《安永&圣加侖大學：2035年瑞士零售銀行展望報告：十大核心命題（英文版）（94頁）.pdf》由會員分享，可在線閱讀，更多相關《安永&圣加侖大學：2035年瑞士零售銀行展望報告：十大核心命題（英文版）（94頁）.pdf（94頁珍藏版）》請在三個皮匠報告上搜索。

1、Retail banking 2035A study by EY and the University of St.Gallen2|Retail banking 2035 A study by EY and the University of St.Gallen3Retail banking 2035 A study by EY and the University of St.Gallen|Table of ContentsEditorial 4Introduction 6Look back at 2020 scenarios 10Our 10 current propositions 15

2、 Proposition 1:Margins in retail banking will continue to fall incrementally in the long term.16 Proposition 2:Innovative technologies will lead to greater competition in the medium term.24 Proposition 3:Pressure on retail banks from regulators and society remains high.32 Proposition 4:ESG initiativ

3、es do not produce any material added financial value for retail banks.38 Proposition 5:Traditional retail banking business models are not a long-term guarantor of success.46 Proposition 6:New ways of delivering customer advice are needed to tap additional customer revenue potential(type of service p

4、rovided).54 Proposition 7:To secure customer lifetime value,retail banks must transform themselves into an integrated financial services provider(content of service provided).60 Proposition 8:Rising customer experience expectations in all channels are leading to increasing costs for retail banks.66

5、Proposition 9:Retail banks will increasingly have different levels of vertical integration.72 Proposition 10:Todays employee profiles are inadequate to meet future requirements.78Institution-specific questions 84Probability of disruptive changes 88Appendix 91Institutions participating in the survey

6、91Endnotes 92Authors/contributors 93Disclaimer 944|Retail banking 2035 A study by EY and the University of St.GallenA study by EY and the University of St.GallenIn 2012,EY published a highly acclaimed study on retail banking in 2020 with the University of St.Gallen.A lot has happened since then.And

7、yet,despite all the challenges,the Swiss retail banking business has proved to be stable and resilient and even achieved record results in 2023.According to the EY Banking Barometer 20241,confidence is high:Around 84%of the cantonal and regional banks surveyed are forecasting continued growth in inc

8、ome in the short term,while around 82%are optimistic in the long term.But is this confidence misplaced?What is the outlook from here?What issues will banks focus on going forward and how might retail banking differ from today in 2035?The study“Retail Banking 2035”,which EY Switzerland has written in

9、 conjunction with the University of St.Gallen in 2024,is designed to provide answers to this question.The idea and concept of the studyColleagues from the Swiss Institute of Banking and Finance at the University of St.Gallen and EY together devised a number of propositions and questions relating to

10、the future of retail banking in Switzerland.In devising these propositions and questions,we gathered the views and expectations of experts from various disciplines.These included banking consultants and auditors,specialists in information and communications 1 cf.EY,2024technology(ICT)and sustainabil

11、ity,as well as experts from outside the financial sector,e.g.the retail and consumer goods industries.A time horizon of around ten years may seem long or short depending on your perspective.You might conclude that a lot has happened in the last ten years or alternatively that,fundamentally,very litt

12、le has changed in retail banking in Switzerland.Either way,the longer time horizon provides scope for more ambitious propositions and more creative ideas.In in-depth discussions,we considered issues that could shape the retail banking business in 2035 and asked representatives from the industry whic

13、h areas they expect innovations to happen in as a result of forces such as technological developments,new growth potential or changes in business models and vertical integration.The study is a joint project and the results are primarily based on the fascinating contributions from representatives of

14、33 retail banks.The participating institutes are listed in the appendix.The study covered all four language regions of Switzerland.We would like to thank all those who took part for the enthusiastic discussions and the valuable insights they contributed.We hope you enjoy reading the report and find

15、some stimulating insights in it.We look forward to further interesting discussions on this topic.Prof Dr Markus SchmidUniversity of St.GallenSwiss Institute of Banking and FinanceProf Dr Andreas BlumerEY Switzerland Financial Services PartnerRoman SandmeierEY Switzerland Financial ServicesPartner,He

16、ad of StudiesEditorialFrom left to right:Prof Dr Andreas Blumer,Prof Dr Markus Schmid,Roman Sandmeier5Retail banking 2035 A study by EY and the University of St.Gallen|6|Retail banking 2035 A study by EY and the University of St.GallenA study by EY and the University of St.GallenImportance of the ba

17、nking industry for the Swiss economyIn its annual Financial Stability Report2,the Swiss National Bank(SNB)analyzes the importance of the banking industry for the Swiss economy.According to the 2024 Financial Stability Report,the banking sectors assets amounted to around CHF 3,400 billion at the end

18、of 2023,which is equivalent to around 430%of Switzerlands gross domestic product(GDP).By way of comparison,the SNB notes that this ratio is 340%of GDP in the UK and 100%in the US.The banking sector also contributes around 5%of value added in Switzerland and employs around 110,000 people.According to

19、 a publication by the Swiss Bankers Association(SBA)3,with“over CHF 1,000 billion in mortgage loans,around 22 million debit and credit cards issued,more than 160 million card payments and over 12 million cash withdrawals monthly,retail banking is a mass market business that is central to the Swiss e

20、conomy.”Swiss banking business highly profitableIn its Swiss Banking Outlook of March 2024,the SBA4 communicated positive earnings expectations overall for the Swiss banking center.It expects the Swiss banks aggregate operating profit for the current year to be similar to the record year of 2023.Net

21、 interest income is expected to decline from last years extraordinarily high levels due to falling interest rates and growing competition,but the SBA expects this to be compensated by increasing fee and commission earnings.While growth is expected in the lending business,it could be below the averag

22、e of the last five years.Meanwhile,declining construction activity and the continuing high interest rates are having a dampening effect on the mortgage business,which is important for retail banks.A 2024 study on European retail banking5 by the consultancy firm Kearney also shows that Switzerland is

23、 at the top of the rankings in terms of profitability.Income per client of EUR 1,901 is more than double the median of EUR 889 for 13 western European countries.Switzerland also leads the way in profit per client at EUR 967 compared to the median of EUR 400.2 cf.SNB,20243 cf.SBA,20234 cf.SBA,20245 c

24、f.Kearney,2024Backdrop and key developmentsThe financial and economic data set out above are just one aspect to take into account when thinking about retail banking and how it might develop.Retail banks are typically deeply rooted in their region and close to their customers.As a result,they are rig

25、ht at the forefront of economic,political and social developments and have to adapt to them or try to play an active role in shaping them.Customer needs are changing and banks have to adapt to these changing needs,ideally anticipating them and fulfilling them proactively.Technological developments a

