If we fall asleep for an instant, we may wake up to find ourselves out of the game
With unemployment in Spain ticking up again, much attention has been focused on prolonged negotiations between the country’s leading bank and the unions on a voluntary redundancy programme. This was agreed in May and could see CaixaBank take €890 million in charges to save €190 million in annual running costs.
CaixaBank is where 26.3% of the Spanish population hold their main bank accounts, putting it far ahead of rivals BBVA and Santander. It is also the country’s leading insurance company, largest asset manager and a leader in payments.
It has shown itself a master of consolidation, acquiring a string of savings and other local banks since 2008 – seven acquisitions in 10 years, with full IT integration achieved in just months. It has ruthlessly segmented its customer base and modified its distribution channels to suit them: imaginBank for millennials; a full branch network for rural areas; new store-like branches in cities, often with fewer staff but open for longer hours and offering advice not cash transactions; and more of its people interacting with customers remotely.
But it is still in the middle of a battle whose outcome remains uncertain.
“What we have to do next is more of what we have been doing to ensure we offer the best customer experience,” says Gonzalo Gortázar, who has been chief executive since 2014. “But we must do it with greater intensity and at higher speed. Technology continues to change the way customers behave. It empowers them and it has brought them closer to alternative providers of financial services who are just a few clicks away.
“Our customers are more exposed than ever both to new entrants and to established brands offering financial services. And precisely because customers move so fast, we must remind our people that if we fall asleep for an instant, we may wake up to find ourselves out of the game.”
Speaking to Euromoney before the announcement of the agreement with the unions, Gortázar explains what change means: “We have to transform our distribution infrastructure, carry on reducing the physical network but also invest in upgrading and improving what remains, focusing less on transactions and more on value-added services such as financial advice, given that we are also an insurance company and an asset manager, unlike many of the Anglo-Saxon banks.”
In case he has not been clear, he adds: “We don’t need so many branches. We will likely reduce by 800 or so to 3,600 in the next three years, which is quite significant. But we will invest €250 million in upgrading our stores. And while it is delicate to move some customers from their present branches and ask them to travel a little further, our commitment is that they will get a better service when they go into them.
“The big change we have been seeing is more customers taking up our remote offering, inTouch, which may be online but on top of the digital offering also provides a dedicated relationship manager who knows the customer and who the customer can call with a query. This is now running at a 90% acceptance rate.”
He knows, as do most bank executives, the risk that customers are less loyal to digital providers but says: “We cannot give up on the idea that a digital experience can also be sticky.
“That is what inTouch is about. We are all humans. We all like technology when it makes our life easier. But we also like to interact with other people.”
Can CaixaBank keep ahead of the game? Citi analyst Stefan Nedialkov noted after first-quarter results: “While we like CaixaBank’s unique business model, we believe most upside from bancassurance is priced in.”
Gortázar has more to say on bancassurance. When CaixaBank was founded 114 years ago to ensure the working classes had better protection against work accidents and some savings for retirement, it was more insurer than bank.
“I have seen quite a few bancassurance attempts fail because they were essentially conglomerates where the bank and insurer were bolted together but had little to do with each other, with separate people running separate models and with very different mindsets. Here we have just one organization. It’s the same branch network, the same person that can deal in mortgages and deposits but also insurance and long-term and short-term investments. That’s very hard to replicate online. Bancassurance is a powerful model – one that will survive and indeed prosper.”