“When preparing the session, we brainstormed with our teams,” began , partner at Deloitte Luxembourg. “We wanted to find the right framework to structure this presentation.”
But instead of using an existing matrix, “we propose to structure ourselves tonight around three main lines of thought, which summarise well, in our view, the themes that we have seen emerging in the banking industry lately,” said , partner at Deloitte Luxembourg.
“We will talk about this movement that we see in the banking industry that goes towards increasing the coverage of the value chain--what are the niches where we can focus on to bring growth and create more value. We call that ‘grow beyond the core,’” said Morel de Westgaver. “The second dimension will be around digitalisation and discussing how, beyond improving operations, we can use digitalisation to improve customer experience and actually trigger new growth opportunities.”
One of the main strategies on the growth agenda for banking executives has been to expand value chain coverage and develop new products and services.
“And last but not least, we will talk about sustainability,” said Morel de Westgaver, “and how to capitalise on these long-term trends to attract new markets and increase opportunities.”
Expanding beyond core banking services
“One of the main strategies on the growth agenda for banking executives has been to expand value chain coverage and develop new products and services,” said Morel de Westgaver. This means banks can provide additional services for existing customers, but also differentiate themselves to attract new customer segments.
This trend is “truly transversal,” as it impacts various parts of the banking sector--retail banking, private banking and asset management. Retail banks are beefing up their offers with “beyond banking” types of products. In private banking, there’s an evolution in the mix of products that clients can access, such as new alternative assets.
Bourguet presented Belfius--which is the best rated banking app in Belgium and the second-best mobile app in Europe in 2021--as a retail banking example that offers many services beyond banking. “They already have 1.7m users on their applications,” she said. “On top of banking and insurance services, of course, you can do a lot of things. You can subscribe to a telecom provider.”
By enhancing the user experience, you also enhance the value that the customer can see from your service.
“You can also manage your loyalty cards, you can manage your meal vouchers, you can book a parking ticket, you can buy transportation tickets, you can buy a house, you can sell a house, you can find a craftsman to renovate your house,” said Bourguet. “So really a lot of additional services beyond banking. On top of that, in the same application, Belfius offers what they call Re=Bel. Re=Bel is an investment application that enables [users] to invest in the Belgian economy in green and sustainable themes.”
Belfius is an excellent use case of the three lines of thought, added Bourguet, as it integrates digitalisation, sustainability and services that go beyond banking.
Morel de Westgaver also gave an example in the private banking sector. Swiss bank Sygnum--which is now , Luxembourg’s financial regulator--tokenises real assets and sells shares to their clients or investors. Clients had the opportunity, for instance, to acquire virtual shares of a Picasso painting.
Digitalisation as a driver for revenue growth
Digitalisation has a lot of positive impacts, said Bourguet. “The first one is you can improve the user experience. And by enhancing the user experience, you also enhance the value that the customer can see from your service. Secondly, you can also personalise and provide tailor-made services based on information collected, based on data analytics. And finally, you can offer the same service at a lower price thanks to automation.”
Retail and private banks have the same goals: improving the digital experience of their clients. People are used to doing whatever they want on their mobile phones, Bourguet pointed out, so why not banking? Why not asset management?
Banks are shifting towards providing more front-to-back services by using platforms that are much more integrated, like Aladdin, said Bourguet. This way, the entire value chain is available on these platforms.
Unlocking new opportunities with sustainability
The third line of thought focuses on sustainability, said Morel de Westgaver. It started as compliance with regulatory requirements, but is now making a difference when it comes to acquiring new clients and boosting growth. “Once again, we see these trends as being transversal, in the sense that it impacts the various business lines of the banking business.”
Sustainability is becoming more important for the younger generation, and banks--both new entrants and traditional players--are starting to shape their propositions accordingly, said Morel de Westgaver. It’s also important in the asset management and asset servicing side.
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KBC, another Belgian bank that was presented as an example, has set up a partnership with June, which uses artificial intelligence to estimate a user’s energy consumption. It then checks among different market providers to see if a user has the best deal. “If it’s not the case, June will propose you to switch contracts to the best provider, and to do all the paperwork as well,” Bourguet explained.
Energy prices change all the time. But June allows users to switch energy providers as often as needed, to set up alerts about price changes, or to allow automatic switches, meaning that every time there is a better deal, the application will change your service provider.
“This use case is kind of an intersection of our three lines of thought,” said Bourguet. It’s digital, provides services beyond banking, and is related to sustainability and energy consumption.
The elephant in the room--interest rates
“It’s probably a bit difficult for us to close this presentation without talking about the elephant in the room, which is the increase in the interest rates,” said Morel de Westgaver. “We know interest rates are rising, and probably the majority of you will benefit from that.” But, he added, “We do believe that there is more in terms of the growth topic.”
“We believe it’s a very important topic indeed to look at your growth driver for two main reasons,” said Bourguet. One is that banks need to be able to cover increases in costs due to inflation. “And the second one is that we all know that nobody can build a long-term competitive advantage only relying on external factors such as the increase of interest rates.”
That’s why it’s important to prioritise these three themes: growing beyond the core, digitalising experiences and operations, and leveraging sustainability trends.