{"id":9960,"date":"2024-12-16T18:38:25","date_gmt":"2024-12-16T17:38:25","guid":{"rendered":"https:\/\/www.oklein.fr\/?p=9960"},"modified":"2024-12-16T18:38:29","modified_gmt":"2024-12-16T17:38:29","slug":"what-does-the-future-hold-for-retail-banking","status":"publish","type":"post","link":"https:\/\/www.oklein.fr\/en\/what-does-the-future-hold-for-retail-banking\/","title":{"rendered":"What does the future hold for Retail Banking?"},"content":{"rendered":"\n
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My article published in ‘Les \u00c9chos’ on November 22, 2024<\/p>\n\n\n\n

The profitability of retail banks is in question. Is it inevitably low in France? Some food for thought. Retail banking has two engines. If one of the two does not work, profitability is compromised. Asset-liability management, i.e. interest rate and liquidity risk management, is crucial because income from loans and deposits – the Net Interest Margin – depends on the yield curve and its evolution. Like any good merchant, in this case money, the bank must buy a little cheaper than it sells. However, it borrows customers’ savings mostly on a short-term rate basis and, in France, lends mostly on a medium-long term fixed rate basis. The evolution of the spread between long and short rates is therefore an essential parameter. The bank itself takes the interest rate risk by allowing individuals, as well as small and medium-sized companies, to be not subject to it. The bank must therefore properly measure, anticipate and manage this risk, which has been successful to a varying degree for French banking groups in recent years with the sudden return of inflation and the subsequent rise in rates.<\/p>\n\n\n\n

But retail banking must also be efficient with its second engine: its commercial capacity. The digital revolution has been a game changer for some years now. Marketing or the offer is one aspect. But since banking products and services are easily and quickly copied and highly regulated, there is little difference between them. On the other hand, the customer approach, the organisation of the sales force, similarly its management method, the choices of combination between physical presence and “online” banking, are key elements in the greater or lesser success of retail banks.<\/p>\n\n\n\n

The digital revolution in banking can lead to a drastic reduction in the number of branches, with the idea that banking will increasingly become online without client advisors. This is a difficult path in France, as banks are much more relational (advice) than purely transactional (simple daily operations: transfers, balance checks, etc.). To make a purely online bank profitable, it is necessary to succeed in sufficiently equippingcustomers with a wider range of products and services. Those who gradually manage to do so therefore need more and more advisors and to move away from a purely “online” model. In a different way, it is possible, while streamlining its network without systematically reducing it, to use digital technology to simultaneously improve customer comfort and free up sales time in the branch for more proactivity, as well as added value provided to customers, by advisors. On the other hand, not significantly changing anything, while ignoring the powerful effects of the technological revolution, cannot serve as a solution. The time of the customer in contact with his bank mainly dueto his visiting a branch is long gone. The operating coefficient (expenses on income) would then inevitably rise to the point of suffocating the bank. With an unavoidable drop in results as a result.<\/p>\n\n\n\n

Retail banking responds to the immediacy of time, through its payment services, but also – and this is probably its deepest essence – to the long term, through its advice. It supports customers in their life and business projects, which are all prepared and unfold over time. This advice requires savings, credit and insurance, all products that continueover time and require support, regardless of the type of customer. Digital technology must therefore be used to ensure customer comfort and to maximise advice time and its added value. It is a question of strategy, means and incentive systems.<\/p>\n\n\n\n

The future of retail banking therefore requires an appropriate financial and distribution policy, excellent operational control of these two drivers and the ability to give meaning and strong motivation to the human resources on which any service industry ultimately relies. Retail banking therefore has a future.<\/p>\n\n\n\n

Olivier\u00a0Klein
Chief Executive Officer of Lazard Fr\u00e8res Banque
Professor of Economics at HEC<\/p>\n","protected":false},"excerpt":{"rendered":"

My article published in ‘Les \u00c9chos’ on November 22, 2024 The profitability of retail banks is in question. Is it inevitably low in France? Some food for thought. Retail banking has two engines. If one of the two does not work, profitability is compromised. Asset-liability management, i.e. interest rate and liquidity risk management, is crucial […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21,136],"tags":[],"class_list":["post-9960","post","type-post","status-publish","format-standard","hentry","category-bank","category-economical-policy"],"acf":[],"yoast_head":"\nWhat does the future hold for Retail Banking? - Le Blog Note d'Olivier KLEIN<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.oklein.fr\/en\/what-does-the-future-hold-for-retail-banking\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What does the future hold for Retail Banking? - Le Blog Note d'Olivier KLEIN\" \/>\n<meta property=\"og:description\" content=\"My article published in ‘Les \u00c9chos’ on November 22, 2024 The profitability of retail banks is in question. 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