The precedent for Goldman Sachs’ recent move into retail banking (GS Bank) was set in 2008 by Alberto Nagel, CEO of Italy’s Mediobanca, who not only created the digital retail business model for investment banks, but did so in a far more challenging market.
“The Great Recession was just starting, and he saw the opportunity to innovate our business by improving our liquidity through new sources of capital,” explained Roberto Ferrari, CheBanca’s General Manager. CheBanca is the online banking arm of Mediobanca, the country’s largest investment bank.
“We wanted to open consumer savings accounts, and since we didn’t have a retail banking presence, we believed our best strategy was to use digital channels.”
What might now seem like an obvious decisions wasn’t that way 8 years ago, however.
Digital banking in Italy was all but unheard-of in 2008, and overall online penetration was somewhere near 10%. There were more geophysical bank branches than at any time in history. The first iPhone wouldn’t be available in Italy until late that year. As the country’s economy entered a recession in Q2, consumers would understandably get more cautious in their decision-making, especially when it came to their finances.
“It took courage from our board and shareholders to make the investment,” Ferrari said.
It also took innovative thinking. Instead of launching the bank only online, it started with reimagining new branches as stores where bankers could educate customers on using technology, as well as interact with them more informally. It purposefully didn’t recruit bankers for its staff, but instead drew from high street retailers, and people from fashion, electronics, and other industries known for customer service.
“Teaching them about our products was a lot easier than trying to teach them to be good with customers.”
Ferrari also noted that CheBanca always saw itself as “a digital multichannel company that happens to be in the financial sector.”
Another strategy was to position those retail experiences as more advisory than transactional, to make it easier to migrate customers to its digital channels. Ferrari tells stories of its bankers explicitly showing customers how to accomplish tasks from home. Mediobanca’s reputation as a successful investment bank probably supported that positioning.
“After our first ad campaign, we attracted more customers than we anticipated and, after two years, we were larger than many digital-only banks today,” Ferrari said. Perhaps just as importantly, CheBanca saw its customers move to online, and then mobile engagement, just as it had hoped.
Today, 98% of CheBanca’s transactions are digital, and its 50 branches focus on mortgages and other higher-value advisory services. Its NPS score is 42, and it currently contributes 30% of the consolidated group profit.
CheBanca continues to innovate its retail business model, having announced plans to buy Barclay’s Italian retail banking business, which will close to double its customers and assets. It has experimented with mobile payments over the past 18 months, has just launched a robo and educational advisor, and is developing a new generation digital offering. As one of the first banks to embrace an API gateway, it’s working with 18 fintech startups on ways to make its services not only accessible, but open.
“We’re a platform, not just a bank or retail chain,” Ferrari added. “We are moving in the direction of being a marketplace for services, whether provided by us or from our best partners and suppliers.”
“The environment continues to change.”