I was recently in Europe where in one week on a tour of the region we met with nine major banks across five cities, including big groups like HSBC, BNP-Paribas, ING and Santander.
"EU banks have exited profitable products on the basis that they are not confident they are always in the best interests of customers."
Shayne Elliott, Chief Financial Officer, ANZ
We saw the old, the new, the growing and the recovering. Besides the observation railway food seems consistently poor wherever you are in the world, I came away from the trip thinking there are six key ingredients they had in common that banks around the world should be thinking about.
- Doing the right thing by customers is even more important than ever
In the wake of the global financial crisis and with cost-of-conduct fines mounting, Europeans are experimenting with how to build banks that produce a sustainably decent return while doing the right thing for customers at the same time.
For example, banks have exited profitable products on the basis they are not confident they are always in the best interests of customers.
- Simplicity is vital
Just like ANZ did in New Zealand (and we've seen dividends there as a result), Euro banks are reducing the number of products they offer.
This pays off in three ways: it's easier for the frontline to focus on the customer when they only need to understand the features of five products rather than 50. You can keep costs down by scaling fewer processes. And it's easier to digitise five products than 50.
- Everyone needs a hero
In a simpler, more transparent digital world, banks need a hero product - one product or service simply better than everyone else. Or put another way: what is the bank famous for?
- It's all about DATA
Customers expect banks to know them, understand them and even be a step ahead. And that requires enormous focus on data and analytics.
We saw great examples of banks using data and customer relationship management systems to drive real value in terms of targeted offers, better risk management and easier regulatory compliance.
- The barbarians are at the gate
The wall of money funding fintech startups is creating a lot of interest and is potentially a huge threat to traditional banks.
Most banks are thinking about setting up venture-capital structures and partnerships to learn and identify the opportunities for core banking.
It is also fair to say they are still grappling with how to monetise these investments and ultimately bring them back into the core bank to make real change in the organisation.
- It's always about the PEOPLE
Fortunately (for the Euro banks) as part of the visits we had agreements in place we won't poach the people we meet. I would have happily hired a large number of the people we saw!
There is a real energy, drive and commitment to the future of banking despite the very real challenges ahead. The quality of thinking and execution was impressive.
A genuine threat of extinction has unleashed enormous drive, creativity and speed in some banks. If successful, they will have significant momentum. It's the classic burning platform effect.
In summary, while we shouldn't envy the regulatory environment most banks outside our region find themselves in, that pressure appears to be bringing out the best in terms of creativity, focus and discipline.
Banks are being driven by a burning ambition to fundamentally change the nature of their business.
ANZ needs to continue to learn from others and attempt to stay a step ahead - or at least in step with the latest global thinking if we are to achieve our aspiration of being the best-connected and most-respected bank in the region.
I'd love to hear what you think, so please post a comment or question below and I'll be sure to get back to you.