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Savings and retail banks: Ready for the future

Savings and retail banks: Ready for the future

​​Closing remarks by WSBI President Isidro Fainé to the 25th World Congress of Savings and Retail Banks, New Delhi, India, 16 November 2018

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"Closing of the Congress: The business model of savings and retail banks – Ready for the future"

 


Dignitaries,

Ladies and Gentlemen,

Dear colleagues,

 

As newly-appointed WSBI President, I would like to thank all of you for participating in the 25th WSBI World Congress here in New Delhi.  

It has indeed been an event full of insight, which has given us an opportunity to share with one another the success we enjoy as savings and retail banks around the world.

I would like to give special thanks to Mr. Heinrich Haasis, whose tireless effort throughout the years as WSBI President has made the association stronger and more successful. Under his presidency, the WSBI has increased its focus on helping savings and retail banks thrive. We are very grateful for your service, Mr. Haasis.  

Moreover, we are fortunate to have you with us as Honorary President for the next three years.  

I would also like to take this opportunity to thank:  

  • Mr. Arun Jaitley, Minister of Finance of India,

  • Mr. Rajnish Kumar, Chairman of the State B ank of India,

  • Mr. Harsh Kumar Bhanwala, Chairman of NABARD,

  • Mr. Javier Solana, former European Union High Representative for the Common Foreign and Security Policy and former Secretary General of NATO,  

  • The National Savings Institute for hosting the Congress  

  • As well as to all the speakers and participants, thanks to whom this Congress has been highly successful and I am sure deeply enriching to all.


It is a great privilege for me to speak at this important gathering among fellow savings and retail banks, (all the locally focused banks and federations who represent them from all over the world, especially here in India, where there are the arguably the largest retail banks in terms of number of bank customers in the world.)

Our Congress has been forward thinking, inspiring and enlightening.  

After listening to all presentations, panels and remarks by the various speakers:  

-I am struck by certain areas that came to light from our time together,  

-which will impact us, retail bankers and our customers, for many reasons.


First, as the Congress theme says, what we do, as savings and retail banks, can …. and will help address income inequality on a global basis.  

Second, savings and retail banks are ideally placed to help calls from society to tackle the need for economic growth – no matter where – that is economic growth, which is sustainable, deep-rooted and widespread.

Just to be clear, when I say widespread, I mean growth that generates inclusive economic and social development, not just in big cities but also in sometimes hard-to-reach rural areas.  

Our World Congress has shown the special role played by savings and retail banks to ensure that Asian, Latin American and African economies become actors that stand side by side with all regions in the global economy, on an equal footing with Western economies.  

This crucial point was not missed by the WSBI members and stakeholders during our panels and speeches, which reflected the essential role that non-OECD countries play in the world.

Connected to this, let me remind you that Asian and Pacific countries, for instance, represent around 40% of the world's GDP and the estimates are that in 2050 their share of the world economy will reach more than over half.  

This remarkable share of the global economy will happen thanks to immense economic expansion driven primarily by China, India and Indonesia.  

Specifically, India will double its weight from the current 7% to 14% of global output.

And all this, without mentioning the vast build-up of know-how that India is harnessing in leading-edge, high-tech areas.

Our Congress has helped us highlight the real economic and social value of retail banking.

WSBI members span the globe, reach deep into rural areas, from Morocco to, for instance, Minnesota in the USA, and in big cities like Mumbai, Mexico City or Nairobi to name a few.  

Mass migration of people – especially young men – from rural areas to urban centres is changing the way farming is done, with more and more women becoming involved in farming activities.

Smartphones are penetrating all corners of the world. Internet is set to reach nearly everyone on the planet in the not-so-distant future.  

Money flows continue to expand across the world and people approach banking in a new way, especially younger generations.  

Banks are changing the way they approach customers, especially when it comes to “when and where" they keep in touch with clients.

The changes are real and are transforming the banking world. For instance:  

  • The role of customers and their needs. They are active “24/7".

  • New technologies are radically changing the way in which business is done the smartphone is prime example.

  • New players (subject to little regulation) are popping up and elbowing in to compete in the market  


That said, new regulations also have an affect not only or our need for capital but our relationship with customers.  

The context of all of these factors is within the chessboard of globalisation. If you step back a bit, we notice that we are living in a period of unprecedented wealth creation worldwide. This is a disruption indeed. And it is gaining in scale and marked by downward pressure on price for goods and services that consumers and businesses buy.

