European banks are a symbol of long-lasting security, but shifts in technology and payment processing advances could undermine their power and erode their total deposits.
There once was a time when banks did business one way. Their way. Large institutions were the only option consumers had for financial transactions, so they called the shots on things like deposit transfer processing times, fees, savings and checking account options, and so on. But now, power players like PayPal (recently spun-off from eBay) and Square Inc. have entered the scene with aggressive, customer-centric options and services that put European banks to shame. This has become a bigger concern than it was five, ten, or even twenty years ago, according to a recent report issued by Deloitte LLP.
Adjusting to the New Ways
Financial services companies that want to make it through the tremendous shifts expected over the next decade need to consider the new behaviors and needs of their depositors. Client retention is vital, but it’s not going to happen unless institutions remain competitive with their:
- Account options
- Processing times
- Interest payments on deposits
Worse, still, brick and mortar banks in Europe will have trouble gaining traction with newer, younger clientele unless they offer competitive advantages to the more convenient online account options.
Loans: Up for Grabs
These institutions aren’t losing footing only in the area of depositors. They’re also losing the war for new loans. Many crowdfunding companies, such as Kickstarter, are moving into low-cost loan territory, offering consumers an advantageous alternative to traditional lenders.
Evolving Business, Evolving Business Customers
Commercial, or business accounts, are another valuable source of revenue for European banking institutions, but the traditional approach to business account requirements and options isn’t necessarily a good fit for millions of one-person businesses using sites like eBay, Elance, and others to generate revenue. Not only are these micro businesses pulling in macro dollars with a non-traditional employee structure, but they’re also working in a fast-paced, ever-changing online environment that requires speedy deposits and real-time payments. But European institutions are resistant to the idea of allowing real-time payments, since it could result in a loss of income from fees, such as wire transfer charges.
European financial institutions that refuse to adjust risk losing their footing as small start-up financial institutions (both online and offline) crop up and offer consumers the features, fees, and services they need and want. Innovation and attention to technology are two key factors to adaptation, something European institutions may realize when they finally understand that they must adjust or die.