ESBG's Chris De Noose explains savings & retail banks help build the future for Europeans
>> Read: 21st Century Banking: Digital Connection
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BRUSSELS, 22 June 2020
Five hundred years ago, German financier Johann Fust placed a bet on a business idea of a fellow Mainzer and goldsmith Johannes Gutenberg. He used movable, metallic type to compose texts applied to paper using farming presses. A breakthrough to say the least, books ran off the press at an incomparably quicker pace than by then-used copying by hand. That money sparked a printing revolution in Europe – and eventually transformed the world.
It’s perhaps the best example of why real economy lending helps drive innovation. Savings and retail banks value both. They support SMEs clients during coronacrisis, keeping the credit tap open, by allowing payment holidays and other measures. Like Fust and Gutenberg in Mainz, Germany, those banks maintain ever-closer client proximity by investing vast sums in technological innovation: big data, artificial intelligence and other developments. But bankers no longer play the role as indispensable catalysts for innovation in financial services. New entrants with deep pockets also take part.
The “Triple As” – Apple, Amazon, Alipay – and others handle large volumes of payments via their platforms, gobbling up a substantial chunk of revenues for banks. With hundreds of millions of users and offering electronic wallets, they bring competition in the payments market not seen in decades. They use data gathered on their clients to establish a credit score, a pre-cursor to lending to consumers and SMEs, bypassing banks as traditional lenders.
So will banks disappear and only banking remain, as Bill Gates famously said? Only time will tell. Banks will surely face total transformation. A digital innovation sweeps over banking, bank branches take a more high-touch role as transactions are just a tap or click away. People visit their bank to receive advice or to solve a problem that cannot sorted via smartphone or computer. And even advice gets given more and more via screens and apps because clients expect an answer at 6 am or at 10 pm, or later. Client expectations towards office hours shift to 24/7, as the likes of Amazon never sleep. Neither should locally focused banks.
As critics point to the end of Main Street banking, they miss the fundamental reason people seek savings and retail banks: trust. That trust deepens when they meet with bankers on the ground, not only via automatically generated emails and anonymous call centres. That deep-rooted relationship often spans generations. As ESBG members head off to work, they keep in mind the trust of clients and nurture it, deploy innovations that change the banking experience, and workplace as never before.
People know that their money remains safe with us. Whatever happens. The services and products offered, tailored to the client’s life and needs, come from an active approach to banking. That translates to meeting the client when it is convenient for them, not waiting until the client comes to the bank branch. But it can also mean refusing to sell the client a product not fitted to their profile because a long-term client relationship should not be sacrificed to short-term profit.
ESBG Member banks are not just any banks. Our retail banks are characterised by what we call the "three Rs": Retail - because our main business is targeted towards households, small and medium sized enterprises and local authorities; Regional – because we are close to our customers via physical or digital networks; and Responsible – because we give something back to the communities that help our institutions thrive. In all of these three elements, the human factor proves essential. It’s what makes community banking so effective, communities so strong.
Fust and Gutenberg belong to history and soon the printing machines they invented and financed will follow the same way, as digital screens sweep over. But we can take inspiration from their flexibility, inventive spirit and practical thinking. If Europe and EU policymakers want to spur the spirit of invention, to better adapt to what the world around them, then they should choose a less beaten path: Trust in locally focused, strong banks. Centuries of innovative examples explain why.
Chris De Noose.