On top of globalisation's effects, we see a “data effect". A “data “explosion" has taken hold. The level of data traffic has swelled dramatically. This is pushing us towards a future of smart networks while opening platforms for new services. The profound impact on banks and our customers cannot be ignored.

As a consequence of this, we as savings and retail banks have adapted to this digitally led 'New Normal'. We have done it by improving:  

  • The professionalism of our employees,

  • That means they are  they are smarter with their time, and as a result  

    • They have more face-to-face dialogue with customers, while

    • Giving them more than they expect.  

 

To make sense of all of this change, due to globalisation and technological breakthroughs, let me quote Pope Francis who said: “We are not living an era of change but a change of era."  

It's important to describe the world around us but it is also needed that we carve out a strategy from it. So from a strategic point of view, the Congress has helped us:

  • identify our strengths and weaknesses; as well as

  • the threats we face and the opportunities we find.  


That is to say,  

  • Where … we excel

  • Where … we perhaps fall short, and  

  • What … we need to do to be leaders in an always-on, digital world  


Our exchanges of views and practical experiences in today's and yesterday's discussions, have brought us up to date.

I am convinced that after the speeches and many private discussions, we will go back to our countries armed with new ideas, success stories, and a greater perspective on the future of banking.  

We have also joined together to remind ourselves that the foundation of savings and retail banking is based on three clear principles: which are outlined in the WSBI New Delhi Declaration announced during the Congress.  

The first principle is “mutual trust", a bond we must nurture. This Mutual trust is to protect our customers' savings and to engage with all our stakeholders in a valuable way.

Unless we enjoy a high level of trust with those we serve, our business … will never flourish.  

In banking, there is a main premise, “without trust there is no business". And the trust of our customers is gained day by day, continuously and particularly in the most difficult times.  

The second principle is “Excellence in service to our customers". We have seen many examples of our efforts to achieve excellence in our relationship with all our stakeholders.  

  • The right quality of service: relentlessly seeking excellence to provide a better valuable service for our customers, who must always be at the centre of our actions.

  • Putting the customer at the centre gives us greater competitive advantage, making us more sensitive to changes and allowing us to adapt to the needs of the market before our competitors. Furthermore, anticipating the market will lead us to become the best bank in quality and reputation.

  • Never forget, that a banker prospers when customers prosper.

  • Achieving excellence in any profession not only depends on the characteristics of a leader or his staff but on the qualities they cultivate throughout their careers.  

  • That is why I think Aristotle was right when he said, “We are what we repeatedly do. Excellence then is not an act but a habit".  

 

The third principle is aligned with the theme of our Congress: “Local banks can help bring the benefits of globalisation to society".  

We cannot turn our backs on the social plights of our society. As far as we can, we must develop different programmes depending on the needs in each country or region.

We have a social mission to help communities and economies to stand strong and prosper in a globalised world, particularly those communities facing real world problems like:

  • Child poverty

  • Unemployment

  • Affordable housing

  • The elderly

  • Palliative care, and

  • Financial exclusion.

 

I would like to elaborate on our social mission of financial inclusion.

It is one of the most effective ways to address globalisation and a pathway to welfare and progress.

Our role in financial inclusion came out loud and clear during the Congress here in New Delhi.

Why?    

Because when financial inclusion improves, more individuals are empowered, more jobs are created and the economy grows.

Knowing that, WSBI members have a strong will and purpose to broaden financial inclusion.

Our Congress has provided plenty of examples of how we promote financial inclusion effectively – and profitably for the bank – while adding value to customers that other entities sometimes disregard.  

We tackle financial inclusion by being socially responsible retail banks that supply banking services to individuals, families, entrepreneurs and micro enterprises in rural or remote geographical areas.  

We also serve marginal neighbourhoods in urban areas, from younger people to those who, due to their advanced age, lack access to basic banking services.

We also support micro-entrepreneurs who cannot present more guarantees than: “their own word, talent and enthusiasm.

Our Institute signed an agreement with the World Bank in 2016 for the implementation of the Universal Financial Access 2020 Pledge, consisting of a commitment to enable 1 billion people to gain access to a bank account. I am happy to say that our members are continuing to make substantial progress towards accomplishing this goal.

