When banking is no longer, and will not be, what it used to be

Customer engagement with their bank falls to 2015 levels. That is one of the main conclusions of the report, the ninth now, from EMO Insights International on the emotions that customers feel about their main bank. A study carried out in January, in the midst of the pandemic, which analyzes the responses of 3,000 Spanish banking users. The main cause of this less union with the financial institution in which you have deposited your payroll, your savings and your mortgage is due to the rise in commissions on the services it provides you.

“We have gone from zero commissions to paying for everything, and that is very bad. In addition, the rates are high and even if you have a connection, you do not free yourself from paying for a service ”, commented on Friday a manager of a fintech about the strategy that traditional banks are now following, and that in the end is benefiting the new financial players , as are the neobanks.

And it is precisely this turn of the screw in commissions that is generating greater customer distrust of their bank in the midst of Covid.

The last group to toughen operating conditions is BBVA. The bank presided over by Carlos Torres has increased the requirements that it demands from its clients in order not to pay commissions. It is not enough to have income and direct debits to not pay, the link must be greater, otherwise you can pay up to 160 euros per year from June 15. Unrelated customers will pay a quarterly maintenance fee of 40 euros, to which must be added 35 euros per year for the debit card.

Thus, traditional banks are becoming a boutique in which customers are segmented by their activity with the entity in the first and second categories. These last cases, in fact, the bank tries to make them the least possible because they do not rent, or so they say. Luckily, it seems that other entities such as fintechs, or rural ones (as I published last week on these same pages), are eager to get hold of these less profitable users.

Despite this selection of customers and the rise in commissions, the profitability of the bank does not take off and remains its main pending issue. In order to improve their ROE (profitability on equity), the entities are undertaking the largest screening in history of offices and staff. CaixaBank, after its merger with Bankia, will announce the largest ERE launched by a Spanish bank. The communication of this job destruction coincides in time with that carried out by BBVA. Between the two, more than 11,000 jobs will disappear, a record.

BBVA gives another turn of the screw to commissions: it tightens the conditions to
clients with payroll not to pay

Union sources assure that this cut, in addition, will not be like on other occasions. Most of the exits will be managed with early retirement, but they are convinced that voluntary layoffs will increase compared to other similar processes given the decisions of the banks to cut the path of early retirements, and the greater obstacles of the Government.

“We are convinced that now the proposals for early retirement will be less, although we will try to raise them,” declared the head of banking for one of the main unions on Friday.

The banking sector, in short, inevitably loses weight in the Spanish economy, not only because its size and capitalization decreases, but also because its influence has been reduced (there are fewer banks and bankers), and its power of command in the Spanish industrial sector has almost disappeared. Only CaixaBank or, rather, Criteria, the holding company of La Caixa, still have industrial tentacles, although the increase in refinancing places some banks back at the heart of certain companies for their salvation, but their position in them is like the stitches in an operation, after the wound heals the suture threads disappear either because they have been absorbed or because they have been eliminated.

Added to all this is the fact that competition in the financial sector is overflowing, with fewer and fewer financial institutions and offices, but with more actors, until relatively recently, outside the banking sector.

Fintechs are slowly gaining market share in certain market niches from banks, such as consumer loans, payments with credit cards or in other activities until now reserved for banks. But they are not the only firms facing increasing rivalry with traditional banks. Insurers have started to enter the wealth management business, an area also exclusive to banking until recently. To which is added the combination of large telephone companies, electricity companies, distributors, large investment funds …, which have decided to explore new businesses, and among them the preferred ones are large financings in some cases, or small ones in others , consumer credit, financial advice, currency exchange, or also savings management, although in these cases they are accompanied by financial entities or insurance companies.

The world traditional benches were used to collapses at their feet. Change or die, and that’s what they are. What happens is that his change, although it has accelerated with the Covid, comes a little late and is going to be very radical.

The customer and his habits have also undergone major changes. That is if we talk about the user accustomed to traditional banking. But if we refer to the youngest customer, the one who has never set foot in a branch, he considers banking a sector that has little to do with his world and his needs.

The role of the bank as a financial intermediary remains key. Banks are the pipes that connect the citizen and the company with credit, with the liquidity that emanates from the European Central Bank (ECB), but doing only that does not provide profitability, and if there is no profitability there are no profits, and it seems that the The old recipe of seeking efficiency with layoffs is still the most effective way, although for the economy in general it may be the opposite. And it is that this year some 20,000 jobs in banking may disappear in Spain alone, jobs that will not be recovered again.


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