Retail banking in Europe: The secret of success
In spite of great regional differences in strategies and business models, there is one essential success factor in the retail banking sector: flexibility in the organization of the branch office network is regarded as the most important lever, with regard to costs as well as results, both in Western and in Eastern Europe. Small branch offices with flexible opening hours, demand-oriented working hours for employees and performance-linked salaries are of paramount importance. As far as this is concerned, the West can learn from the East: on the one hand, over the last few years, a very efficient distribution network of small branch offices offering a broad product portfolio has been built up in CEE. Branch offices are located in shopping centers, open on Saturdays and also sell mortgage loans. On the other hand, the employees' salaries are more closely linked to performance: in Central Europe, bonus payments account for an average of almost 30 percent of the salary, while in Western Europe, the average is approximately 13 percent and in Scandinavia, it amounts to no more than 1.5 percent. Concerning the question of using employees in more than one branch office and the supplementary employment of part-time workers during peak periods, the CIS states (62 percent) and Western Europe (50 percent) show the better results.
In Northern Europe, banks (as well as customers) are familiar with technology and prepared to use it. This results in cost advantages, but also entails the risk of a loss of direct contact with customers. It may be true that the close personal customer contact of Western European institutions results in very high turnover rates per individual customer, but the large number of branch offices entails a risk of neglecting technical distribution channels. In Central Europe, growth is now slowing down, while it continues unabated in the CIS states.
As far as productivity is concerned, CIS banks still have not caught up with banks in CEE and Western Europe. However, with increasing market maturity, the problems faced by banks are becoming more and more similar: the turnover per customer must be maximized, while costs should be reduced to a minimum.