26、nd innovation are other key drivers of change,even if it is not always clear when something is truly innovative rather than just the ongoing process of technical improvements.Technological and digital developments will shape all retail banks and history shows that innovation cycles are becoming shor

27、ter and the pace of innovation is increasing.In combination with demographic changes,technological developments require new employee profiles.Financial institutions therefore need to think about how they can recruit and retain the skilled workers they will need in the future.While in the past banks

28、faced competition from pension funds and insurance companies in the lending business,nowadays fintechs and big techs are offering new services such as advanced payment and pension solutions and weakening customer loyalty to financial institutions,including Swiss banks.An added influence in Switzerla

29、nd is the collapse of Credit Suisse(CS),which has reshaped the competitive landscape and will also bring tighter regulation in its wake.For financial crises to trigger a wave of regulation is nothing new and we can expect the same after the takeover of CS by UBS.For retail banks,this will primarily

30、mean additional costs.Introduction7Retail banking 2035 A study by EY and the University of St.Gallen|Structure of the studyThe team of experts from the Swiss Institute of Banking and Finance at the University of St.Gallen and banking consultants and auditors from EY began by analyzing the current si

31、tuation and went on to derive ten propositions for the study based on this analysis.These propositions are intended to draw out issues that will be of particular importance for the development of the retail banking business in Switzerland up to 2035.Many banks have a shorter strategic planning horiz

32、on of three to five years,but as the business changes on an evolutionary basis and relevant trends generally develop over longer cycles,we wanted to base the study on a longer planning horizon of around ten years.These ten propositions formed the basis for the third step,the survey of experts,which

33、we carried out in spring and summer 2024.The results of the interviews were summarized for each proposition to reflect the experts assessment of the market.We were able to secure the participation of CEOs and other senior representatives from 33 retail banks in Switzerland in the survey.A list of al

34、l participating institutions can be found in the appendix.As a result,we achieved almost complete coverage of the retail banking market and would like to take this opportunity to thank everyone involved for their support.We rounded off the discussions on all of the propositions with a brief analysis

35、 of our own.This additional perspective is intended to contribute to a critical discussion of the issues and stimulate debate.Definition of retail banking and affluent banking(as a basis for understanding this study)For the purposes of this study,we have used a standard definition of retail banking.

36、In retail banking,banks offer products and services to meet the day-to-day financial needs of private individuals and corporate clients,primarily in the SME sector.This is mainly based around deposit-taking and the lending business for mortgages and other loans,supplemented by the business with inve

37、stments and payments.Retail banks have high recognition value as a result of their branches,counters and ATMs.Customers now mainly interact with the banks through digital channels,including e-banking,mobile banking and in some cases other specialized apps.However,some areas of retail banking are not

38、 exclusive to banks and are also covered by other market players such as fintechs,big techs or companies from outside the industry that are trying to access this valuable interface in the credit card or payments business,for example.Retail clients are defined as persons with bankable assets of up to

39、 between CHF 250,000 and CHF 1 million,depending on the bank.We also use the term“affluent banking”in the study.There is no uniform definition for this segment.While retail customers in a strict sense are generally defined as clients with bankable assets of up to CHF 100,000 to CHF 200,000,affluent

40、clients are often defined as clients with bankable assets from around CHF 100,000 or CHF 200,000 up to around CHF 4 million.The rationale for the above thresholds is that these assets are not sufficient to finance a household with a comfortable standard of living purely from investment income.In sim

41、ple terms,affluent clients rank between retail clients and private banking clients.Due to their financial situation,they have different and additional needs to retail customers,but are not yet eligible for the full personalized advisory service enjoyed by clients in the private banking segment(HNWI

42、and UHNWI).8|Retail banking 2035 A study by EY and the University of St.GallenA study by EY and the University of St.GallenGradual decrease in value-added due to margin pressureAgainst the backdrop of geopolitical tensions,survey participants continue to view Switzerland as stable and believe it wil

43、l remain attractive in the future.Participants agreed with the thesis of a gradual erosion of margins driven by the interest rate environment(with a temporary improvement in the asset and liability margin),rising customer expectations and fiercer competition,partly due to new technologies and platfo

44、rms.Despite the growing influence of new providers and other challenges,the industry remains confident and continues to believe in the value of central features of retail banking,such as closeness to the customer and advisory quality.However,keeping revenues stable in the core maturity transformatio

45、n business by expanding volumes may not be a viable model in future.And in the strategically important investment business,margins could fall further and may not be compensated by additional volumes.Uncertainty about the medium-term implications of innovative technologiesThere were different views o

46、n the impact of innovative technologies on competition.Participants agree that technology influences competition,while overall the impact of innovative technologies is thought to be overstated.Genuine innovations with material implications for value creation are rare,said respondents.Artificial inte

47、lligence(AI)and quantum computing could possibly change this but even they will not do so overnight.Fintech and big tech companies are seen as catalysts for innovation and the epitome of convenience,but not as direct competitors at least as long as they do not gain control of the customer interface.

48、In banking experts view,the tech multinationals do not see entering the Swiss market as worthwhile due to its small size,at least at the moment.The high regulatory hurdles surrounding the Swiss market are another barrier to them.Rising expectations and reputational risks due to societal changeTrust

49、is key for banks,and their regional presence is often used as an argument by banks to differentiate themselves,not least when it comes to sustainability.Responsibility to society is also an issue for banks,but its implementation remains somewhat diffuse.Specific issues such as managers salaries,fair

50、 interest rates and sustainability are all issues of concern.In addition,demographic developments as a megatrend will become a much bigger issue for the banks than it already is.Ambivalent view on regulationOn the one hand,banks view regulation positively as a mark of quality that connects the expec

51、tations of society and financial policymakers with operational requirements and is thus in the interests of the financial center and the individual institutions;it also protects the Swiss market from those whom they regard as intruders.However,they are critical of disproportionate regulation and the

52、 cost implications.No financial incentives for banks to be sustainableThere is agreement that sustainability initiatives have become a standard,but also that sustainability is not a real differentiator and only can be so if it is shown to make a difference at a regional level.An ongoing,strong custo

53、mer need,significant earnings potential and the associated economic value added for banks are largely absent.On the other hand,reputational risks are increasing.Banks sometimes feel increasingly pushed into the role of“sustainability policemen”,especially as there is no legislative framework in many

54、 areas.Executive summaryOur comprehensive study reflects the views of 33 retail banks on ten succinct propositions on the shape of retail banking in 2035.This resulted in the following findings,which provide material for interesting reading and fruitful debate:9Retail banking 2035 A study by EY and

55、the University of St.Gallen|Traditional retail banking remains a successful business modelHowever,this does not absolve the industry from constantly adapting.Banks need to remain agile,for example with regard to macroeconomic developments,revenue diversification,positioning in the financial ecosyste

