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The new CEO of Credit Suisse wants to grow the bank's business in its domestic market. He faces competition from a new type of service provider that poses a threat to the established industry.

In his first interview following his appointment as CEO of Credit Suisse, Thomas Gottstein said that the domestic market was a strategic priority for the bank (the link to the German-language interview in «Tages-Anzeiger»): «In mature markets such as Switzerland, it is all about gaining market share.»

Gottstein obviously knows what he is talking about, because he was head of the Swiss division under his predecessor Tidjane Thiam. A division that in reality is akin a big bank within a big bank with retail, private and investment banking operations under one roof. He did well at the Swiss unit and Thiam didn’t (have to) cut the growth targets for the domestic arm as he did for other units.

A Foreign Challenge...

And yet, Gottstein’s message has to be treated with caution. Swiss banking is, after all, undergoing a period of change, with retail banking in particular challenged by new players that have emerged faster than some may have expected. And still, retail banking remains the bread-and-butter business of established banks.

Revolut is the best-known of the challengers. The payment app of British and Russian origin has sent the commissions charged for foreign transactions into a nosedive. Ironically, Nikolas Storonsky, the head of Revolut, used to work as a trader for Credit Suisse. Revolut claims to have 250,000 clients in Switzerland – tripling the amount it had a year ago. Quite a few of Revolut's customers are working for established rivals – bankers frequently are seen waving Revolut cards when the settle their bills in restaurants around Paradeplatz.

... and Swiss Upstarts

Revolut isn’t alone in this field. Others have joined the fray – Swiss banking apps Neon and Zak, as well as Germany’s N26, are active as well, with these challengers already boasting some 300,000 clients of their services, according to estimates by finews.com.

The figures pale in comparison with the client books of Swiss big banks. Raiffeisen Switzerland has 3.8 million clients in Switzerland, Postfinance serves some 2.9 million customers, UBS has 2.5 million and Credit Suisse more than a million customers.

It's More Than Peanuts

But high growth rates, ultra-low fees, and customer-friendly services are a headache for the established firms. «Since we adjusted our fees on January 20, we have witnessed an increase in our growth rate,» said Neon. «We believe that the established banks will be forced to react over the shorter or longer term.»

The revenues that banks have to forgo already amount to more than just peanuts. Major banks are said to be missing out on amounts that reach the double-digits. The new players may yet be loss-making, but the fees they make through the turnover generated by their Mastercards are quickly adding up.

A «Freemium» Counter-Attack

While he was in power at Credit Suisse Switzerland, Gottstein oversaw the launch of a digital strategy. In August of 2019, the bank announced the direct-banking solution as a boost for its digital services. The hope was to gain new clients with a so-called «freemium»-model, combining low fees with top quality services. Time will tell whether the counter-attack will prove successful in fending off the challengers.

Serge Fehr, a manager at Credit Suisse Switzerland, said the banks had three years to react to the threat posed by neo-banks – he may be too optimistic in his assessment.