Bank branches will save banks from digital challengers - Botin

Bank branches will save banks from digital challengers - Botin

Banco Santander intends to use a combination of old-school bank branches and a $3 billion global IT budget to beat off competition from cash rich technology companies intent on invading its territory.

In her first interview since taking charge of the giant Spanish bank, Ana Botin told the FT that the she is closely monitoring the activities of the big four consumer tech companies - Apple, Facebook, Google and Amazon - who have more cash than the banks and operate under a less onerous regulatory regime.

Contrary to perceived wisdom, Botin believes that the banking industry’s large branch networks give traditional financial services firms an edge over their deeper-pocketed competitors.

“You are not going to get married through technology. You are not going to buy a house through technology. I think that is where we are going to compete very effectively with these guys, if we can find a model that combines the personal side with the technology,” she told the FT. “The fact is even young people like to go to a branch at least twice a year. That means you need quite a significant retail presence, which they [the big tech groups] don’t have.”

Botin is no digital naysayer. In her previous role as head of Santander UK she set up a $100m fund to invest in financial technology start-ups. She says her aim is to put banks at the forefront of digital innovation as trusted safekeepers of customer data, playing to consumer fears over privacy and digital eavesdropping.

The bank has set a target of moving 45% of its customers to online banking channels over the next two years from a current base of 28%. According to a results presentation delivered to analysts today, digital customers are considered 2.6 times more profitable than regular users.

“I think of digital as a means to an end: How do I service and get more loyal customers: how do I achieve operational excellence and how do I change my culture?” she asks. “Those are my three building blocks and if you think about it, digital comes into it in every single one of them.”

Comments: (32)

A Finextra member
A Finextra member 03 February, 2015, 12:561 like 1 like

when you see that Santander has a $3bn IT budget, you begin to understand the scale of their problem!

Nick Biggam
Nick Biggam - aps - london 03 February, 2015, 19:301 like 1 like

Consumers and SME customers want their banking service providers to be accessible and easy to do business with and they want this now, not in 2-3 years time.  Other alternative providers are already able to offer this.

Brett King
Brett King - Moven - New York 03 February, 2015, 20:393 likes 3 likes

This is rubbish frankly. For $3Bn Santander could provide a digital platform that would be used 10 times a week for a 'relationship' compared with branches that might be used twice a year. Doubling down on branches smacks of poor strategy and lack of creative thinking at the board level. Let's defend against Kindle with more book stores! Customer want book stores!!!

Daniel Smith
Daniel Smith - Raisin Technology Europe and USA - New York & Madrid 04 February, 2015, 07:582 likes 2 likes

To discard this strategy as simply rubbish seems short-sighted to me. The  biggest attacks to this way of thinking always seem to come from the “Tech” players themselves who have the obligation to believe their way is the only way.

Ana Botin is both banking smart and technology smart and you have to ask yourself where does most of a bank’s revenue and margins come from, and how do I maximize the way I service those business lines? I’m pretty sure it’s not just through online channels.

Interestingly enough, what is perhaps the greatest exponent of online channel distribution and disruption – Amazon – is right now today in talks to  potentially buy some of the (about to be bankrupt) Radio Shack stores across the US.

Why? So that they can leverage these stores as showcases for their own  strategic products.

Isn’t that what branch networks of banks should be all about?

Sure, maybe you don’t need as many branches, but that sort of ROI analysis is already business as usual for banks today, not a radical change in strategy.

Brett King
Brett King - Moven - New York 04 February, 2015, 08:19Be the first to give this comment the thumbs up 0 likes

If Botin was really Tech savvy then she'd rethink this. The frustrating thing is for 20 years since the emergence of the internet we've seen a constant and sustained attack on physical distribution channels by digital. With the exception of grocery chains in the early days of the web, that has been universally successful. There is absolute no data available anywhere in the developed world where you can successfully put forward a business case for increased branch investment based on engagement, relationship or revenue. If the $3bn was spent on real relationship metrics then we'd see a split more like 70/30 in favor of digital. 