56、m,cost management and customer orientation.There is room for improvement compared to other sectors,as the banks acknowledge self-critically,for example regarding the use of customer data and its analysis a resource that is still waiting to be tapped.The core issue in financial advice is cost efficie

57、ncy in scalingRetail banking is considered to be down-to-earth and reliable,but needs a breath of fresh air in its approach to providing financial advice.Retail banks need to approach customers more proactively,make more active use of life events(and use the data to identify them in time),and suppor

58、t customers throughout their entire lifecycle in a manner not dissimilar to that of a general practitioner.The banks aim must be to become the customers trusted“principal bank”.To achieve this,financial advice must offer more holistic added value for the client;personal communication founded on trus

59、t remains crucial.AI will not change that for the time being,but will support client advisors in the background and make processes more efficient.The fact that all banks have been keen to expand their customer advisory services and make them more customer-focused for years begs the question why this

60、 objective has not been achieved so far.Comprehensive financial advice beyond the banking business does not achieve the desired resultsParticipants confirm that there is a demand for advisory services,particularly in the context of expanding the range of bank products centered around life phases and

61、 events.Financial planning is often mentioned as the basis for these kind of services.Matching the offering with customer needs is sometimes difficult,however,because many customers lack basic financial literacy and have to have things explained to them first.Moreover,an even broader range outside o

62、f the expanded bank offering complicates the provision of advice and processes.A look at the insurance sector gives grounds for skepticism about bancassurance:past failures,the complexity of the business,regulation and a reluctance to cooperate have caused retail banks to hesitate.Channel integratio

63、n remains a central goal of the customer experienceCustomers have high expectations of their interactions with banks.They want the same convenience of other areas of everyday life from banks,as well as availability around the clock on all channels,preferably without interruptions and yet with intero

64、perability they do not want to be asked the same thing again when switching channels,for example from online to bank advisor.However,implementing all customer wishes is expensive,especially due to outdated and convoluted IT infrastructures.Branches will still be part of the business model of the fut

65、ureBranches remain crucial as channels and are important for a high market share in the regions.The way the branches are used and the associated processes have already been brought into line with business models(proposition 5)and the approach to financial advice(proposition 6).This optimization of b

66、ranches function will continue.Vertical integration will not decline radically over the coming decadeThere is no doubt that processes and the design of the value chain need to be reassessed.However,the banks do not like handing over their own activities to third parties.Although there are activities

67、 the banks would be willing to consider,the fear of risks and of losing control is great,and the potential for cost savings is often too low;the customer interface is in any case non-negotiable.Due to the comfortable situation of the retail banks,the pressure to do something is simply too low overal

68、l.However,if outsourcing did nevertheless become necessary in the future(e.g.due to a shortage of skilled workers or as a cost-cutting measure),this would have to be prepared over a prolonged period,as numerous interfaces have to be created.Attracting,developing and retaining employees is becoming i

69、ncreasingly importantWhen it comes to recruiting suitable employees,banks face the challenge of adapting existing job profiles to future requirements.A realignment of job roles is required,especially in technical areas.Continuing development of older employees,and training and development of younger

70、 employees is critical.Demographic changes will exacerbate the shortage of skilled workers in the future.In order to remain attractive for talented individuals,banks also have to offer their employees a sense of purpose and good development opportunities alongside flexible working time models.10|Ret

71、ail banking 2035 A study by EY and the University of St.GallenLook back at 2020 scenariosTechnology scenarioSummary of the scenario Resistance to mobile payments is diminishing thanks to improved security measures.Digital money has advantages over cash,e.g.fast credit transfers.New technologies give

72、 customers more bargaining power through non-stop online availability and opportunities to compare.Banks role is changing dramatically.They are increasingly acting as utilities rather than service providers and are becoming an execution platform,which reduces the personal links with customers.The ba

73、nking landscape is changing radically,the value chain is dissolving and banks are being divided up into advisors and providers.Providers from outside the industry and peer-to-peer marketplaces are gaining ground,weakening customers trust in traditional banks and reducing the number of retail banks.B

74、asically,we can say that the technology scenario only came true in parts and its forecast of the speed and disruptive nature of the new digital technologies that were emerging at the time was exaggerated.Nevertheless,it is also true that a large number of fintechs have,with varying degrees of succes

75、s,tried to penetrate retail banking,particularly business with more attractive margins,but the direct impact on the market has so far been limited.Compared to their counterparts in the US and Europe,Swiss banking customers are more reluctant to adopt purely digital offerings,particularly from non-ba

76、nks and technology groups.The market entry of neobanks and corporations such as Apple,Amazon and Google has materialized only at the margins,and we are very far from these new providers being in any way dominant on the market.On the other hand,digital offerings such as mobile banking apps from tradi

77、tional banks are popular with clients.TWINT is the only fully digital offering that is successful on a large scale.However,this new offering did not have any significant impact on the established banks business model and was seen more as an extension of the banks existing products than a competitor

78、and eventually it was launched by the banks themselves.In general,mobile banking is widely used in Switzerland and logins are growing rapidly at an annual login rate of over 33%.6 Initial concerns about information security and financial losses in the event of smartphone theft have been laid to rest

79、 by advances in cybersecurity,such as two-factor authentication and biometric safeguards(e.g.Face ID and Touch ID).Buy-now-pay-later offerings are also growing in Switzerland,particularly among younger demographics.However,these are mainly integrated in online shops and not offered by banks,as consu

80、mer credit is seen as too risky.The general frequency of face-to-face meetings at banks has declined in Switzerland and business is increasingly conducted digitally or via video calls.Nevertheless,Swiss bank clients continue to consult their bank advisors for important financial decisions(e.g.mortga

81、ges or investment decisions).The forecast price elasticity and increase in customers bargaining power also failed to materialize to the extent outlined in 2020.In spite of the availability and increasing use of online consumer portals such as“comparis”and“moneyland”,market observations show that the

82、 majority of bank customers have remained relatively loyal to their banks and are not particularly price-sensitive.This was particularly evident when banks were slow to pass on increases in interest rates to customer deposit accounts.7 6 cf.HSLU,2024a7 cf.HSLU,202311Retail banking 2035 A study by EY

83、 and the University of St.Gallen|The forecast that digital competition would mean that banks could be seen by customers as utilities rather than service providers and lose their interface with customers did not materialize either.There were no significant disruptive changes to traditional value chai

84、ns and the branch network remained largely intact.Today,banks are even reinvesting in modernizing and redesigning their branches.And even providers that were originally purely digital have noticed that it is beneficial to have a limited physical presence in the form of customer service centers.Surve

