Traditional French banks under pressure as customers change


The trend is increasing: in 2019, 5.5% of customers in France changed banks against 4.8% in 2018 and 2.5% in 2014.These results come from a study by the management consulting firm Bain & Company.

One of the groups most likely to change banks are young people aged 18 to 34, with 8% doing so in 2019. The study authors believe that banks should take this trend seriously. They write: “These are the customers of tomorrow. ”

High net worth clients who earn more than € 80,000 per year are also likely to change banks, with 10% of this group doing so in 2019.

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Digital banking attracts more customers

Over the past five years, digital banks have attracted the most migratory customers. On the other hand, traditional banks lost between 0.4 and 1.4% of customers per year.

This trend was accelerated by the coronavirus pandemic because, during the confinement period, the French were highly dependent on digital banking services. The study specifies: “The period of confinement represented material gains [for digital banks] equivalent to four years on the pre-crisis trajectory.

“The adoption of digital banking could change the balance of power between banks that have successfully gone digital and those that have not.”

Traditional banks under pressure

The digital trend is a worrying sign for traditional banks, many of which were already under some financial pressure in France before the crisis. In recent years, low interest rates have reduced the margins that banks charge on loans, affecting their overall income.

These low interest rates are expected to stay in place, rather than increase – as was expected at the time – thanks to the economic effects of the coronavirus crisis.

A second study by the management consultancy firm Alvarez and Marsal found that since 2016, under income pressure, French banks have also seen their costs increase.

Mark Bennett, one of the authors of the study, says that traditional French banks have already tried to solve this problem, without success. He said news source The world: “The banks have tried to increase their volume of loans. The loaned money increased by 5.6% between 2014 and 2019 and the commissions by 6% per year. But that is not enough to reduce the margins. “

Work from home to save money

Many traditional banks are currently exploring the possibility of increasing homework in order to save on rent. Possible plans include reducing the number of offices rented and stopping the rental of expensive sites in central Paris.

Bennett says, “Banks are also reducing their dependence on expensive external service providers.” This, he says, should also help banks avoid cutting too many internal jobs.

French bank representative the French Banking Federation says banking jobs fell 1% in 2018 and 1.2% in 2017.

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