I'll say it again. This is a spectacular waste of effort in reinforcing outdated and outmoded distribution mechanics. 

Daniel Smith
Daniel Smith - Raisin Technology Europe and USA - New York & Madrid 04 February, 2015, 08:302 likes 2 likes

Who said anything about "increased branch investment"? The article says the banks is looking to move close to half its customers to online channels.

As for the $3BN amount that everyone gets so excited about, this number does not refer to investment in branch technology either. This is the global IT budget for everything from IT staff, datacenters, networks and communications, ATM networks, hardware, telecoms, software licenses, new product developments, new regulatory developments and an extremely long list of other elements including investment in new technologies and services.

For a bank with a truly global presence across mutliple countries, this is not such a big number.

A Finextra member
A Finextra member 04 February, 2015, 09:20Be the first to give this comment the thumbs up 0 likes

Consumer's want Financial Services on demand with personalized offerings and transactional convenience. This can be achieved by Digital Innovations but restricting that to branches will not serve the purpose. Therefore, branch networks will not give traditional financial services firms an edge over their deeper-pocketed competitors.

It's very important that IT budget is spent on the right areas to drive the business innovation and having branches in the top list may not be the right choice.

It was also surprising to have the quotes like "You are not going to get married through technology. You are not going to buy a house through technology." This is already happening! Marraige counselors having digital presence are driving millions of marriages across the world. Real estate portals (i.e. zillow, realtor, magicbricks etc) are ky influencers in decision to buy home. Now it's upto how can Financial Services be integrated with these changing trends and drive the customer satisfaction.

Michael Wright
Michael Wright - Tilte, Taxd, Welleasy - London 04 February, 2015, 09:45Be the first to give this comment the thumbs up 0 likes

Botin's quote "even young people like to go to a branch" seems to be the real talking point.

No-one 'likes' to go to a branch - but in some circumstances they are forced to by the bank's own process and interpretation of the regulations for KYC and risk-based events.

For Brett's vision of Bank2.0 to be truly realised, these last ditch visits to comsumate a transaction would need to be eradicated by smart tech.

But don't knock Botin's commitment to driving digital processes through a 150 year old institution. 

A Finextra member
A Finextra member 04 February, 2015, 09:481 like 1 like Whilst neither Brett King nor I can be viewed as being entirely dispassionate on the subject of digitising consumer access to Current Accounts, I think the debate here is in danger of missing the point. The value of retail footprint is hard to prove and the question of whether it is necessary is unanswered and frankly I don't care one bit. What is clear is that spending £3bn on "IT" is a Big Ticket reflecting the underlying issues faced by the banks with their unmanageable legacy systems, outmoded and largely non changeable business model and embedded ways of thinking. This retains the high costs and poor experience for the mass market and it is why the banks are so utterly vulnerable to new entrants with new models.
A Finextra member
A Finextra member 04 February, 2015, 09:492 likes 2 likes

Surely, more and more customers are using digital channels and services for access and convenience. I'm sure that branch networks - having the same and only functions as today - are not sustainable. There are lots of things which still can be done only in branches today and frankly it does not make sense. (except regulations and banks playing catch-up with technology and customer needs, of course)

Having said that, there are quite a lot of people - at least where I live, this is still the majority - who choose their bank based on who has the nearest branch to their home and how many ATMs that bank has. This generation will be with us for 30-45 years.

Banks can and will change, technology does change, but the change in people's minds and habits is the slowest one.

Michael Wright
Michael Wright - Tilte, Taxd, Welleasy - London 04 February, 2015, 10:241 like 1 like

Alex's point on legasy systems is a good one - it's incredibly hard to implement the change that is required to ditch 50 year old systems and start again.

But the risk is that you will become easy pickings to new entrants that don't have the same issues. 