85、ys also show that it is mainly small and medium-sized banks with a strong branch presence that score particularly well in customer reviews.8 This years HSLU9 survey also shows that banks with a physical presence in their region have a higher market share than competitors without a physical presence

86、there.Peer-to-peer-lending marketplaces have also not gained widespread acceptance and have remained more of a niche market.8 cf.HSLU,20199 cf.HSLU,2024aThe example of TWINT shows that new approaches and partnerships between banks and platform solutions can also have resounding success in Switzerlan

87、d.Initially,PostFinance,Berner Kantonalbank,Valiant,Basler Kantonalbank and Bank Coop,as well as UBS,Zrcher Kantonalbank and SIX through a separate company(Paymit),were looking to launch a new payment solution.Following the foundation of its predecessor company in 2014 and the merger with Paymit and

88、 founding of TWINT AG in 2016,TWINT had around five million users by January 2023.In 2023,over 590 million transactions were processed through TWINT and more than half of the Swiss population uses it regularly.At its core,it was about making everyday life a little easier for bank customers,ensuring

89、that payments and everything related to can be integrated smoothly into our lives,so we no longer have to worry about a thing.1010 cf.TWINT,202412|Retail banking 2035 A study by EY and the University of St.GallenConsolidation scenarioSummary of the scenario Banks will be unable to raise revenue suff

90、iciently to compensate for rising costs.Regulation will lead to high implementation costs,particularly at smaller banks.Banks below a certain size will be unable to spread these costs in a profitable way.Industry-wide consolidation is expected,particularly among savings banks and cantonal and region

91、al banks,as smaller banks will struggle to operate profitably.Gradual consolidation,starting with collaborations in the value chain.Weaker market players will be integrated into larger umbrella institutions,but the brands will be retained due to their regional significance.Retail banks will break up

92、 their value chains and outsource some of their work processes.Small and medium-sized banks will transfer downstream work processes to specialist companies.White labeling,where entire business areas are outsourced and marketed under the banks name,will become common.Banks will focus on advising and

93、supporting clients.Outsourcing will be an intermediate step towards further consolidation in the Swiss retail banking market.Overall,the consolidation scenario for the Swiss retail banking market only partly materialized.The main reason for the absence of a wave of consolidation was that,despite a d

94、ifficult environment,the banks found ways to keep earnings stable and maintain market share,meaning that the business was not threatened to such an extent that disposals or mergers were needed.The total number of banks in Switzerland fell from 297 in 2012 to 236 in 2023(see Figure 111).In the retail

95、 banking market,the forecast wave of consolidation for small and medium-sized banks did not materialize:the number of cantonal banks remained stable,while the number of regional banks fell from 66 in 2012 to 58 in 2023.Mergers were most likely to occur among the currently almost 220 Raiffeisen banks

96、.Of course,the crisis at CS led to its takeover by UBS,which means that Switzerland now only has one global systemically important bank with a corresponding Swiss retail client business.11 The Raiffeisen Group counts as one bank in the SNBs statistics.050100150200250300202320222021202020192018201720

97、162015201420132012283297275266261253248246243239235236Cantonal banksMajor banksRegional banks and savings banksRaiffeisen banksListed banksOther banksForeign-controlled banksForeign bank branchesPrivate banksFigure 1:Number of banks in Switzerland by group.Source:SNBStructure of the Swiss banking se

98、ctor(number of banks)13Retail banking 2035 A study by EY and the University of St.Gallen|In other words,there were idiosyncratic but not systemic reasons for the mergers of Swiss banks.Although the economic pressure from the low interest rate environment in the pre-COVID period,the digitalization of

99、 banking products,rising compliance costs and increased capital requirements was high,particularly for small and medium-sized institutions,most banks were able to cope.Pressure on margins was largely offset by an increase in lending volumes(see proposition 1).As a result,revenues remained stable and

100、 the wave of consolidation forecast in this scenario did not occur.Some parts of the value chain mainly support activities such as IT and settlement processes have been outsourced to external service providers,in some cases for some time,but the value chains in traditional retail banking have remain

101、ed largely unchanged overall.Diversification into the fee-based advisory business was also limited(see proposition 5).The lending business continues to account for a large proportion of total income and,in the vast majority of cases,continues to be operated by the banks in their own right.White labe

102、ling,i.e.handing over certain business areas to external parties whose products are then marketed under the banks brand,has continued to develop and become a widespread practice in the industry(e.g.in the credit card and fund business).However,it has not experienced the major breakthrough that was e

103、xpected.One example of this is that other cantonal banks sold their stakes in Swisscanto,which was originally set up to pool the cantonal banks fund business,to Zrcher Kantonalbank.Since then,some cantonal banks have even built up their own fund business again.IONSNetherlandsSpainGermanyItalyFranceS

104、witzerland-21%-11%-37%-46%-54%-72%14|Retail banking 2035 A study by EY and the University of St.GallenFigure 2:Decline in bank branches between 2012 and 2022.Source:Bank for International Settlements,BIS(2023)Decline in bank branches 2012 vs.2022Swiss island scenarioSummary of the scenario The isola

105、tion and independence of Switzerland have led to a banking island.As an island shaped by tradition,mentality and geography,Switzerland is cut off from international trends.Switzerland has many small banks and few large banks,because multilingualism and federalism favor cantonal and regional customer

106、 relationships.Security and customer contact are so important in Switzerland that branches are retained.Branches are also resilient to competition,such as from mortgage platforms on the internet.Swiss customers are loyal to their banks and are not lured away by innovations by competitors.They would

107、have to receive a very considerable benefit to induce them to switch the banking relationship they have held for many years.Mobile banking will become more prevalent in the existing business,as this channel offers a high degree of convenience.This scenario has come closest to reality:Swiss banks hav

108、e an extremely loyal clientele with strong demand for advisory services.This makes Switzerland something of a self-sufficient island in the banking sector,which sets it apart from the US and other European countries.Switzerland continued to have a large number of banks,although their number decrease

109、d slightly(see consolidation scenario).Cantonal,Raiffeisen and regional banks in particular continue to prosper and reflect the political and regional differences in Switzerland.Swiss banks have retained more branches than most other countries(see Figure 2).While there has been a more pronounced dec

110、line in neighboring countries such as Germany and Italy,Swiss bank customers seem to prefer branches offering personal advice to digital services.In rural regions such as Jura,Appenzell and Graubnden in particular,there is still a preference for face-to-face contact in branches.12Swiss customers rem

111、ain very loyal.They seldom switch to competing banks,often due to a lack of knowledge about their own costs or the differences in costs and interest rates between banks.Although rising interest rates have changed what Swiss banks are offering over the past year or two,customers are often unfamiliar

112、with the latest offers;only around 7%of the population know the interest rates they are currently receiving.13To date,many internet banks have had little success in competing with traditional banks for customers.While internet banking pioneers were initially successful in attracting customers,neoban

