After healthcare, are banking services disappearing from our cities too ?

3 TIPS FOR TRANSFORMING AND STRENGTHENING THE BANKING DISTRIBUTION MODEL

French banks are gradually reducing their number of branches. By the end of 2022, almost 2,500 branches will have closed across France (1). This is hardly surprising, given that operating costs are high and customer numbers are falling, with the majority of retail customers only visiting branches once or twice a year. The digitalisation of day-to-day transactions, the decline in the use of cash and cheques, and a general reduction in customer loyalty are other reasons for this trend. However, the branch density remains high in France. There is still one branch for every 2,000 citizens, compared with one for every 4,000 in Germany, and the branch remains a tool for winning new banking customers. Its proximity reassures certain professions and older people who have a greater need for direct contact and advice.

So, is this the end of high street banking and the victory of the 100% digital customer journey? Is one distribution model more virtuous than the other ?

THE FRENCH BANKING LANDSCAPE IN MOTION

First and foremost, it’s a question of striking the right balance between several elements: capitalising on its strengths (e.g. territorial coverage via branch network, for example), adapting to new customer and market expectations (e.g. premium offerings such as private banking, for example), and maintaining consistency with its value proposition (e.g. availability and efficiency of advisers, for example).

The search for ways to optimise the distribution model is gathering pace and now affects all banking players. The news (2) is full of examples of this transformation of the French banking landscape.

Here are 5 trends that illustrate the changing structuring:

• Expansion of neo-banks: E.g. Qonto, the French online only bank, is accelerating its geographical expansion and now aims to have one million customers by 2026.
• Mergers of regional banks: A project to merge the Caisses d’Epargne de Normandie and Hauts de France of the BPCE group is under consideration.
• Consolidation of online banks: 20 years ago, the first online banks arrived on the French market. With varying degrees of success. Boursorama is now the market leader, while ING, Orange and Banque Postale have recently withdrawn.
• Alliances: French banks. e.g. BNP Paribas, BPCE, Crédit Agricole, Crédit Mutuel and Société Générale have joined forces to offer a one-click identification and authentication solution (‘B.Connect’) and counter the hegemony of the GAFAMs (Google, Amazon, Facebook, Apple and Microsoft) with their digital wallets.
• Partnerships: Banking-Insurance, e.g. Alan, a French unicorn in health insurance, has become the preferred partner of Belfius, Belgium’s 3rd largest bank.

To remain competitive, distribution models need to adapt to the new realities of the market and find appropriate responses to satisfy the (diverse) expectations of customers.

OUR 3 TIPS FOR BUILDING EFFECTIVE DISTRIBUTION MODELS

#1 : Agility: Knowing how to be proactive

Adapting your model means thinking in terms of movement. Digital banks are often more agile. Through their digital customer journeys, they adapt to the specific needs of certain target groups, such as SMEs and the self-employed, who are looking for simplicity and accessibility. Network banks can also be pro-active, thanks to their reputation and local presence. They can thus identify new projects emerging locally and respond to them with a differentiated value proposition.

#2: Adaptation: offering the right physical and digital network

Adapting your business model also means adopting a multi-channel and omni-channel approach. Digitalisation of operations can reach its limits when certain needs become more complex and require the support and advice of professionals. The agency/advisor/collective on the one hand and the app/website on the other are two sides of the same value promise. The main objective remains to offer an optimal customer experience, whatever the point of contact activated.

#3: Augmentation: Rethink the way you run your business

Adapting your business model also means optimising your management and control systems. Empowering managers, training teams in complex and digital products, reinvesting the time saved on administrative tasks in enriched customer interactions, etc… these are all investments that will turn teams into true markers of excellence and brand ambassadors.

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As a conclusion, traditional banks are having to rethink their distribution model to adapt to an increasingly digital world that encourages customer autonomy through online processes or applications (account management, payment methods, taking out fully digital loans, etc.), while the customer still expects and values in person advice for more complex issues (investment strategies, asset issues, etc.). Better defining and enhancing the role of the human element to complement the contribution of digital tools and AI can give them a considerable advantage over online banks.

The consulting company Spirit Advisors supports its customers in organisational issues, in particular changes to the distribution model. Created in 2016, we are specialised in the banking and industrial sectors, we base our approach on field analyses supplemented by sector benchmarking, and we are committed to achieving the objectives defined.

« Spirit Advisors is different from the other consulting firms I’ve known. They combine a wealth of industrial experience, an excellent command of the full range of lean tools and a pragmatic approach to methodology. They know how to ask the right questions that lead to finding the right solutions together » (Testimonial from a client and Executive Committee member)

Discover our client references here, and more specifically, a case study on the overhaul of a distribution model for a bank here

Sources : (1) BCE, étude 2023, (2) Les Echos, septembre 2024