​Regarding this international commitment, the latest available data, as of 31st December 2017, show that:

- We, the WSBI, contributed to this goal by providing financial access to 234 million new customers, who suffered from financial exclusion.

- Our total number of customers worldwide reached 1.6 billion.

These figures show the tremendous potential the WSBI has when it comes to linking retail banking with financial inclusion.  

And as I just said, we also know that our activity must be profitable. Without profit our Members would not be sustainable in the long term.

By contrast, being more profitable will allow us to deliver more financial services to the most vulnerable, social segments of society.

We, as bankers, know that one of the greatest challenges we face daily is the need to generate more income through services and, at the same time, reduce operating expenses.

As you are well aware, banks today provide an increasing number of services to customers:

- standard banking products

- advisory and investment services

- multichannel and digital payments, and

- many other value-added services, such as

  • financial planning,

  • stock analysis,

  • budgeting management and

  • expense control, among others.  


Providing these services, however, with the highest quality standards comes at a cost, which should be reflected in prices.

In line with our times we should revise our costs, some of which can be found in:  

  • Having overstaffed headquarters  

  • Streamlining our structural networks  

  • Closely watching our financial costs and,

  • Reducing the risk of defaults and thereby impairments  


I have always kept in mind, as the risk manager that I was in the Sixties, the two Warren Buffet rules: First, when you give a loan, make sure you can recover the money. And second, never forget the first rule.

In addition, we should never forget market share: we must survive by growing, offering a wider range of services for families, SMEs, large enterprises and institutions while adapting our branch networks to the different segments of the market.

As savings and retail banks, the role of our branch networks is another crucial component in our strategies.

The importance of having a strong branch network is vital.

Based on my experience, I believe that in branches, the ideal thing would be for employees to dedicate 90% of their time to commercial activity and speaking to customers, while leaving the other 10% for office and administrative work.

It is paramount to ensure that the branch network is a sales network and not an administrative burden.

Bank branches play an essential role in the service mix within an integrated multi-channel distribution model. Branches allow for a personal and a more human contact with customers.

I would like to explain to you an anecdote concerning branches. In 1996 I had met and discussed with Bank of America Chairman Mr. Richard Rosenberg, the issue of closing branches. On my return to Spain, I had a meeting with Bill Gates in Madrid and we talked a lot about physical branches and internet banking. I asked: “Bill, which do you think is the right strategy?" And he responded, “Isidro, I think the best one is to have both:

- many branches and

- many internet banking"


I would now like to address the issue of digitalisation. As you will agree, digitalisation is an opportunity we cannot afford to miss.  

Digitalisation means revolutionising our proximity to customers. It gives us a chance to be even closer to our customers, and make our relationship with them more profitable.  

It's an extraordinary “once-in-a-generation" opportunity to include through digital and mobile banking large numbers of people, from around the world, in the global economy.  

It is also an opportunity to learn more about the customer by better use of Big Data as a tool, which will allow us to offer our customers:  

- better, faster and more-targeted personal services, and

- customer-designed products,  

- through their desired channel,

- resulting in overall cost savings, and  

- an enhanced customer experience.  

 

In a nutshell, digitalisation gives us the best of both worlds: branch and digital. In other words, it represents the combination of human intelligence and artificial intelligence.  

Digitalisation entails change in our business models.  

There is a plethora of influencing factors that include: mobile telephony, 5G, cloud computing, blockchain, big data, social networks, augmented and virtual reality, robotics, virtual assistants, artificial and cognitive intelligence.  

To face this challenge, WSBI members must cooperate with other digital actors, setting up partnerships with:

- Banks and Financial institutions

- Fintechs

- Telecommunication companies

- Even the big players in the digital world.

 

 

As far as management and leadership are concerned, I would like to say a few words on these topics:

Good management is an essential component to successfully carry out our business activity.

Managers must exercise active leadership. A high responsibility position is defined by the type of leadership the manager exercises.

The role of the manager should be to empower and promote employees and set goals permanently…to encourage the spirit of improvement, perseverance and permanent updating.  

Managers do not work alone, but in a team.

A team, in line with my experience, is made up of people who should have the following conditions:

  1. The critical experience of thinkers  

  2. The capacity of technicians  

  3. The creativity of artists, and…

  4. The sensibility of poets, …
     

For this to work, the leader and the team must engage in permanent and mutual trust.  

In terms of internal organisation, I believe that a flatter organisation creates greater operating efficiency and more focus to achieve the commercial and business goals employees must have.  

