Friday 2 November 2012

DANISH BANKS (2)

Denmark still has a lot of small banks, including the one I use. The aftermath of the financial crisis has led to some bankruptcies, mergers and consolidations; but there are still many more banks than in (say) the U.K., which has ten times the population. It seems that Danes like local branches populated with humans, and are prepared to pay for that privilege.

Which makes the new strategic plan announced this week by Danske Bank, Denmark's largest, somewhat surprising. Basically, it is going to move towards the British model. Lots of branches, particularly in rural areas, will close, and 1,000 people will lose their jobs in addition to the 2,000 already earmarked to go. Customers buying more than one product will be subject to more intensive advisory services; those with just a current account and not much else will be encouraged to stay at home and make their transactions over the internet. Pensioners and others who have trouble with computers will wither on the vine.

Danske Bank doesn't earn enough money, and the strategic plan aims to rectify that. However, the main reason why the bank isn't profitable has nothing to do with pensioners in local branches (who provide a steady, and cheap, source of deposits) but catastrophic investments in banks in both Northern and Southern Ireland, in the Bernie Madoff scam, and in a host of duff property loans. Merely stopping doing that and similar things would do much to the bank's bottom line.

And what will be the long-term effect of reducing the amount of human contact with its customers? My prediction is that it will be sharply negative. And rightly so.

Walter Blotscher


Posted by Walter Blotscher at 22:59

2 comments:

  1. Joachim Satchwell3 November 2012 at 18:34

    You are correct in your short term prediction, but the long term one I disagree with.

    Firstly, online is the future. Online services will save time and resources for the bank, and lower transaction times for the individual. My local bank still requires me to show up to order foreign currencies, and if I want to transfer money internationally I have to print out a form, fill it in and sign it, scan it, and then send it back. I am switching bank the minute I get back home!

    Second, the idea of brick and mortar banking is limiting the vision of the future. Google Wallet (a service allowing you to use your smartphone as a wireless credit card) or the Octopus card (Hong Kongs nifty metro / bus / shopping debit card) is already pushing forward. The Economist recently published a special report on the trends: http://www.economist.com/node/21554742.

    Sure, personal interaction might be important, but it is excessive. You need hospital assistance when you get hurt and need x-rays / surgery, but that doesn't warrant building a hospital every 5 miles.

    Solution idea: Cut the number of branches in half, but keep them open for longer, say till 8 PM (so that people who work till 4 PM can actually go there after work). My prediction is people will still go when they feel they have to (pensioners will drive the extra 5-6 miles), but your costs just dropped dramatically.

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    1. Walter Blotscher6 November 2012 at 23:28

      Hi Joachim,

      The reason I disagree with you is that I have seen that banking future, in the U.K., and I don't like it. A few big banks, but very few people to talk to, or customer service.

      I also think that the hospital analogy is a bit overdrawn. Most people would prefer never ever to have to go to hospital; you can't say the same for a bank.

      Regards,

      Walter

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