The global retail banking industry is facing a revolution where the need to simplify operations and streamline activities will determine who wins and who loses, a major study on the retail banking industry by Deloitte & Touche Tohmatsu International has concluded.
Releasing the study at a Bratislava press conference in late October packed with a who's who of Slovak banking, Deputy Finance Minister Jozef Magula backed the report, titled "The future of retail banking: a global industry perspective." "I am pleased that the opinion of the future of banks' restructuring is close to the opinions and views of the Slovak government," Magula said.
Slovak banking officials, though, are holding back on giving the study a final stamp of approval. While acknowledging that changes will sweep through Slovakia's retail banking system, they said the effect is harder to determine due to the industry's relative youth in the country.
The report, based on research of current industry practices in a number of western countries, warned that universal banks must refocus their strategies to take on heavy competition from "specialist institutions," such as consumer lending services and processing services, and making greater use of technology to fit customer needs.
A winning strategy will fall into three main activities, the study concluded. First, a bank must reduce its branches and transform them into "sales centers." Second, it should offer its full range of banking services, known as "cross-selling," only to its most affluent customers, while delivering "cheap and efficient services" to the rest. And lastly, it should focus on those activities with economies of scale and develop software that will maximize their efficiency.
Andrew Goldman, the banking sector manager for Deloitte & Touche in central Europe, said at the press conference: "The banks that win will be those that move first." Slovak banking officials listened attentively to the advice, but said they had trouble relating to some of the conclusions.
"It's very hard to gauge [the report's] precise influence on our bank," said Félix Hutník, the chairman of Poľnobanka's board of directors, who attended the conference.
But he did take into account some of the findings, especially regarding a low number of branches. "You don't have to put the branches in all the same valleys and villages," Hutník said. Poľnobanka, established on New Year's Day 1991, currently has 16 branches and 14 sub-branches in Slovakia and one representative office in Prague.
The bank, which in August increased its capital share from 800 million Sk to 1.27 billion Sk, has already targeted a customer base, doling out one-third of its loans to Slovakia's agricultural sector.
Foreign retail banks as well were wary of swallowing the study whole. Reiner Franz, the deputy director of Austian-owned Tatra Banka, said that all banks must cross-sell to reach the country's small pool of wealthy customers. "The affluent part in Slovakia is very small," Franz said. "Anybody who makes more than 10-15,000 Sk a month is already of interest to any bank." He also said that Tatra Banka will not be "outsourcing," or sub-contracting services out, as the study suggests, but will work "in house to develop our own culture."