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Retail banking: The real use of digital

Technology is an opportunity not a threat – international retail banks need to realize that.


Too often banks see digital technology as a threat, especially in Europe. Branches made them incumbents; closing them is a hassle. The return from investment in new technology is uncertain. 

This is the wrong attitude. The internet has been a chance for banks to boost their profitability for more than two decades – and it should help further boost profits in the decades to come. Digital banking is not just about staving off competition from new branch-free competitors. It is a means to cut the cost of serving existing customers – and new ones.

Spain is home to some of the world’s biggest retail-focused banks; technology is at the forefront of all their strategies, if somewhat belatedly at Santander. But in Spain, perhaps more than elsewhere, digital investment sometimes seems too much about shoring up their positions. 

This is understandable given how important branches have been to their profits. The relative lack of mid-cap corporates in Spain has made retail a large part of the banks’ businesses. This retail focus, rather than technology, is why their efficiency ratios are better than their European peers.

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