113、ks lost 5.6%of their customers last year.14 Experience so far shows that clients continue to place their trust in established banks.12 cf.HSLU,2024b13 cf.HSLU,202314 cf.HSG and ZHAW,2023Our 10 currentPROPOSITIONS15Retail banking 2035 A study by EY and the University of St.Gallen|1.Margins in retail

114、banking will continue to fall incrementally in the long term.2.Innovative technologies will lead to greater competition in the medium term.3.Pressure on retail banks from regulators and society remains high.4.ESG initiatives do not produce any material added financial value for retail banks.5.Tradit

115、ional retail banking business models are not a long-term guarantor of success.6.New ways of delivering customer advice are needed to tap additional customer revenue potential(type of service provided).7.To secure customer lifetime value,retail banks must transform themselves into an integrated finan

116、cial services provider(content of service provided).8.Rising customer experience expectations in all channels are leading to increasing costs for retail banks.9.Retail banks will increasingly have different levels of vertical integration.10.Todays employee profiles are inadequate to meet future requ

117、irements.16|Retail banking 2035 A study by EY and the University of St.Gallen1Margins in retail banking will continue to fall incrementally in the long term.17Retail banking 2035 A study by EY and the University of St.Gallen|BackgroundThe SNB raised key interest rates in June,September and December

118、2022 and again in March and June 2023.Despite the temporary relief this gave to margins in retail banking,pressure on margins will persist.The main factors that will exacerbate these pressures are a likely return to looser monetary policy in the medium to long term,increasing competition from both e

119、stablished players and non-banks(especially in day-to-day banking),rising regulatory costs and the costs of modernizing IT systems and cybersecurity.Volume expansion as temporary compensationDespite a temporary increase in the net interest margins of domestic banks compared to the previous year(+20

120、basis points in 2023)to an average of 1.10%15,margin pressure on Swiss retail banks can be expected to increase in the long term,especially as the SNB has already lowered its official interest rates again.In recent years,banks have largely been able to compensate for declining margins by expanding t

121、heir loan volumes.Between 2012 and 2023,Swiss banks mortgage loans rose from CHF 834 billion to CHF 1,179 billion,a growth of 41.3%(compared with 9.8%for other loans)(see Figure 3).Measured by the return on assets,the profitability of Swiss banks fell sharply from 2017.With the increase in mortgage

122、volumes during the pandemic,it began to rise again and was additionally boosted by rising interest margins from 2022(see Figure 4).However,this recovery in profitability is unlikely to be very long-lasting for two reasons.Firstly,in a largely saturated and competitive market,it can be assumed that o

123、nly a limited further expansion of credit will be possible in the medium to long term and will hardly be profitable at all.Secondly,official interest rates are likely to remain at a low level in the medium to long term.Already in 2024,the SNB became the first major central bank to cut its key intere

124、st rate in two steps from 1.75%to 1.25%in March and June and is likely to continue to pursue a loose monetary policy in the medium term,as inflation remains very low in Switzerland and there are even risks of deflation.In addition,the strong Swiss franc poses a challenge to the export economy.Lower

125、interest rates would help to reduce upward pressure on the currency.Furthermore,persistently slow economic growth,both in Switzerland and globally,could prompt the SNB to keep monetary policy loose in order to stimulate the economy.This forecast is in line with expectations on the medium to long-ter

126、m Swiss government bond market and the inverted yield curve.15 cf.SNB,2024Increased transparency and price pressure due to technology and competitionIncreasing price transparency due to the internet and the use of AI are giving clients more of an insight into banks cost and service structures.Compar

127、ison portals and financial apps(e.g.“comparis”or“moneyland”)enable customers to find the best deals and put banks under greater price pressure.For example,the first banks have begun to abolish certain fees introduced during the low-interest phase,which could lead to a domino effect where other banks

128、 follow suit.This will reduce fee income and increase price elasticity of customers and margin pressure on retail banks.Competition from new entrantsNew market players are entering the retail banking market both from inside and outside the financial industry.Fintech companies,tech giants and other n

129、on-banks offer some innovative financial services,mostly digital and often cheaper,that compete with traditional banking business.These new competitors are nibbling at the edges of retail banks business models and will put additional pressure on them to reduce their margins to remain competitive.Pro

130、position 1:Margins in retail banking will continue to fall incrementally in the long term.18|Retail banking 2035 A study by EY and the University of St.GallenGeopolitical uncertainties and increasing regulatory pressure Geopolitical uncertainties and stagnant economic growth in Switzerland are also

131、having a dampening effect on the retail banking business.Weak economic growth,uncertainties over international trade and volatile markets are leading to more cautious lending and lower capital spending,further tightening margins.These factors also adversely affect the general propensity to consume a

132、nd invest,which has an impact on banks earnings.Regulatory changes also have a significant effect on margins in retail banking,as they feed through directly to banks cost structure and business processes.There have been a series of regulatory changes in Switzerland in the recent past that have impac

133、ted significantly on banks margins.Regulatory pressure can be expected to remain high or even increase further in the future.Regulatory changes such as Basel III,the“too big to fail”regime,FINMA guidelines and client protection rules increase capital requirements,raise compliance costs and force ban

134、ks to invest heavily in risk management,compliance and IT infrastructure.The recent CS crisis,where government backing was needed to resolve the crisis,also supports the forecast that the regulatory requirements for Swiss banks will be tightened further.The Federal Councils report on financial marke

135、t stability of 10 April 2024 states that the CS crisis highlighted the weaknesses of the regulatory framework and that liquidity and capital requirements will have to be tightened up as a result of the crisis.16 In addition,repeated taxpayer-funded support of some banks over the past decades as well

136、 as current political and societal trends are likely to lead to ESG(environmental,social and governance)requirements and reporting obligations being tightened up,putting additional financial pressure on Swiss retail banks and compliance pressure on their management staff.To continue to operate succe

137、ssfully in these more complex conditions,institutions need to realign themselves strategically either by gaining market share and increasing volumes or by focusing on profitable business areas and withdrawing from unprofitable business.16 cf.Federal Department of Finance,2024Proposition 1:Margins in

138、 retail banking will continue to fall incrementally in the long term.03006009001,2001,500202320222021202020192018201720162015201420132012MortgagesOther loans0.80.91.01.11.21.31.41.51.6202320222021202020192018201720162015201420132012Net interest margin(left scale,in%)Return on assets(right scale,in%)

139、0.300.320.340.360.380.400.420.440.460.480.5019Retail banking 2035 A study by EY and the University of St.Gallen|Figure 3:Lending volumes of Swiss banks(domestic business).Source:SNBFigure 4:Bank profitability between 2012 and 2023.Source:SNBProfitability of banks with a domestic focus(in%)Credit vol

140、ume of Swiss banks(in CHF billion)Proposition 1:Margins in retail banking will continue to fall incrementally in the long term.0%10%20%30%40%50%60%70%agreeneutraldisagree3%3%24%21%49%strongly disagreedisagreeneutralagreestrongly agree20|Retail banking 2035 A study by EY and the University of St.Gall

141、enAnalysis of responsesExpert opinionSynopsisMargins in retail banking will remain under pressure.On the other hand,by international standards Switzerland still looks like an“oasis of well-being”where there is room for everyone.And even in the recipe for profitability,not that much seems to have cha

142、nged:strong customer relationships are securing margins.Swiss customers remain willing to pay extra for advice.No paradigm shift in customer behavior is expected in key needs such as buying property,investing and saving for retirement.So far,neobanks and big tech only seem to have increased competit

143、ion marginally,and the Swiss retail banking market is apparently still not attractive enough for major foreign players from outside the industry.The most important driver of profitability is beyond the market players control:in the machinery room of the banking business,the yield curve still represe

144、nts the transmission belts and banks profitability the flywheel attached to it.Proposition 1:Margins in retail banking will continue to fall incrementally in the long term.The average score is 3.8(1=strongly disagree,5=strongly agree).This proposition had the highest proportion of neutral responses.

145、Proposition 1:Margins in retail banking will continue to fall incrementally in the long term.Editorial noteStatistical analyses may contain rounding differences.21Retail banking 2035 A study by EY and the University of St.Gallen|AnalysisOur first proposition of a gradual erosion of margins in retail

146、 banking was supported by the banks taking part in the survey.The interest rate environment,customer expectations,new platforms and technologies,as well as increasing competition,were cited as drivers for the shrinking margins.New providers are increasingly appearing,but their influence is seen as l

147、imited.Nonetheless,the industry is not succumbing to panic.One of the strengths of Swiss retail banking is the ability for banks to position themselves on the basis of quality rather than price;the price sensitivity of Swiss clients is still not very pronounced.Many banks could also live with lower

148、margins.Support for the traditional banks is also seen in the low proportion of switching among clients,which the experts believe banks need to continue to utilize to maintain interest and commission margins.Interest rates the main driver of marginsSurvey participants expect the decline in margins t

149、o continue in spite of the normalization of the interest rate environment since 2022.Interest rate trends lie at the heart of retail banking,the maturity transformation process,where short-term client deposits are lent out over the long term and at higher interest rates.The steepness of the yield cu

150、rve is key for profitability:the higher the interest rates on loans or investments,the more likely the client is to accept higher margins,the participants say.Falling margins in commission business and cardsMargins are expected to decline in the fee and commission business,for example in investment

151、commissions.Most banks need a certain transaction volume to cover the costs of their infrastructure.However,they can only obtain higher volumes by lowering prices.This screw is turning slowly in the experts view,but is contributing to a gradual downward spiral of prices and margins.Institutions are

152、only optimistic about active asset management.Technological developments in payments continue to have a major impact on margins,and the best days of the credit and debit card business are already behind it,according to respondents.Lending businessWhile the market participants taking part in the surv

153、ey forecast a downward trend overall for the next ten years,lending margins could increase again.Banks expect to feel the effects of the disappearance of CS after its absorption by UBS,particularly in the corporate lending business,where financing needs are high.In their view,not all banks will be a

154、ble or willing to fill this gap.Competition:not too afraid of newcomersOne strategy to counter margin erosion is the pursuit of volume.When it comes to competition,the institutions are reasonably relaxed;the banks“arent hurting each other all that much”.However,the expansion of the cantonal banks ou

155、tside their home cantons is seen as a sign of more intense competition.The arrival of external players could shake this up in the opinion of respondents.Insurers,pension funds and family offices who entered the credit market in the negative interest rate environment have mostly pulled back again,but

156、 potential big players from the tech sector such as Google and Apple are being watched closely.If the Swiss market were to become of interest to them one day,it is to be expected that there would be more competition.Opinions are divided on competition from neobanks and fintech companies.All in all,r

157、espondents note that these new providers live off the barely profitable transaction business.Others see them as a major driver for further margin reductions,as they offer services at a fraction of the fees(see also proposition 2).There is no pressure to thoroughly optimize,automate or digitize.There

158、 is still plenty of meat on the bone.“Margins are shrinking just like the Aletsch Glacier on the front cover of the report.“Proposition 1:Margins in retail banking will continue to fall incrementally in the long term.22|Retail banking 2035 A study by EY and the University of St.GallenCustomer behavi

159、or:customers still willing to pay almost any priceComparison platforms and AI have led to greater price transparency.Nonetheless,according to the survey participants,“price-aggressive”customers remain rare overall.The prices being asked are usually paid without complaint,and customers often do not e

160、ven know how much they are paying.But banks are under no illusions:the better informed customers are,the greater the pressure on margins will be.Knowledge and transparency will increase.Residential mortgage lending seems to be the segment the banks feel most secure in.Here they expect margins to rem

161、ain stable and customers are rarely willing to change providers.They note that the relationship with the institution seems to have become more important again.Other influences:consolidationIncreasing complexity of business models and a lack of economies of scale increase costs for smaller banks,and

162、they lack pricing power when buying third-party products and services.Although regulation provides protection against new market entrants,it also drives up costs,for example in the area of cybersecurity.Smaller banks in particular therefore expect to see further waves of consolidation in retail bank

163、ing.Price and value:positioning with customers instead of price warsNone of the banks ignore the fact that interest rates are the main driver of margins.On the revenue side,they say banks are often dependent on external developments.However,banks regard the quality of advice as the most important ea

164、rnings lever for influencing their own profitability.A pure product approach will not save margins in their view.Instead of price leadership,they need to position themselves as a customers“principal bank”.The aim of holistic financial planning must be to become the clients trusted partner in all tra

165、nsactions.Their conclusion is that margins can only be maintained through customer loyalty.Banks options to control marginsThe experts answers to the question of how to optimize margins were fairly general.They believe that they have more room for maneuver on the cost side and that costs can be redu

166、ced with the help of standardized and automated processes as well as digitalization.This includes risk and compliance processes,as costs have risen disproportionately in these areas in particular in recent years.However,this is a lengthy process that initially requires up-front investments.The searc

167、h for economies of scale could also mean thinking outside the box and entering into partnerships.As interest is the main revenue source,a banks asset and liability management is crucial in the experts opinion.The right strategies and decisions can boost net interest income considerably but unfortuna

168、tely the opposite is also true.Business and economic center:Switzerland still an oasis of well-beingIn the eyes of the institutions taking part in the survey,Switzerland remains an oasis of well-being thanks to political stability,low unemployment and high levels of immigration.Switzerland cannot es

