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What does banking need? A few perspectives on this matter

This is the result of the New SBE Finance Week from Monday, April 8 until the next day 12. At the end of Monday, a panel entitled “Portuguese banking system: can be more competitive” joined in the auditorium João Talone Professor Samuel Lopes, with Pedro Pereira, of the Boston Consulting Group, António Ramalho (CEO of the Nuevo Banco); and Bernardo Meyrelles CEO of Deutsche Bank Portugal. But he ended up discussing banking in the era of digitalization, a topic that appeals to an audience of students at the university specialized in economics and management.

An anticipation of what banking will be in the 10-year horizon dominated the presentation

Bernardo Meyrelles argued that larger, more general banks coexist with smaller niche banks but that they have difficulties in complying with regulatory requirements, if these are the same as those required of large banks, so regulators will have to adjust the regulatory environment proportionality of the size of the institutions to create conditions for these niche banks that complement the offer well and are desired by the clients. If this is not the case, there will only be room for the larger banks, with more capacity but less differentiation, losing the consumer.

The president of Deutsche Bank Portugal, also warned that negative interest rates are being punitive for banks with high liquidity (deposits exceed the credits), once with negative interest rates lose money. Bernando Meyrelles goes further and says that negative interests are penalizing for saving. That is why it defends neutral interests (0%) because, thus, economic expansionism is maintained without affecting banks and savers.

The Fintechs are more agile and can create spontaneous solutions

But still, they do not have the brand and the credibility of the banks and the customer base of the banks, they defended the participants in the debate that took place in the class of Nova students.

Bernardo Meyrelles began by defending that the great surplus value will come from the symbiosis of fintechs with traditional banking, once these are complementary to them.

In the era of digitalization, banking needs a bionic solution, that is, a physical and electronic solution simultaneously, defended Antonio Ramalho.

The issue is recurrent in the debates about the future of banking. Contrary to what has been said, the big competitors of the banks are not the Fintechs, they are the big distribution chains. Any distribution chain that launches a credit card, for example, is competing with the banks, defending the participants in the debate.

António Ramalho further argued that what changed in banking was an expansion of the means of approaching customers

“Our regulation is very conservative,” said the CEO of the new bank, who cited the case of the large British and Spanish banks that sell various products, including food products, which the Bank of Portugal’s law does not allow, at the level of “compliance”. rules”.

António Ramalho also defended that the balconies of the banks are going to have different formats and change choreography, like for example to become a cafeteria, as in the last Santander Totta counter. “Finally having balconies is a competitive advantage compared to banks that do not have them.” The “how to use of branch” is that it is the challenge.

In this regard, he agreed with the panel colleagues, that the use of balconies is not a vicissitude of the older customers, because the truth is that under 45 years old customers go to the counters, and that only the group of Age of 45, to 55 years goes less to the counters.

Finally, he cited the case of the Banco Best digital bank, which owes its success to the physical presence on balconies, as does the BCP’s ActivoBank.

On the question of digitization going to make disappear the physical balconies nobody agreed with that thesis

The head of BCG even said that the counters are not going to disappear because they serve companies and individuals.

After Antonio Ramalho took the opportunity to mention that the largest network of balconies is the Agricultural Credit, but in second place comes the Santander, in third place the BCP and only in fourth comes to the CGD.

On the question posed by students about the trust in digital banking, in a scenario in which banks do not have physical support, Bernardo Meyrelles replied that this credibility depends on what is sold. The brand of what is sold is imposed on the credibility of the distributor. Antonio Ramalho cited the success story of the sale of a JP Morgan fund.

As for deposits, says Bernardo Meyrelles, those are more dependent on the credibility of the bank

“In the beginning the brand needs to be coupled to the vendor, the product or the distributor, because if the wrong customers go to a door they need to call,” says the CEO of Deutsche Bank in Portugal.

Antonio Ramalho spoke of a paradox. On the one hand, the Portuguese are the most suspicious of electronic commerce, but accept ATM payment for their taxes, and it is a bilateral relationship with the Tax Agency. So “the perception of trust is relative,” he says.

“The quality of services at ATMs is higher in Portugal, for example, the fact that in certain tax payments the customer interacts with the ATM,” said António Ramalho, who recalled that a code is requested at ATM (9). digits) and the machine responds with the value to be paid. What a dialogue with the system means” and this does not happen in any country.

The normal thing is only a monologue, the client isere a code, insert the amount and give the order. Without the machine to respond.

Banks buy and sell risk and confidence is the basis of the industry, defended the CEO of NB, in another context

Regarding the Fintech Revolut, Ramalho said that the new Bank is accompanying her with curiosity and argued that this is a very interesting example in terms of the evolution of a free service for a paid service, and recalled that the banks tried to do it with the “and they did not succeed.

Later the issue turned to mergers and acquisitions in banking. Bernardo Meyrelles defended that in addition to intra-European mergers, there will be cross-border mergers in the future. This is because European banks are going to need to gain a global dimension to compete with the United States, and that is not achieved only with intra-country mergers.

It is recalled that at this time the merger of Deutsche Bank with Commerzbank is being discussed

Antonio Ramalho said that European banks are oriented towards segments (afluent, mass market, etc.), but that the United States and United Kingdom banks are “product oriented”, which means that each client can have several banks depending on the products you need.

In this regard, Professor Samuel Lopes recalled that the interest of this issue is that the United States is an integrated country and Europe is a process under construction, with 28 jurisdictions and 28 countries.

For example, a loan in Portugal whose guarantee is in Spain, the United Kingdom or Germany, is a problem because it has to deal with the different legislations. That is why the clean-up of balance sheets in European banks is much longer than in US banks.

Published inFintech

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