How much of a threat are challenger banks? What are banks’ opinions on digital transformation? What are the most successful digital offerings in France? How profitable are credit cards? These are just some of the questions pondered at a roundtable hosted by RBI on behalf of Assurant Solutions. Anna Milne writes
When banks seek to push the innovation boundaries, they tend to brainstorm ideas based on their experience as a consumer. It’s true the retail consumer market often informs finance sector products. With this is mind the roundtable discussion kicked off with a round-up of favourite apps, and more importantly, why they are chosen as favourites.
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Whatsapp, Uber (ironically, given the difficulty people had getting to the venue on the day on account of the cab driver strike in the capital over the car sharing app), Spotify, Instagram, YouTube and ‘connected appliance’ apps were some of the more well-known apps cited as favourites.
Brought to light was the fact that very few actual banking apps were chosen.
This, for an industry that is one of the biggest spenders and investors in mobile technology; a sector in which millions of pounds are spent on consultants, analysts and innovation labs, is perhaps surprising at best, disappointing at worst.
Douglas Blakey, group editor of Timetric finance titles including Retail Banker International, and chair of the discussion, asked: “Can you see in the next two to three years, you answering your bank app to this question of favourite apps? Because with the investment being made by the banks, arguably we should be there already.”
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By GlobalDataJae Won Jeong, global head of savings and term life, BNP Paribas Cardif, said: “Yes- there are experiments with user experience, not only from the banks but also from the para-banking companies, for example applications for sharing money between people.”
Fintech competition: boom or bust?
Delegates discussed the sea change in the number of mobile-only challenger banks coming out now in the UK. And whether there is an actual appetite for people to conduct all their banking on their phone. A similar situation is reflected in France, with the likes of Boursorama Banque.
Jeong continued: “BNP Paribas was very late to launch a dedicated digital bank and still we are trying to find a way to extend the business. Boursorama Banque for example has its own site for its transactions and everything.
“To have maximum benefit to attract new clients there needs to be differentiation. Boursorama Banque is doing very well in terms of the customer interface and total value.”
Politics were brought into the frame as well, there being a very different political climate in the UK to France. French banks were not bailed out to the same extent as publicly as the UK banks.
Douglas Blakey: “French customers, generally, have a higher regard for banks than UK customers so there’s not the feeling of antipathy. There are moves from fintech players to eat away at some of the traditional forms of banking revenue, eg, remittances or international payments and compete. BNP Paribas launched Hello Bank as a new brand.”
Corrine Leger-Licoine, head of operations at HSBC, said: “Hello Bank came out and said it wanted to create a new bank but continue to use the processes done by BNP. That’s the reason for which Hello Bank is absolutely not profitable. Which is not the case of Boursorama, which has developed as two different banks, it has re-created its entire IT system, with which they are able to be very agile.”
Delegates described the current market as ‘very energetic, similar to the dotcom boom’ when there were some great people with great ideas and innovation and eventually what happened was they all got consolidated and bought.
The bankers agreed this was a scenario likely to be replicated. After all, given the muscle in the big banks, and the amount of money they have, it’s not very difficult for them to buy the small challengers, taking them out of the market.
Crossing the digital line – how far to take it?
Blakey said: “BBVA is a very successful Spanish bank, digitally-speaking. Unlike Santander, which grew market share in the UK by acquisitions, BBVA had virtually no presence in the UK, had bought a third stake in Atom very cheaply – £45m ($65m), call it £60m – loose change. It is possible that the start-up digital banks may not be very independent for very long if they’re successful.”
Roberta Cecchin, international retail and commercial banking multichannel project manager, Credit Agricole, said: “The big banks have a lot of money and can buy these fintech banks, it’s true but I think the danger comes more from Apple, Google and Facebook.
“Banks can die, despite all the money they have. I don’t think I would bank with Google but I think my nephew would.”
However, Leger-Licoine said: “We cannot compare Google or Apple with a bank – it’s totally different. I don’t think that we will finance the economy through Google or Apple; we can certainly pay through Google and Apple, but I don’t think we will do structured bonds through them. And I think we are confusing the most important volume of activity, and the real activity of the bank, which is financing.
“For this type of flow the main competitor should be Google and Apple but I am more worried by someone like Boursorama, backed by a big bank.”
Brice Groche, director of investment operations, Boursorama: “It’s totally different. Hello Bank is based on the site of BNP but we do not rely on the site of Societe Generale.”
Leger-Licoine: “We need to propose all the activity of digitalisation for the customer.
“We don’t think that even for mortgages for example, it’s possible to do via the internet, we see that, we have opened an offer for our customers for mortgages in France and one person has completed the process, one person. The others prefer to discuss in person. People are afraid of the risk involved if they make a mistake, they don’t want to decide the rest of their lives with a mortgage via the internet.”
Agility is easier achieved with smaller customer numbers, Leger-Licoine explained: “When you have larger numbers, it is more difficult. HSBC, globally has more than 80 million customers.
“We think in the future we will be more agile but today our main issue is to be robust, to deliver the same service to all countries, to be sure we have no risk of fault: the main thing. The credit card is an activity which is not profitable because we accept to pay when the customer has an issue.
“I think to try to attract the customer with free cards of payments is slightly stupid from an economic point of view. I’m not sure that digitalisation is the solution to all our worries today. Advisory services are important and can’t necessarily be done online.”
The question is how far to take digital, are customers ready even if the technology is? To what extent do customers still want a personal interaction for a sensitive transaction?
Jeong: “Once you are too digitalised you grow tired of digital. A few years ago I did everything digitally; I don’t like it anymore because I don’t want to replace human interaction on the phone.”
Is the demise of the physical branch premature?
Blakey asked the French bankers to discuss the reduction in branches in France. “In the UK, Barclays are down from 2,200 to 1,300, over a third of branches. Do you see real reduction in branch networks of the type we see in the UK?”
Leger-Licoine: “A lot of branches are closing in France. And yet the customers do still want direct contact for sensitive transactions.
“The best in class in terms of customer service in France are the mutual banks, Credit Mutuel, Credit Agricole, and why are they considered best in class? Because they provide a physical link for the customer, that’s very important, despite the fact 60-80% of customers use internet banking.”
One thing is for sure, the pace of change.
Konstanty Kasprzyk, who manages agile service products at Credit Agricole, commented on the recent changes in the market: “A few weeks ago to change the credit limit on my card I was told I had to speak to an advisor but since then I’ve received an update to my app informing me that there are new options and I can now do it through my app. So the changes are happening now.”
Elfried Didehia, senior analyst, Ecobank France (EBI SA) brought the roundtable full circle by reconsidering the question of what actually is the best mobile app: “Maybe the best app is about discretion, and in providing a fast, discrete service, you forget, you don’t spend a lot of time in it so maybe if we ask ourselves the question again, everybody might well say their favourite app is their banks’. Because I need something where I have two clicks and it’s done.”
Wrapping up, Blakey came in: “If it’s just a case of taking holiday insurance the scope surely is as Alexandra [Berger, director commercial corporate, Assurant] says, just to be able to do it quickly on your phone to add it to your product.”