169、cape geopolitical problems,but continues to gain in attractiveness in an uncertain world.Prosperity will continue to increase in their view,which is the main growth driver for the retail banking segment.Demographic change and Switzerlands attractiveness as an educational location remain well-known c

170、hallenges.The baby-boomers of the 1950s and 1960s are withdrawing from the labor market and the new generations will struggle to fill this gap.For banks,however,this also means that a lot of wealth will be inherited in the coming years.Ultimately,the industry looks to the future with confidence:resp

171、ondents believe retail banks will still be important players in ten years time.Particularly in view of the ongoing levels of immigration to Switzerland,they point out that everyone needs a bank account,everyone needs somewhere to live and everyone needs financial advice.Proposition 1:Margins in reta

172、il banking will continue to fall incrementally in the long term.23Retail banking 2035 A study by EY and the University of St.Gallen|Our point of viewMargins will remain under pressure,even if they have(temporarily)recovered as a result of the rise in interest rates.The contribution of core businesse

173、s,such as lending and investments,to profitability will remain central,albeit on the basis of lower margins compared to the situation before the financial crisis.However,further volume expansion,as occurred between 2010 and 2020,is unlikely to be an option to keep the profit contribution stable or o

174、n a growth path.The abolition of imputed rental value,which was being discussed in the Swiss parliament at the time of this study,would also have serious implications for lending volumes and therefore also for the investment business.Whether margin erosion accelerates or slows down for an individual

175、 institution will depend on how it reacts to market pressure and the specific price sensitivity of its clients.To this day,many retail banks(justifiably)rely on client inertia,assuming that only a few clients will actively look for the best offer and actually switch banks.For traditional retail bank

176、s,it will be crucial to actively solidify their position as the“principal bank”.They need to focus the value-added of their products and services on enabling customers to carry out all banking transactions through them rather than obtaining individual products from a low-cost provider.This service c

177、ommitment must be communicated in the market,demonstrated when advising clients and anchored in customer loyalty.Proposition 1:Margins in retail banking will continue to fall incrementally in the long term.24|Retail banking 2035 A study by EY and the University of St.Gallen2Innovative technologies w

178、ill lead to greater competition in the medium term.25Retail banking 2035 A study by EY and the University of St.Gallen|Background In the past,innovations developed internally in Swiss retail banking have often only had limited success.TWINT,a mobile payment platform originally developed by PostFinan

179、ce,was only able to gain significant market share after it merged with Paymit,a rival product of SIX,UBS and Zrcher Kantonalbank.The entry of the largest Swiss banks was key to the subsequent success of TWINT(see also scenario 1 from the 2012 study).Challenges from digitalizationThe digital transfor

180、mation is forcing Swiss banks to adapt their value creation models to remain competitive.Currently,these models are highly resource-intensive and have limited digital capabilities,resulting in productivity losses.This fragmentation of available resources and insufficient integration of new technolog

181、ies hampers the efficiency and competitiveness of banks.Given the increasing intensity of competition from innovative fintech companies and new technologies,Swiss banks need to improve their digital and organizational capabilities to be successful in the long term.17 The ratio of IT experts and soft

182、ware developers to bank employees is relatively low,which hinders the digitalization of existing products and innovations in new banking products compared to big tech and fintech companies.It is therefore a strategic imperative for retail banks to invest sufficient time and resources in innovation.I

183、n recent years,however,profits have tended to be paid out in dividends rather than invested in innovation.In addition to the challenges of developing their own innovations,Swiss retail banks face structural problems.Silo structures,outdated IT infrastructure,resource bottlenecks and a lack of skills

184、 have made it difficult to develop and adapt to digital trends.Customer data is often incomplete and unstructured,leaving untapped potential for cross-selling and strategic use of this data.17 cf.SBA,2021Competition from new entrantsNew technologies have the potential to attract new market players w

185、ho introduce innovative solutions and thus increase competition.More companies than ever were active in the fintech sector in Switzerland in 2023 483 in total.The latest advances in AI and the need for seamless integration of financial services into different applications are driving a large number

186、of start-ups,which significantly intensifies competition.18 Compared to other industries and sectors,retail banks are lagging behind in the digital transformation.Developments in open bankingAnother example are initiatives to promote open banking.Open banking enables flexible and seamless collaborat

187、ion with third parties and provides banks with access to established digital marketplaces and platforms.While these initiatives are currently still voluntary in Switzerland,it is to be expected that future measures will further promote open banking,which will make it easier for non-banks to enter th

188、e market from a technical point of view.Strategic advantages of traditional banksDespite these challenges,traditional banks have some advantages over competitors from outside the industry.They often have greater capital strength,which allows them to invest in technological infrastructure and digital

189、 transformation.Their established branding helps them to gain customers trust and they offer a wider range of financial products and services.But the most important advantage is that traditional banks have gained a large customer base through their longstanding operations.Fintech companies often hav

190、e good ideas,but they lack a customer base.18 cf.HSLU,2024cProposition 2:Innovative technologies will lead to greater competition in the medium term.0%10%20%30%40%50%60%70%80%90%agreeneutraldisagree3%15%36%46%strongly disagreedisagreeneutralagreestrongly agree0%10%20%30%40%50%60%70%80%90%100%Compani

191、es from other industries Big tech companies Fintech companiesOther direct competitorsneutral13%31%50%6%3%34%16%34%13%3%25%9%38%25%59%16%19%6%not at allsomewhatrather stronglyvery stronglyProposition 2:Innovative technologies will lead to greater competition in the medium term.Sub-question to proposi

192、tion 2:How strongly is technology-driven competition being fuelled by the following players?26|Retail banking 2035 A study by EY and the University of St.GallenAnalysis of responsesExpert opinionThe most technology-driven competition is expected from other direct competitors.There are widely differi

193、ng views on the potential influence of fintech and big tech companies.The impact of companies from outside the sector is considered to be relatively low.The average score is 4.2(1=strongly agree,5=strongly disagree).Proposition 2:Innovative technologies will lead to greater competition in the medium

194、 term.27Retail banking 2035 A study by EY and the University of St.Gallen|SynopsisIn general the institutions predict that technology will intensify competition but perhaps not as dramatically as might have been assumed,especially since the hype surrounding AI took off about two years ago.Digitaliza

195、tion is being implemented across the board to such a degree that everyone is back on the same level.In the battle for margins,the institutions firmly believe there is no escaping the relationship with the customers and the advice they are given(cf.proposition 1).This is precisely what purely price a

196、nd technology-driven competitors such as neobanks and fintech companies lack.In fact,it is they who will likely have to evolve in the direction of traditional institutions in order to reach customers.Against this backdrop,how the banks should use the new technologies seems clear:to simplify their se

