Opinion : Network banking versus zero banking, who will make history?
BoursoBank, Revolut and Nickel open more accounts than any other network bank in France. But the latter still capture the vast majority of the sector’s revenues. Circle Strategy’s Christophe Baniol analyzes the situation.
In France, 2024 was the year of the online bank. Collectively, they passed the twenty-million-customer mark and now serve one in three French adults. The icing on the cake is that rising interest rates have made them profitable, often for the first time. After a quarter-century of unfulfilled promises since the advent of digital banking, online banks are now really on a roll.
So, is the battle between zero banking – zero branches, zero advisors, zero fees – and network banking over? No, because while the two models have converged in certain respects – one now offers a broad range of products and services, the other is also almost totally digitalized – they nonetheless offer opposite customer promises.
Contrasting customer promises
For the digital bank, talking to a customer is more often than not a failure, the symptom of a perfectible digital journey and the harbinger of excessive operating costs. It’s betting on a transactional and trivialized relationship with money. Its customers tend to be urban, young and on comfortable incomes, and are won over by free cards and accounts and iconoclastic marketing.
For the network bank, it’s a pain not to see a customer, because that’s how it builds loyalty and equips them with high value-added products, priced to match. It relies on an emotional relationship with money, to which it responds with an assertive promise of reassurance and an anchoring in the life of the city through the agency and its outreach. It relies on the children of its customers to renew itself and, to build loyalty, on home loans and the viscosity of the behaviors of its rich customer base.
The two models clash in a fierce battle that each prides itself on winning. Digital banking is leading the way in terms of conquest. BoursoBank, Revolut and Nickel alone open more accounts than all the network banks in France. Conversely, the latter still capture over 90% of the sector’s revenues. This huge gap between customers and revenues can be explained by the multi-banking habits of digital bank customers.The latter, by entrusting their expenses to some and their savings to others, maintain this oddity. Basically, in twenty-five years, the lines have changed a lot… and very little.
Multiply income by 10
And what about tomorrow? Will BoursoBank be France’s leading bank in 2040? Possibly, but not for sure, as each model faces a serious strategic challenge.
Digital banks will need to generate revenue per customer. To keep their shareholder promise, they will have to do so on a ratio of one to ten. Revolut, for example, valued at 41 billion euros, posted net income of less than 400 million euros in 2023. That’s a PER of one hundred, when the major French banks are under ten! We’re going to have to “principalize” secondary accounts, equip customers and start charging for what is currently free… without losing our raison d’être. This culture of loyalty and pricing will not be easy to assimilate for those who have been immersed in conquering customers and offering free services.
For network banks, the challenge is the opposite. They have to justify the prices they charge by offering a much higher quality of service than they do today. The contactability, responsiveness and expertise of advisors must be considerably enhanced. The branch, placed at the heart of the model, will become more local than ever, while back offices will gradually disappear to lower the cost base. Customer care” must become an obsession. Last but not least, social issues need to be tackled head-on to maintain emotional ties. In short, a cultural revolution is in prospect.
“Money for value” for some, ‘value for money’ for others, to each his own challenge… and questions for all! One thing is certain: the customer will be the main beneficiary of this clash of models, which will drive everyone to excellence.
Christophe Baniol is a partner at Circle Strategy
Baniol, Christophe, “Banque à réseau versus banque à zéro : qui écrira l’histoire ? ” in Les Echos, 25/12/2024