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Why Would A Digital Bank Have Branches? (CheBanca! case study)

The Finanser:  I just visited with Roberto Ferrari at CheBanca! in Italy.  For those who don’t know CheBanca!, it is the digital first bank launched in 2008 by Mediobanca.  Mediobanca provides merchant bank services in Italy and had never had a retail bank before.  Therefore, it made sense in the post-meltdown digital age to implement a fintech bank fit for Italy, and CheBanca! claims to be that bank.  

Anyways, being a digital first bank does not mean being a digital only bank, and Roberto took great pride in showing me his branch.

A digital bank with a branch?  Yep.  CheBanca! has launched almost 50 of them so far, with more to follow.  This has proven critical in getting trust and deposits, with the main aim of achieving three things that digital only does not achieve:

  1. Trust
  2. Brand
  3. Service

These three things are harder to achieve when you are unseen, unproven and unknown, although some are bound to disagree.  However, Roberto and his team gave me some interesting statistics that may back up this claim.

First and foremost, asset holdings in areas with a branch are 2.5 times more than those areas that are unbranched.  This reinforces item #1: Trust.  When you can see where the money goes in and out, the claim is that this builds more trust than the unseen bank.

Second, CheBanca! is gaining 4,000 new customers per month with 45% from branches and 37% from remote contact (the bulk, 30% of that 37% is generated by the internet).  The remaining balance of 18% is generated by third party physical channels.  That means a whopping 63% today is coming from direct physical contact, and demonstrates the increased trust in the branch services as well as the strength of the branch in building brand.

Third, customer behaviours demonstrate that, for service, they prefer digital with 37% of customers handling all of their transactions and operations just through digital access.  Then there are a second group of customers, 26% of the total, who deal with CheBanca! purely through remote servicing via the web and call centre.  A third group that represent around 28% of all customers, use all the access points (web, call centre, branch).   Finally, only 9% deal with just the branch and nowhere else.

However, you have to think about the first two – would they trust a pure play digital firm with zero branches? – and the latter two – for over a third of customers (37%), the branch is still important even in a digital first bank.

Interestingly, the figures continue to bear this out when you look at how customers interact with the bank, versus performing transactions.  89% of all contact is via digital access, three times the volume of contact that takes place in a branch.   Just 9% of customers visit a branch every month versus 7% contact the call centre and 42% interact via digital channels.

So there are a few things about a digital first bank branch that are different.  For example, once you get inside, it looks a bit empty.

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