Meet Tink’s new senior adviser and investor: Christian Clausen. He’s a veteran of the old guard of banking – a former CEO of Nordea and chairman of the European Banking Federation. He’s sharing his expertise and unique insight gained from years working with Europe’s biggest banks. And we’ve joined forces to help bankers seize the immense opportunity up for grabs as the industry shifts – and open the digital doors to their customers.
In the first of many Q&As, Christian shares his perspective on the radical shifts and technology that are reshaping the industry. He gives advice about how to easily adapt banking business models. How to keep customers loyal. And why it will be more challenging if bankers do nothing.
Banks are afraid of what investments to make first, and when to take the leap to embrace open banking. The mentality of banks needs to be transformed – from closed to open. We’re getting there but like other industries, we have to do it fully.
The business model for banks is changing because customers are choosing a different way of living, working and thinking. Transformation itself is not that complicated, especially when you have businesses like fintechs to help. A bank’s business model can be adapted quite easily. Soon, it will become more challenging to do nothing.
Branch networks will be a thing of the past. For a typical large European bank, up to 60% of their costs sit with the branch network. It’s expensive. As the networks close down, it will free up resources so banks can open the digital doors to their customers.
Having greater customer insight opens up a lot of opportunities. A large bank with, say, 10 million customers has the opportunity to meet the needs of 10 million life cycles. Some are 84 years old and some are a few years old. Within this customer base, there will be those who save, those who borrow for a mortgage, those who spend their pensions. So the balance sheet of a bank will mirror the finances of their customers.
It’s important for banks to retain customers throughout these life cycles. A bank can make a lot of money in having these flows of business. To do this, they need to tailor their offering and use big data to make sure it’s absolutely relevant.
Knowing when a customer is looking for a new house allows you to get in touch about a mortgage. With the knowledge about their financial situation and knowing what you can offer, all the customer has to do is sign the papers – and your bank does the rest.
You need to get to people before they make a buying decision so you can open the door for them. It’s about being relevant to the customer at the right time.
New entrants will do this better but they’re not as relevant. People don’t want to cope with too many providers, so the traditional banks are well positioned. If banks can boost their tech, it becomes so much easier to lead the digital transformation.
Retail banks with physical branches have dominated the banking market. But moving forward, it will be retail banks that open the digital doors to customers that will win. And it’s here that fintechs can help show the way, partnering with banks to facilitate this innovation.
Retail banks can find inspiration in the approach that digital challenger banks have taken. They’ve been so successful because they give consumers a lot of insight, and they are built to be good at it from the start. With help from the right fintechs, traditional banks can do the same – and more.
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