A Finextra member
A Finextra member 04 February, 2015, 11:52Be the first to give this comment the thumbs up 0 likes

Vernon Hill was most probably right saying

"The big banks can’t change. It is almost hopeless to fix the situation. No one has enough money to fix this. That is sort of the problem here."


A Finextra member
A Finextra member 04 February, 2015, 12:021 like 1 like

Botin is demonstrating true banking pragmatism. She is no fool and realises that digital financial services are superior. So I think we need to ask why she says what she says.

Santander have a large branch network. There is some demand for this high street service and in any case the property lease or ownership means they are going to continue running branches.

While digital is clearly more profitable and the way forward there is still money to be made from branches, especially via older customers (I can't believe 'young people visit twice a year').

Looking further ahead one can imagine the branches being used to provide video enabled remote financial advice and obviously showcasing their products and services as regular retailers do.


João Bohner
João Bohner - Independent Consultant - Carapicuiba 04 February, 2015, 12:39Be the first to give this comment the thumbs up 0 likes


THAT'S the point!

"The more direct control that a customer has to understand its financial position, greater confidence it will have in the bank holding its assets."

So, it doesn't matter if it is mobile, ATM, Branch, videotext, beacons, smoke signs, etc.

Then, what matters is that the customer does control its financial position (not only current account) at any time, any place and by any means.

There won't be a 'branch network', there will be an omni network handling a single source of knowledge.

It's more than time to replace ('transform') the 50 year old architecture by a new one.

Just remembering: In today's market there is no 'best' coresystems, only 'least worst' ones, since all treat the banking business by line-of-business instead of corporately! (and they are very expensive...)


Paul Love
Paul Love - Konsentus - Nottingham 04 February, 2015, 13:433 likes 3 likes

The branch is the bank - is the mantra of Handelsbanken, who are the now fastest growing bank in the UK.

I agree with all the comments above that visiting a typical Branch is pointless, however this is because those typical branches have become mere service channels with no authority to deal with customers directly.

A Branch without a proper Bank Manager offers little more benefit than an ATM.

Many bank branches are now full of "helpful and friendly staff" which are not able to actually help customers. This is not a good distribution channel.

Devolve back some responsibility, allow branch staff to make decisions, and make it worthwhile for customers to visit a branch and the business will follow.

Of course we all agree that successful banks still need great online self-service capabilities, but these should complement a great Branch experience rather than replace it.


Daniel Smith
Daniel Smith - Raisin Technology Europe and USA - New York & Madrid 04 February, 2015, 13:572 likes 2 likes

Paul - I couldn't agree more. Branches and all other channels should complement each other. They're not mutually exclusive.

In the same way that some "traditional" processes and systems are needed for a bank to operate. Doesn't mean those traditional systems cannot be improved, often dramatically - but they provide services and internal functions and controls where no new Fintech is really going to go.

They (old and new systems, branches and alternative channels) therefore need to learn to work together in the best possible way to optimize a client's experience and drive efficient, profitable relationships and transactions.

A Finextra member
A Finextra member 04 February, 2015, 16:561 like 1 like

Some really interesting debate on which I'd like to add a slightly different slant. I agree with many that the customer wants choice in the way they interact with consistency across the touchpoints. For some occasions (and some customers) a branch may be the best route for a discussion, though Paul's comment about disempowerment of branches is spot on. For these occasions and customers the bank with branch retains an advantage.

However the thing I really wanted to comment on is where much of Santander's $3bn goes, and that's on the legacy, not the shiny new digital stuff. For most established banks this is a painful, messy, expensive heritage that they wish they could fix but they can't work out how. Most of the shiny new "digital disrupters" keep very quiet about the fact that they can only operate by riding upon services provided by these messy, expensive heritage infrastructures.

