COVID-19 pushes online banking gift lenders to advance in lagging markets

Spain-based Banco Santander is among European banks that have seen an increase in the use of their digital banking platforms during the COVID-19 pandemic.
Source: Carlos Alvarez / Getty Images News via Getty Images

If European banks need a silver liner for the endless COVID-19 cloud, they will likely look to the growth of online banking. In recent years, many of the region’s top lenders have struggled to move retail customers away from capital-intensive bank branches to their less expensive digital platforms. The pandemic has changed that.

While restrictions on business openings and movements during the COVID-19 pandemic have left lending portfolios bruised, they have also helped to increase the use of online banking services in European markets by 3.18 points. percentage on average in 2020 in markets for which the latest data are available, according to S&P Global Market Intelligence calculations based on Eurostat figures.

Lenders will be particularly keen to build on progress made in key markets where digital banking has yet to be fully embraced. Spain and Germany saw year-over-year increases in online banking use of 7 percentage points and 4 percentage points, respectively, in 2020, according to Eurostat data .

“I definitively think were not Go back, “said Carl Faulkner, head of digital and channels at BNP Paribas, during a roundtable on March 23 at the Finovate Europe online conference.” It’s not a question of loss things this we have Finished; were correct discovery [during this pandemic] this digital is really Well for Easy Mass Tasks.”

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BNP Paribas SA, which carries out around a third of its activity on its domestic market, France, recorded more than 6.1 million active customers on its mobile applications in the fourth quarter of 2020, up 20.1% year-on-year. Its platforms recorded almost 4.6 million daily connections on average during the same period, a 41.5% increase year-over-year.

Eurostat data on the use of internet banking services in France in 2020 is not yet available, but the penetration rate was 66% in 2019.

Slow connection

France is one of the four major European markets where online banking penetration remains below 70%. Germany and Spain recorded internet banking usage of 65% and 62%, respectively, in 2020, according to Eurostat data. Italy’s figures for 2020 are not yet available, but the country recorded 36% penetration in 2019, 28th out of 39 European countries monitored by Eurostat.

The forced switch to online banking during the COVID-19 pandemic has helped many major banks in these markets cut operating expenses in 2020. Seven of the 10 largest listed banks by market capitalization in France, Germany, in Italy and Spain were recorded over one year. – lower operating expenses in 2020, according to data from S&P Global Market Intelligence. The average decline among these eight banks was 5.5%, according to the data, while Banco Santander SA received the largest reduction with 11%.

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Santander has been slower to convert clients to its digital platforms than some of its Spanish peers, such as Banco Bilbao Vizcaya Argentaria SA, said Sam Theodore, bank analyst and independent consultant.

In 2017, BBVA already had more digital customers than Santander currently has. It has since grown its mobile customer base to 34.5 million, while mobile penetration among its customers stands at 59.0%. BBVA’s digital success has enabled it to reduce its cost / income ratio from 54.47% in 2016 to 46.63% in 2020.

Santander, whose retail banking business contributed 46% of its underlying profit in 2020, saw a 10% year-over-year increase in the number of digital customers to 15.2 million in 2020, including an increase of 11% in Spain. The improvement in digital performance in Spain coincided with a 10% year-over-year cost reduction for Santander in the country, the largest such drop of any market in which it operates.

The pandemic-induced rush for digital platforms in Santander comes as the bank continues to downsize its branch network. In its latest round of closings, Santander announced it was closing 111 branches in the UK, its fourth largest market in terms of revenue, leaving 452 open.

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Early adopters

The UK is among the European markets with the highest penetration of online banking services, according to Eurostat data. Some 80% of the country’s account holders performed online banking in 2020, up 2 percentage points from 2019. The Netherlands also enjoys high penetration at 89%, although it does being one of the four countries to record a decline in use in 2020 among those for which data is available, down two percentage points.

The Nordic markets have by far the highest penetration rate for online banking services in the region, with Iceland, Norway and Denmark recording penetration rates of 96%, 94% and 94%, respectively.

While the pandemic has “accelerated things that were already there” regarding the growth of digital banking, it has also exposed its limits in some ways, Faulkner said. SMEs and business banking in particular can raise “many issues” and “personal situations” that require face-to-face physical interaction, Faulkner said.

“People to want at to be reassured, ”Faulkner said.They to want advice. They to want at speak at someone on a complex problem. And, Sadly, in financial services the are a parcel of complex problems. “

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Lenders may also face increased resistance to digital banking services due to prevailing attitudes towards technology and financial services in certain markets. A December 2020 study by the consultancy firm Accenture which questioned the attitudes towards online banking services of 47,000 consumers in 28 markets found that France contained the highest percentage of “skeptics” at 63%.

Accenture defined skeptics as being suspicious of technology, dissatisfied with their financial services provider, and the least confident of the four “characters” which also included traditionalists, pragmatists and pioneers. France also had the highest combined percentage of traditionalists, defined as those who “value the human touch and avoid technology where possible”, at 89%.

Nonetheless, bank executives should be thankful for the twist of fate that pushed previously reluctant customers online last year, Theodore said. This has forced lenders to adapt more quickly to the demands of the digital market than they initially anticipated, he said.

“With the pandemic, it is not Like banks have seen a chance, said Theodore.They had no other choice. Their clients moved in line, their employees moved in line, so What other could they do? “

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