Western Europe: Wealth managers unlock Italian digital banking


Dominic O’Neill
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Fineco share price shoots up; rivals set up similar businesses.

When it comes to capturing retail clients, ING has not yet enjoyed the same level of success in Italy as it has in Germany or Spain. Chief executive Ralph Hamers admitted this much to Euromoney in August, blaming Italy’s general openness to digital channels, though he predicted a shift would come that could allow online banks like his to put on exponential growth.

However, a surge in digital banking is already happening in Italy, according to locals, although in a different way to ING’s purer online approach. They point, for example, to the share performance of Finecobank, which describes itself as the “direct multichannel bank” of UniCredit, Italy’s biggest bank.

Our sails are in the
right direction

Alessandro Foti,

Fineco’s shares almost doubled in the year following its IPO in July 2014. Its 2015 first half profit rose by almost a third, to €93 million, thanks to strong increases in revenues and a cost-to-income ratio below 45%. That contrasts to the group’s stagnant revenues, and stubbornly high cost-to-income (about 60%). UniCredit’s share price in late August was roughly similar to a year before, while shares in Italy’s second biggest bank, Intesa Sanpaolo, have risen almost 50%.

Fineco’s chief executive Alessandro Foti says what makes it successful is complementing an online banking model for day-to-day transactions with a network of financial advisers, working from cashless offices scattered across Italy. “You can’t simply divide clients into either purely online or purely physical,” he says. “The reality is that clients use their bank according to their needs.”

Foti has run the bank since its launch in 1999. By 2001, according to the bank’s website, it had become Europe’s biggest online trader, and it remains Italy’s biggest equity trading platform today.

But Foti says Fineco’s growth has recently accelerated. In 2014, it saw €4 billion of net inflows (assets under management and custody, and online deposits) compared to €2.5 billion in 2013. In the first seven months of 2015 alone, inflows reached €3.2 billion. Foti says the fastest-growing segment is customers with more than €500,000 in assets, which already account for 40% of clients’ funds.

Italians have become more comfortable with internet banking over the past two years, according to Foti, thanks to better broadband infrastructure (though it is still patchy) and as smartphones and tablets have spread, including among the older generation. He says the sovereign debt crisis and rock bottom rates have also hurt savers who were concentrated in term deposits or Italian government bonds and real estate (which he says is in a structural bear market).

“There’s a boom in advice requests from clients, at the same time as the rapid digitalization of society,” says Foti. “We’ve been able to capture both these trends.”

Following suit

Other Italian banks are following suit, fusing online banking and brokerage platforms with physical networks of financial advisers – capturing digitally-savvy transaction banking customers, as well as wealthier clients who are looking for in-person advice but who are happy to do their day-to-day banking online.

In May, UBI Banca (Italy’s third biggest bank by market capitalization) said it was merging two units, UBI Banca Private Investments, and IWBank. That effectively added a network of financial advisers to its online bank, Italy’s second biggest stock trader after Fineco.

With around €12.8 billion in Italian savings, and 200,000 clients, the new entity has a long way to go to catch up with Fineco, which has around €58 billion and more than a million clients. IWBank Private Investments also has far fewer advisers (around 800 versus Fineco’s 2600) although by the number of its offices it is closer (around 200 to Fineco’s 330).

Banca Monte dei Paschi di Siena, Italy’s third biggest bank by assets, has also shifted wealth advisers (along with some clients) to a new online banking platform Widiba, which it officially launched in September last year.

Further reading
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Digital banking:
Clouded thinking

The new bank, unlike Fineco and IWBank is not active as a lender, but has already gained some 130,000 clients and €6.5 billion in assets under management. Widiba is benefiting from the tendency for the under-40s to see the traditional banking industry as “old, and unable to provide a good experience” according to Massimo Giacomelli, head of Widiba’s adviser network.

“The online banking market in Italy has changed a lot in the past year,” says Giacomelli. “Italy is a country where online banks can grow; our numbers demonstrate that.”

Like Fineco, IWBank and Widiba make more use than ING of face-to-face wealth services, which they provide at offices and clients’ homes. “It’s the advisers who transform liquidity into high-value products,” says Giacomelli. “You need a human touch, and that can’t be digitalized.”

US banks focused on brokerage and wealth management like Charles Schwab and Ameritrade are in some ways similar to Fineco given their small advisory-focused networks and strong technology platforms. But, according to Foti, this kind of model is especially suited to Italy, which he says has a relatively high median level of wealth (more evenly-distributed than in Germany, for example).

“Our sails are in the right direction,” says Foti. “There will be a convergence towards our kind of business – a small number of branches, heavy reliance on technology, and a network of financial planners.”