At least Brett's digital bank was honest about it ("We are working with some fantastic banking partners who do the core banking stuff" -

And there lies the key. This industry remains for the most part vertically integrated: my Santander branch sells and services only Santander products. But the digitalisation of delivery may be showing us the way that this industry nees to split, into providers of the infrastructure (the systems of record) and providers of the service (the systems of engagement). And the Santander's of this world have to decde which side they want to be on. Or perhaps be one of the few big players doing both, but separately.

A Finextra member
A Finextra member 04 February, 2015, 17:55Be the first to give this comment the thumbs up 0 likes Mark My view is that, in the UK at least, we have a pretty worldclass banking infrastructure. All the new players need to access this, and most is owned by the banks or Visa and MasterCard, but that infrastructure is not to be confused with what the banks have in their own back office, which is a ghastly mess of old and new systems held together by middleware. The infrastructure that we new players access is the utility element, not the bank bank office (and certainly not in Santander's case). As for the role of banks: great at stewardship of money (we keep Ffrees' customer money safely stashed in a single UK bank, and they are clearly good enough at B2B relationships with eg. Ffrees, but they are now unable to provide innovation, service and a business model to support modern human beings fairly and well. You are right to warn against bank bashing, except when it comes to them no longer being fit for purpose for consumers!
João Bohner
João Bohner - Independent Consultant - Carapicuiba 04 February, 2015, 18:10Be the first to give this comment the thumbs up 0 likes

Complementing my previous comment.


To leveling the understanding:

             This difference should be taken in account.

There is a fundamental difference between the banking business and all other businesses: The bank business 'holds' the client assets.

Other businesses need to 'sell' their assets to customers.

This difference is crucial.

So, the differential focus is to ensure the maintenance of customer assets safely and reliably, while providing the customer complete control over the management of their assets.
The customer should have its tools (not bank tools) to handle/use its assets properly.

Only then the bank will offer the 'products' for the handling of customer assets, according to the banks interests!

A Finextra member
A Finextra member 04 February, 2015, 18:521 like 1 like

The headline using a quote from the new CEO to promote branches as a differentiator has set off a fire storm of comments. Good. Look not just at what is said, but at what is being done. Goal is to increase digital to 45% vs 28% today. Although it has actually reduced branch count in Spain, a big bank like Santander is not going to change over night, nor is it going to close its ALL branches and fire all those employees.


Richard Sanders
Richard Sanders - Hermosa Consulting - Southend on Sea 05 February, 2015, 11:00Be the first to give this comment the thumbs up 0 likes

An interesting debate. The fact that many other banks in Europe, the US and APAC are spending money on either increasing the technology in their branches, downsizing but increasing capabilities, virtual tellers etc - plus making them more 'green' and automated suggests Botin is not alone in her thinking at Bank Executive level.

The branch is a channel many people still want to use and it does complement other channels. The key is keeping them relevant to the customer base of all ages. Silver surfers are making greater use of the internet but also like to use a branch for some transactions

James Piggot
James Piggot - Finastra - London 05 February, 2015, 17:02Be the first to give this comment the thumbs up 0 likes

Santander spend just over 2.5 billion EUR on their IT infrastucture and they have just made a profit of 5.8 billion EUR, how does that compare with other large multinational banks such as HSBC?

I don't think transitioning from bricks and mortar to digital is cheap, quite the contrary as investing in getting the right people and the right ideas is expensive, look at BBVA talking about investing in artificial intelligence and spending billions of euros on digital transformation alone, and saying:

The effort has yet to reap any visible swing in revenues, but Gonzalez is banking on a collapse in costs as BBVA moves more customers to online and smartphone banking, noting a 104% growth rate in mobile banking customers over the past year.

On that basis the question is whether Santander is spending enough on technology?


