Mr. Renfer, what do you think makes an efficient bank?
An efficient bank is able to quickly provide the customer with an individualized, low-cost offer. The challenge here lies in combining efficiency and individuality.
Why is efficiency now becoming an issue for banks?
The pressure on margins is forcing efficiency - if you look at the interest rates, the pressure can't really grow much more. But it will intensify further when current mortgages have to be renewed and refinanced.
On the other hand, things are going well on the stock market.
Brokerage fees and margins on commissions are also heading towards zero. Again, that has to do with efficiency: Fintechs pick the part of the business that is either very easy to do and costs nothing more. Or they focus on areas with high margins. In between is the valley of death, where you don't really make money through either volume or revenue.
What does that mean in terms of cost-income ratio?
We will probably have to get used to higher CIRs. New standards will probably be defined there. The loss of revenue cannot be compensated for only in part by cost reductions. Very large banks can use technology and variables to drive marginal costs to practically zero. Smaller banks cannot do that, making the situation even more challenging for them.
Retain customers. Reduce costs.
Where does Finstar help banks cut costs?
As a bank, you have the option to do everything, or not everything, yourself. The added value of small banks is not the account, but the customer relationship. The big challenge is to retain customers and reduce costs. And that only works if low-differentiation things are no longer done in-house. With Finstar Open Banking, products and services are bought ready-made, from accounts to investment savings to cards. If, at the same time, you manage to get compensated for the advice you give, then you have a good chance.
What does it take to seize this opportunity?
The first step is to focus on the customer, to define yourself as a bank and your core business. Non-differentiating services are sourced from the ecosystem instead of dispensing with them altogether. Because otherwise, the offering and the revenues will melt away, and the customers will stop coming. This requires massive changes to the business model, but it is the only way to reduce costs and increase revenues.
Can you give us an example of this?
Let's take international payments: With Transfer-Wise, smaller banks can not only offer this business again, but also generate revenue through commissions. Smaller banks today get the same products at the same price as the big ones. The scaling is done by the specialists who perfect a product to the point where the bank can't offer it as well or as cheaply.
Doing more business
So focusing doesn't mean doing without?
No, on the contrary. The bank, as part of an ecosystem, no longer has to turn down business for cost reasons, and the customer has no reason to switch to another provider - the regional bank ideally matures into the family office of the retail customer.
Where do you see Finstar's role in this construct?
Finstar is a technology, an open platform that allows this. At the moment, not everything is available, but a lot is feasible. Let's just think of products for paying, financing and investing. If a customer asks for an investment opportunity and the bank offers him investment savings with several strategies, then there is no reason for him to change banks, but to do more business. Concierge services are also conceivable, for example, with offers relating to living and eating, health and leisure. If the bank builds up such an ecosystem, it becomes the main point of contact in the region, then consumption takes place in the village. This is the classic marketplace of yesteryear, simply digital and different for each region. In this environment, regional banks own their opportunities. The key to success is cooperation with a focus on the customer, even outside the traditional banking business. Small banks in particular are used to working together because they can't do everything.
What role do processes play in terms of efficiency?
You can't earn anything from very efficient processes either. And vice versa. The ideas and not the process make the difference. The customer is interested in the product, the service. So it's about finding a process that offers the customer something more. It may not be as efficient, but it generates more revenue.
You define the efficiency of a process by its effect on the market?
Yes. You can have two different processes that pursue the same goal. If the customer doesn't want to initiate the efficient one, then he doesn't want to. If he wants to pay more for the expensive one, then that's his decision. If you look at everything only in terms of process, you are no longer unique; the differentiation is then usually made by the lower price.
Asking the right questions
Are mobile e-banking and e-banking primarily a means of cutting costs?
Of course, costs can be optimized by giving everything back to the customer. But what is important is how the freed-up resources are used to differentiate the company in the market. After all, mobile banking and e-banking alone won't differentiate if everyone has it. That's the crux of the matter with eBill, Messenger, investment savings or digital channels: you have to offer them first to see if customers will use them.
What is Finstar doing to further increase the efficiency of banks?
The further development of any software is per se aimed at automating processes, making work easier; Credit 2.0 with the Financing Suite is just one example of this. At the same time, our ecosystem offers the opportunity to generate revenue. Overall, I see a lot of potential for increasing efficiency. We just need to ask ourselves the right questions.
What does Finstar look like in the more distant future?
The bottom line is that Finstar needs to scale. The individual layers may no longer exist in the future. All banks share one platform: only one account for all means only one payment transaction, SIC, eBill each. What we have already implemented with Neon can basically be offered to every Finstar customer. Finstar and Hypothekarbank Lenzburg know the services and master the processes. Solutions are integrated via the Open API, which can be similar products from different providers - a marketplace in the classic sense.
How concrete are these plans?
We are very far along in our thoughts and have already implemented many building blocks. This is our approach to increasing efficiency - now it's a matter of convincing the banks and their customers of our path.
*(This interview is part of our Finstar Space magazine).
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