Reinventing Retail: The future of banking? (2)


In the first part of this article we looked at the changing face of local banking and how players are reconfiguring themselves not only for survival but also in order to compete more effectively. In today’s article, we look at a retail banking model that has been adopted elsewhere and enquire whether the local banking sector will go the same way.
TN Bank envisages that its banking halls will offer more traditional banking services, cellphone products, healthcare products and furniture all under one roof.
While selling cellphone and health care products might simply be for the convenience of TN Bank’s customers and the generation of commission income, furniture products are meant to assist the bank in strengthening its loan book by targeting customers who want to buy furniture on credit.
What TN Bank is aiming to do is not entirely new; Kingdom Bank Limited was the pioneer of in–store banking when they introduced banking services in Meikles’ department stores.
A number of banks have been selling insurance in their banking halls for a while through the Bank Insurance Model (BIM).
This is also known as bancassurance, the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank’s sales channel to sell insurance products.
TN Bank, however, appears to be poised to take the model to new heights by not only situating its branches in retail stores to provide traditional financial services but also intends to provide other products such as healthcare and furniture.
Internationally, there are also players that have implemented similar retail banking models. For many of us, Spain evokes images of football and teams such as Real Madrid and Barcelona, and perhaps bullfighting.
The European country also provides another famous name in the form of a bank that has championed a retail strategy similar to what we are about to see in the Zimbabwean banking sector. Banco Bilbao Vizcaya Argentaria (BBVA) is the second largest bank in Spain, after Santander.
The impression one gets upon visiting a typical BBVA branch is of a large boutique rather than a traditional bank branch.
Outside the branch, billboards advertise motor vehicles, houses, health insurance and consumer electronic products, all available with BBVA financing and at a discount, thanks to arrangements between the bank and several manufacturers.
One can already see similarities of this model with TN Bank’s model based on its relationship with TN Harlequin Luxaire, the furniture manufacturer.
BBVA’s model basically involves remodelling branches to look more like retail stores and striking partnerships with real estate developers and manufacturers to market everything from motor vehicles to consumer electronics to apartments alongside its loans and investment products.
BBVA gets a commission on sales and stands ready to finance purchases with loans. It enjoys the best of both worlds.
The bank argues that its knowledge of customers’ spending habits enables it to tailor its offering for them and product sales drive faster growth of loans, insurance and other financial services.
The strategy is therefore aimed at turning the bank into the very best sales machine possible and to develop a powerful retail franchise that transforms the bank’s branches from administrative outposts processing transactions into outlets focusing on sales.
The branches are therefore made to think like shops and sell products.
This overhaul has made BBVA a leader in Spain’s fast-growing markets for credit cards, motor vehicles, mortgages and home–improvement loans.
The model is however not without its critics. Rivals of the bank contend that BBVA’s branches already handle a very large financial product range but different skills are needed to sell cars and health insurance, for instance.
The skeptics further argue that while BBVA can use these products to attract clients, selling nonfinancial products cannot be the ultimate objective of a bank.
Critics of BBVA’s strategy say they understand that it may want to maximise the value of each branch but they doubt that the strategy can be a growth driver for the bank’s overall business.
BBVA executives however insist that the retail strategy is critical to maintaining growth in the face of increasing competition.
One of BBVA’s growth strategies is to aggressively pursue the sort of clients who don’t arouse much interest among other Spanish banks, such as immigrants, young people and elderly widows.
Comparatively, CBZ Bank Limited recently announced that it planned to introduce what it called “development lending” targeting informal traders who are traditionally shunned on the grounds of their perceived high credit risk profile.
The bank said that this diversification into untapped market segments is meant to counter the effects of overbanking in the economy.
A typical description of one of BBVA’s branches that seek to attract the growing immigrant population would be something like this.
“During normal hours the branch operates like a regular bank outlet. After 3:00 pm the conventional banking area in the back of the branch is shuttered, and sliding panels create new space at the front offering services aimed at immigrant clients.
Open until 10:00 pm, it provides booths for discount long-distance phone calls, online computer access, remittances, package courier services, job referrals, cheap airfares, and even legal help to obtain residency — in addition to more conventional financial services, like savings and checking accounts, credit cards and mortgages.”
Perhaps BBVA’s retail banking model is something to emulate after all and just like the sleek and patient passing game of the Spanish national team, which recently won them the World Cup, it may be the strategy that will help local banks to strike gold again!
So are we likely to see such aggressive customer-centric business models taking root in Zimbabwe?
How far can local banks go in devising new ways to get more consumers into the bank and keeping them there as loyal, repeat customers?
Well, the work is cut out for them, so let’s sit back and watch as events unfold.

l Omen N. Muza is a banker and Managing Director of TFC Capital (Zimbabwe) (Pvt) Ltd. He writes in his personal capacity. Feedback: