Neobanking is challenging the established financial industry in Switzerland with customer-friendly services, reaping high rates of growth. Classic banking providers haven't yet reached for the panic button, which may have something to do with their information headstart.
The rapid growth of banking startups such as Revolut brings along some disadvantages. One is that neobanks typically don’t operate with their own banking license. It makes them fast but forces clients to replenish their accounts on a regular basis, either by credit card or via a transfer from their traditional bank account.
This is not only a disadvantage in the sense that the product offering of neobanking is narrower than at established banks. But also, because this generates a flow of data about the use of new services by consumers.
Limited Services
The information that the established banks glean from the transfers may be a reason why many bankers remain unimpressed by the onslaught of Revolut, N26 and others. None of the companies however wanted to reveal how strong the flow has become.
The Swiss retail banks seem to feel confident about their business model given that they haven’t yet launched their own cut-price campaigns. The fact that neobanking only covers one aspect of the daily banking business is of the reasons for this, one banker told finews.com.
A Disproportionate Influence
Consumers can’t yet do without a proper bank account. To use their Revolut card, they have to transfer money from their bank to the startup’s account at Credit Suisse. N26 meanwhile uses a bank account based in Germany, while Swiss rivals Neon and Zak have their deposits at Hypothekarbank Lenzburg and Cler.
The real influence of neobanking on the revenues of traditional banks is disproportionate in comparison with the number of accounts. They have at 300,000 clients by now, which compares with 2.8 million at Postfinance, 2.3 million at UBS and about 1 million in the retail business of Credit Suisse.
Giving an Answer to the Challenge
Credit Suisse is the only among the four biggest national retail banks not to evaluate the flow of assets to neobanks. And that’s even as it launched a new unit called «Direct Banking» in the summer of 2019, which can be seen as a direct answer to neobanking.
The direct bank is also keen to know more about the needs of its clients, but seems to know less than others about the «enemy». But with the direct banking unit, Switzerland's No. 2 bank at least has an advantage over its rivals .
Because even if Swiss retail banking isn’t yet that heavily affected by the challenger banks, consumer expectations are. The banks that fail to get ready now may find it hard to catch up once neobanking is taking off for real.