A Finextra member
A Finextra member 07 February, 2015, 17:55Be the first to give this comment the thumbs up 0 likes

The banks have been slow of the starting blocks but have the greatest oppurtunity to leverage their trusted (dont know why but still are!) position as one of the most frequently used apps on smartphones. When they link, offers, proximity alerts and enable payments across a wide range of platforms they will prosper YAAP is a good example of this potential. Santanders investment along with Telephonica, IBM & others investment in Monitise PLC demonstrates where they see the future.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 February, 2015, 10:45Be the first to give this comment the thumbs up 0 likes

@JamesP is spot on: If the digital-only model really had such a low-cost footprint as it's touted to be, why're UBER, OlaCabs and other "asset-light aggregators" raising 100s of million / billions of dollars of capital? Meanwhile, when was the last time anyone bought a financial product from a remote channel? I thought so, too. IMO, therein lies the Secret Of Survival Of Bank Branches.

James Piggot
James Piggot - Finastra - London 09 February, 2015, 11:25Be the first to give this comment the thumbs up 0 likes

Sorry Ketharaman I am not defending Bank Branches and I am very much an advocate of digital channels!

I was pointing out that digital innovation is not necessarily cheap and may not immediately have an impact on profits.

But the danger for banks that do not move to digital channels is that their competitors will have dramatically lower costs per transaction which will potentially lead to mass extintion of banks that do not move over.

Hence the comparisons with UBER and the taxi industry where slow moving incumbents are under pressure from a fast moving digital innovator that is bypassing the friction from regulators. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 10 February, 2015, 07:361 like 1 like

@JamesP: I was endorsing only your statement that "digital innovation is not necessarily cheap and may not immediately have an impact on profits". Personally, all my banks have expanded adequately into digital channels, while at the same time using their branches to do what they do best in branches, namely, sell. With whatever mix of channels they have currently, the banking sector's profits are are near record highs ( If digital-only competitors have such low cost of transaction, why're they still dependent upon VC funding or selling out to banks? If anyone is going to become extinct, it will be the VCs (pre-IPO) or the common man (post-IPO) who fund them at their inflated valuations.

A Finextra member
A Finextra member 10 February, 2015, 09:021 like 1 like

Ketharaman's thoughts merit response. I can only comment on Banks from a UK perspective.

UK Banks are really struggling.  Not because they are bad businesses, but because they are burdened with terrible legacy both in IT and operations. On top of this there is a perfect storm of other issues (increased capital requirements, mind boggling compliance, ethical scandals and fines/reserving, ring-fencing of profitable arms etc.  It is a credit to their strength and resilience that they plough on, operate worldclass infrastructure, and continue to be the backbone of the UK economy. But in effect they are really backs to the walls.

So, this is NOT about bank-basking if you feared that.  This is about a moment of massive dislocation, or in VC-speak: "market disruption".  It is a one-off, similar to what happened in the music industry and travel sector. The banks though, to their credit, see it coming, and their only possible ways of fighting it are:

1. Incremental change:  in business school language this is the extension of the life cycle of a dying model by making whatever short-term changes you can to prolong a cash cow.  In the end the changes cost more than they are worth and eventually the model is abandoned.  This has perhaps 10 years to run.  Maybe 5 years.  In extreme forecasts 3 years.  Breaking waves break fast and flood the existing villages.  Look at iTunes.  Where was it 10 years ago?

2. Acquire or build new models:  this Ketharaman is what you see as VC-backed unprofitable enterprises selling out to banks.  The start-ups may sell but not because they cannot succeed but because the offer is so good and the future is so much easier when you have the wealth and power of a major corporation behind you. (My current view is that this is a short-term mistake, but then no-one has yet offered our investors $1150 per customer, as Simple apparently got).  Some banks will try to build their own, but will be too slow and make mistakes and get left behind, but, as Microsoft did in the 1990's with PC s/w technologies, the big guys will wait and cherry-pick de-risked players with great futures (and damn the short-term financials).

So it is not about who is making money today, or over hyping valuations. This is the start of a market change, where the banks will survivce as the Big Beasts by acquisition of the new models and other banks will lose their way.  And that is why you see the flows of money into digital players at strange prices.  In 10 years time those prices will look a snip.




Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 February, 2015, 13:01Be the first to give this comment the thumbs up 0 likes

I could claim that there won't be any independent neobanks left in 10 years. Crystalball gazing is easy but it means nothing - like this  Mobile Commerce article says, "Each of the last 5 years were (sic) deemed to be the ‘tipping point’ for mobile payments". To me, the here and now matters much more. And, on that count, banks are doing very well, thank you. Per the WSJ article I've cited earlier, US banks' profits are at a record high. According to FORTUNE (, Santander - a Spanish bank - made a profit of EUR 5.8B, which was up by a whopping 104% from the previous year. Even if there's a reliable source to back the sweeping statement that "UK Banks are really struggling", I strongly suspect that multibillion dollar fines have contributed to that situation far more than any right or wrong decisions around channel mix.

Gearoid Power
Gearoid Power - antuar - Dublin 12 February, 2015, 16:26Be the first to give this comment the thumbs up 0 likes

Maintaining those all those legacy systems in the banks does cost a lot, no matter what the geography.  Some say too much!

Removing branches is seen as a good cost saver when you look at the cost per transaction when compared to digital channels, and so is an easy target for the technologists or financial roles to reduce overall operational costs. 

There are still functions that the branch provides that the digital channels can’t. Functions such as a high street advertisement; service location; giving assurances to the customer base that the bank is ‘real’ etc. (more points covered above). There is no doubt that the current branch networks and systems are not fit for purpose (they are transaction-centric and not service-centric; some branches are physically larger than they need to be; there may be more branches than what may be required; they can often fall behind the ease and experience of what is offered online). 

Keep in mind that branches have not had much of those large IT budgets allocated to them as banks (rightly) embraced the digital direct channels to fulfil customer requirements and changing culture and consumer behaviour. 

Revamping the branches to work as part of the overall offering of a bank and to have them part of the complete omni channel offering needs to be done…..if the divide between digital and branch is 70/30 as stated above, there are still 30% of customers that prefer the branch: should they be forced to the digital channels against their wishes?  If so, will they remain in that financial institution?

The question is: “How do you maximise the benefits of the existing branch network that 30% of your customer base prefer (and maybe even some of the 70% use)?”  To reiterate above….the branch and digital channels are not mutually exclusive, there should be a considered “Flicks AND Mortar” approach.


Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 February, 2015, 06:47Be the first to give this comment the thumbs up 0 likes

This just out:  

"HSBC reported a 17% fall in profits to $18.7bn (£12.2bn) after a "challenging year" in 2014. The bank attributed the slump to the negative impact of a series of fines, settlements and customer redress." (Source: 

As I'd suspected, channel mix - or, while on the subject, legacy systems - had nothing to do with why UK banks are reportedly struggling. 

On another note, does a $18.7B profit really sound like a "struggle"?

James Piggot
James Piggot - Finastra - London 25 February, 2015, 09:59Be the first to give this comment the thumbs up 0 likes

Not sure I would classify HSBC as a UK bank, it is a London/Hong Kong/New York bank ?

It depends on the rate of return that the 18.7B USD profit represents for the capital of HSBC. They are paying a dividend and the return on equity is around 7%, given the record rises in the stockmarkets in which HSBC is listed over the past few years this may or may not delight their investors.

JP Morgan in the US has just announced it is closing 300 branches in the US over the next two years due to customers using mobile banking. They are moving staff from being tellers to advisors which agrees with what we have been discussing in these comments. They do say cost per deposit has been reduced by 50% as customers move away from using tellers towards ATMs and mobile deposits.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 February, 2015, 10:58Be the first to give this comment the thumbs up 0 likes

Lest there be any doubts, HSBC is a UK bank and one among the Top 4 UK Banks at that.

"HSBC Holdings plc is a British multinational banking and financial services company headquartered in London, United Kingdom."

"The UK-based bank..."

$18.7B is a huge profit, not a sign of struggling. Low ROSE may - repeat, may - be a sign that its investors are struggling. But that's another topic.