With one of my last visits in Tehran, I was meeting up with some of the bankers and had a interesting chat about the topics, upcoming with being now back in the normal capital markets and business field. I had the impression as it must have been the same discussion 50 years ago, as with BTX the rise of e-banking has just begun.
Open the market – create competition
These times, innovation was to bring new clients to the own counter through the internet. Innovation was fancy and nice, but no one saw the other side of the coin. This is the same as today in Iranian banks society. Everyone only sees the opportunities for foreign money new clients and a bright new world. No one looses a single thought that this will also mean, that the banks have to cope with the competition from foreign banks. And these banks are hardened through the last decades of hard competition in Europe, US or Asia.
Internet and banking – misunderstood love
In comparison, the story of internet and banking goes in the same direction. Banks used Internet to scale production or to create new products, market and productivity gains could be achieved without consequences. Internet banking, which means a real disruption, was unilaterally exploited and disruption completely underestimated or ignored.
The fall of the branch
Since the first online offering in 1976 still in the BTX today half of the stores are no longer existent. True "online" strategies, there are a few, a few online banks have found their niche, Fintechs currently show what may be possible. At that time, Internet banking has made it possible to offer the products significantly more customers than the stores at much better cost, thereby achieving economies of scale in cost and coverage. However, neither of store sales for the challenge set, yet the technology has been set up appropriate new products or forms of investment advisory. Gladly taken were the enormous savings by switching from branch accounts to online accounts. However, as customers learned to appreciate this advantage, the banks were aware that they had lost USPs. Customers need neither the bank nor the branch, but the service. Banks followed the customer and translated dedicated distribution channels with appropriate communication channels on. As a result of this online consultation stores are even less used and more jobs fall away.
Disruption loops again
The disruption starts now, as the employee of the online advisory neither needs branches nor has the same skill profile as branch employees. As a result branches and their staff are still under heavy “restructuring”. Banks now have to lift substantial restructuring costs, need for the new employees modern management and organizational forms, as they are known from other online industries, build and compete in the new environment with a growing amount of competitors. And these competitors may not know banking that good, but they no ecommerce to an extent, banks will not keep up on short distance.
Yours K-Street6 team