The basic characteristic of decentralised organisations is the delegation of authority to people at lower levels, to make decisions and take action in a more direct way. In this sense, it is important to keep in mind that authority resides … in people, not … in positions.  

On the other hand, employees must be empowered to take quick and intelligent decisions when the satisfaction of a client needs or his loyalty is at risk. Employees should have:

  • A driving entrepreneurial spirit  

  • A culture of work and service  

  • Respect for people and their ideas  

  • Dialogue based on reality and truth  

  • Social responsibility and solidarity  

 

To prevent confusion and facilitate quick and right decisions, employees should have clear hierarchical lines. By doing this, the management process becomes simpler and more efficient.  

If I had to summarise management, I would conclude that management is:  

·         Making our people grow  

·         Helping them take decisions  

·         Creating a good work climate  

·         Having good communication  

·         Paying them adequately  


Our employees need to know:  

-       What they do  

-       Why they do it, and…

-       What lies behind their actions  

 

Seneca said that “If a man does not know to which port he is sailing, no wind is favourable". And indeed it is very true.  


I cannot but mention Jack Welch's leadership policy.  He was for me, probably the best manager of the last century.

He required the 4 “E"s from his people.  

  • Energy: He wanted his employees   to have energy.  
  • Energiser: He wanted his people to instil energy in others.  
  • Edge: He wanted people who knew how to work on a knife edge in other words, in complex situations.  
  • Execution: He wanted people who knew how to do things and do them well.  

 

I could not end my speech without presenting the main goals that I would like to pursue during my presidency.  

First of all, I will make reference to three objectives, which have been approved by the President's Committee:  


-The first one is focused on retention and acquisition of members:

We know that customer loyalty is a key priority. Consequently, bolstering our membership base will help make WSBI stronger.  

Furthermore, we would like to enlarge our Institution with new members to reach countries where we do not have a presence.

“The more we are, the stronger we will be."  

 

-The second goal is related to global advocacy:  

Our target is to increase WSBI's visibility on a global level.  

To achieve this milestone, we will dedicate our efforts to reinforce our profile and influence in the regional and international fields.  

We also want to strengthen our advocacy profile vis-à-vis international policy makers and organisations.

In this sense, financial inclusion through the Universal Financial Access Goals 2020 is also part of our advocacy goal.

 

-The third objective approved by the President's Committee involves an exchange of best practices and know-how.  

Our purpose is to involve non-European Members in Committees, Task Forces and High-Level Groups to foster the exchange of practices, knowledge and experience to promote cooperation between Institution members.  

In addition to these goals, we would also like to pursue the following three initiatives during my mandate:

First: Promote financial education. This is an area where many members from the WSBI excel with strong programmes already going on. I think that makes a lot of sense to get the best out of them and create specially designed programmes for WSBI members. These programmes could be implemented in those countries where members believe they would make a greater impact.

Second: Highlight the importance of retail banks before regulators and policy makers. Emphasise that saving and retail banks enjoy a key position supporting local economies. We have to highlight our contribution in the real economy before National and International Authorities.  

And Third: Reinforce the Regional Groups of WSBI. The Asian, African, and Latin American ones without forgetting the great potential the American community banks have.

If you allow me, let me insist once more, that, we, retail and saving banks, are always willing to support those activities and initiatives, whether public or private, that pursue human development and the improvement in the quality of life.  

 

Not only can we do that, but we must also remain faithful to the basic 3-R Principles of WSBI, which guide our activity:  

  • Retail banks, with a…

  • Regional presence, and a …

  • Responsible attitude towards business and society  


In other words, we are deeply rooted in every corner in every country in the world.

The time has come when we are all obliged to give the best of ourselves and to demonstrate to society, that solutions to big problems exist and are within our reach.  


We need to show society, with projects and facts,  

  • That economic and social progress is not only possible but we can … and want to achieve it.  

  • We will be absolutely committed to reach that goal, and  

  • We will not contemplate … failure.


I firmly believe that opportunities exist. All we must do is find them and give them life to continue offering our collaborators and citizens  

  • The hope of a job  

  • The chance to feel useful, and  

  • The necessary energy to forge with their daily effort:  

    • A life with sense  

    • A family, and  

    • A fairer society,  

Thank you very much.  

​ 


Financial inclusion; Digitalisation