal implications of transparency, ethics, and digitalization in banking, with a particular focus on compliance, and regulation in Kosovo.

igitalization has revolutionized the banking industry by streamlining processes, enhancing customer experiences, and increasing efficiency. However, with this shift comes a heightened demand for transparency in how banks collect, use, and safeguard customer data. In Kosovo, as in much of Europe, digital banking operations are subject to laws such as the General Data Protection Regulation (GDPR), which mandates strict requirements for the transparency of data usage and the protection of customer privacy. The rise of digital banking platforms has empowered customers with realtime access to their accounts, transactions, and loan terms, promoting

greater transparency. However, the legal obligation for banks to ensure that these digital services remain secure and reliable is a critical issue, as cyberattacks and data breaches can undermine trust and lead to serious legal and financial repercussions. The Central Bank of Kosovo (CBK) and the European Union (EU) regulatory bodies, including the European Banking Authority (EBA), continue to update existing transparency frameworks to reflect these changes. For instance, Kosovo’s draft law on payment services, which was circulated for public consultation in June 2024, aligns national legislation with the EU’s Payment Services Directive II (PSD2). PSD2 is a key piece of legislation aimed

at fostering transparency in the digital banking environment by introducing concepts such as “Open Banking”. PSD2 requires banks to provide open access to customer data, with their consent, to authorized third-party service providers. While this enhances competition and improves customer service, it introduces new legal challenges concerning data protection and cybersecurity. Banks must balance the benefits of open data access with the obligation to protect sensitive customer information. The growth of digital banking has also led to an increase in financial crimes such as money laundering (AML), fraud, and cybercrime. Legal frameworks designed to prevent the-

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se crimes require banks to implement advanced digital tools to monitor and report suspicious activities. However, the reliance on third-party providers for customer due diligence (CDD) services presents additional challenges. Although the Law No. 08/L-022 on Electronic Identification and Trust Services in Electronic Transactions (effective since January 2022) permits trust services to be registered at ministerial bodies, allowing electronic identification, there are still limitations. For instance, the recent Concept Document in the AML field confirms that Kosovo does not yet allow full reliance on third-party providers for CDD in digital banking, presenting a regulatory challenge for policymakers. The rise of digital banking also raises ethical questions about how banks should conduct their operations. Ethical banking, grounded in principles

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such as fairness, customer protection, and social responsibility, must evolve alongside digitalization. Legal frameworks impose duties on banks to act in the best interest of their customers, but digitalization introduces new ethical considerations. One such issue is algorithm-driven lending, where banks rely on historical data to assess creditworthiness. While this approach can streamline lending processes, it also raises concern about fairness, particularly during times of economic instability or sudden market fluctuations. Ensuring that these digital tools are used ethically, without discriminating against certain customer segments, is an ongoing challenge for regulators. Kosovo policymakers face significant challenges in ensuring that transparency and ethical standards are upheld in the banking sector without stifling

technological innovation. While digital services offer immense benefits, overreliance on these tools exposes banks to cyberattacks and data breaches. The legal consequences of non-compliance with data protection laws, such as Kosovo’s Law No. 06/L-082 on Protection of Personal Data, can be severe, with potential fines of up to 4% of a bank’s turnover. In today’s digital landscape, the elements of digitalization, transparency, and ethics are inseparable in modern banking. While technology offers the potential to enhance transparency and operational efficiency, it also presents new challenges. For financial institutions, adhering to legal standards is not just about avoiding penalties – it is about fostering trust, protecting customers, and ensuring the long-term success of the industry in an increasingly digital world.

ntervie

VALON CANHASI FOUNDER & CEO HALLAKATE

Digital transformation is essential for businesses in any industry, including the use of technology to improve operations, advance services, and improve customer experience.

What does digital transformation mean for businesses today and how can they implement it effectively? Digital transformation is essential for businesses in any industry, including the use of technology to improve operations, advance services, and improve customer experience. Businesses should adopt an integrated approach where data, automation, and Artificial Intelligence (AI) are used to optimize every aspect of their process, from marketing to after-sales services. Effective implementation requires clear strategies and investment in novel technologies, but also training staff on how to use these technologies. Digital transformation in Kosovo started with accounting digitization 20 years ago. After this step, businesses began to digitize marketing, especially after the pandemic, when many companies switched to online sales. Today, they also digitize internal processes. For effective implementation, businesses must use technologies such as automation and AI, investing in training staff to utilize these tools.

How is AI affecting the job market globally and what skills are becoming more valuable? AI is changing the job market by automating routine tasks and creating demand for updated skills. While some roles are at risk, skills like critical thinking, data analysis, and AI strategic use are becoming more critical. Even Kosovo is affected, so we have started the recent project, Shkolla.ai, to help professionals acquire these skills and stay competitive in the future job market. Are you seeing increased interest among young people in Kosovo in careers in digital fields and AI? Yes, we see a significant increase in young people’s interest in digital fields and AI. This interest is related to outsourcing’s global opportunities, as well as flexibility of working from home. Digital fields allow young people to access the global market without leaving their country. Through educational platforms like Shkolla.ai, we are trying to equip young people with the right skills to succeed in these fields. In the launch

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“Artificial Intelligence is transforming the job market by automating routine tasks and creating demand for new skills. While some roles are at risk, skills that involve critical thinking, data analysis, and the strategic use of AI are becoming increasingly important.”

week alone, we had more than 50 applications for learning how to use AI. What challenges do companies face when digitizing their operations or services? What economic benefits can digitization bring to a country like Kosovo? A major challenge in Kosovo is that many businesses are family-owned and often do not see the need for digitization. Many of them have limited knowledge of the digitization benefits and are not used to asking for advice. Challenges also include poor infrastructure and high startup costs. However, digitization brings significant benefits such as increasing efficiency, reducing costs, and the opportunity to compete on global markets. This would significantly improve Kosovo’s economy.

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How do you perceive the digitization of institutions and public services for citizens? Kosovo has made progress in the digitization of public institutions, but there is still room for improvement. Greater focus on AI and automation would increase public services efficiency and reduce waiting times for citizens. We have domestic ICT companies that create solutions for institutions in the EU and USA. Their engagement in Kosovo would significantly improve the situation, as well as contribute to transparency and better governance. How can small- and medium-sized enterprises in Kosovo use digital tools to compete in the global market? Small and medium-sized enterprises (SMEs) today have the opportunity to reach new markets through social

media and digital channels. Hallakate has helped many Kosovan businesses explore new markets in the EU using these tools. Our diaspora can be easily reached through online platforms, and we have countless examples that prove this approach is effective. Using AI and data helps SMEs compete in larger markets and increase efficiency by reducing operating costs. In conclusion, digital transformation is vital for Kosovo businesses and offers tremendous opportunities for growth and innovation. Through digital tools, social media, and AI, enterprises can reach global markets and improve efficiency. Banks can play a key role by providing financial support and advice to help businesses in the digitalization process, facilitating investments in technology. With this approach, Kosovo’s economy could be strengthened to become more internationally competitive.

EDITORIAL

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Str. Lidhja e Pejës, no. 177 Industrial Zone 10000, Pristina, Republic of Kosovo

+383 38 246 171 contact@bankassoc-kos.com https://www.bankassoc-kos.com