197、rvices without diluting the quality of their customer advice.Ideally,they should even improve the quality of advice.AnalysisWill innovative technologies intensify competition in the medium term?One is tempted to say of course they will.According to the responses of survey participants,however,indust

198、ry insiders take a more nuanced view.Although banks have implemented many technologies in recent years,hardly any of them have been truly innovative.Innovation:Is boring beautiful?Retail banking does not seem to have a reputation among its own experts for being especially innovative.According to the

199、 institutions that took part in the survey,the industry is more interested in developing what it already has.The tenor is that the importance of innovation is often overstated.A new technology has to strike a chord with customer needs,but according to participants,these needs will not change much in

200、 the next ten to fifteen years.Employees and customers also have to want to use a new technology.AI and blockchain:increase in efficiency,but not much more Up to now,banks have seen AI as little more than a tool for increasing efficiency and improving chatbots.Robo advisors have had mixed success in

201、 the investment business;the vast majority of clients want personal advice.When it comes to blockchain,some fear that the technology is too complicated for retail banking customers.So far,the SNB has only put a central bank digital currency(CBDC)on its agenda for the wholesale business,i.e.with inst

202、itutional clients,but perhaps by 2035 there will also be a digital currency for retail customers.The use of quantum computers is even more difficult to predict,which is precisely why some institutions do not want to rule out the possibility that this technology could turn everything on its head at s

203、ome point.An innovation was often thought to be disruptive,but customers just werent interested.“Swiss people tend to be traditionalists when it comes to money.They like to know what building it is kept in.“Proposition 2:Innovative technologies will lead to greater competition in the medium term.28|

204、Retail banking 2035 A study by EY and the University of St.GallenFinancial advice is like going to the dentist for many people.You do it when you have to,but then you want the dentist to treat you in other words,you want a physical consultation.“Those who used to listen to records found the quality

205、of CDs inferior and now believe digital music is even worse.The same pattern was repeated in the transition from cameras to digital cameras and mobile phones.And yet they both took over because it is easier.It will be the same with simple fintech solutions,even if the advisory service is worse.“The

206、power of convenience and marketingHowever,one or two respondents also gave a caveat.Time savings and ease of use are important,even if the customer is initially reluctant to learn a new technology.With enough marketing firepower,it might be possible to achieve widespread adoption of initially unpopu

207、lar technologies.If the client can be persuaded to practice using it a few times and likes the convenience and simplicity,they might be willing to accept a lower quality of advice in return.Customer interface:the determinant factor in payment transactionsAccording to the experts,payments which are e

208、ssential for establishing a customer base are the most vulnerable to disruption from new technologies such as instant payments or token-based payment systems.ApplePay has hit the credit card sector hard.In future,payments will be embedded in customers business processes(instant,invisible or embedded

209、 payments).Customers will no longer consciously choose a form of payment,but instead this will be seamlessly integrated in their business transaction.The key point will therefore be who has access to the customer interface.Fellow banks in the same boatThe biggest competition generally comes from dir

210、ect competitors.According to respondents,this is not because innovators are moving forward with their technological ideas,thus fueling competitiveness,but because they are all in the same boat.Every bank is busy with new technologies,but none of them are really doing anything fundamentally new.For e

211、xample,the introduction of digital pension solutions prompted competitors to respond with similar solutions designed to boost volumes.In the end,no one saw an increase in volumes.Fintech:catalysts and sources of ideasThe experience with new providers such as fintech companies and neobanks has also n

212、ot been very dramatic so far.They regularly trigger innovations in the retail banking business,but are seen more as beneficial catalysts than competitors.If successful,their innovations can be adopted relatively easily and quickly by the traditional banks,the experts point out.Existing fintech compa

213、nies have not been able to revolutionize the business,they say.If anything,it is the other way around:the“challenger banks”are trying to move in the direction of the traditional banks because they lack a broad customer base.They are often focused on stripped-down offerings in one niche with low-cost

214、 structures,but still the business model does not scale enough.Moreover,the bank representatives are sure that the vast majority of customers will continue to want personal advice in the future.This applies in particular to the trigger events in life:starting a family and providing financial securit

215、y,buying a home,saving for a pension,and wills and inheritance.The rule here,according to respondents,is that anyone who gets the same at a bank as at a fintech will stay with the bank.Protected from big tech?The banks taking part in the survey are convinced that Switzerland is too small a market fo

216、r the big tech champions such as Apple and Google and if they did want to enter it,then only for basic services that do not require a banking license.These include the credit card business,but not mortgages or asset management.However,the big multinationals lack proximity to Swiss customers,they arg

217、ue.So far,the Swiss banking app TWINT is the clear market leader ahead of Apples payment solutions.Swiss peculiarities such as its four national languages and many cantons,the different Proposition 2:Innovative technologies will lead to greater competition in the medium term.29Retail banking 2035 A

218、study by EY and the University of St.Gallen|cultures within a small area and legal differences compared to the European Union(EU)are cited as barriers to market entry,as are banking regulations.The survey respondents do seem to agree on one point though.Big tech shows banks where they need to catch

219、up:in performance,convenience and simplicity.Providers from outside the industry:if anyone,then insurersDomestic retailers with millions of customers,the Swiss Federal Railways or even telecoms service providers have vast amounts of customer data and the tools to use it,and could start offering fina

220、ncial services thanks to open banking and embedded finance.However,these players would not be able to maintain accounts and would not be allowed to lend for regulatory reasons,argue the industry experts.At most,retailers and media companies could offer credit cards free of charge,which the banks wou

221、ld have to react to.According to the survey,however,traditional banks are not afraid of losing bank customers as a result.They see insurers as a more likely source of competition.Insurance advisors traditionally have a closer relationship with their customers than bank advisors.Our point of viewThe

222、most common core banking platforms(particularly Avaloq,Finnova)have not yet reached the end of their lifecycles.Nevertheless,the question is whether cost efficiency can be further increased in the medium term by using modern technologies.So far,this does not appear to be the case,while the complexit

223、y of the systems in which the core systems are embedded,as well as that of the overall architecture,will continue to increase.In the area of data management,data quality and data linkage are not yet up to the required level.At the same time,the recognition that data management is becoming more impor

224、tant as a differentiating factor has become increasingly established against the backdrop of discussions about the possibilities of AI.AI and generative AI(GenAI)are obviously hype and at the same time a structural shift that will bring about far-reaching changes in the coming years.However,the effe

225、cts will not be visible within a few months.They will take years and development will initially cost money;structural change will probably happen in waves,punctuated by periods of disillusionment,and affect the following areas in particular:control functions,process efficiency,frontline effectivenes

226、s and,finally,direct customer utility and advice.Another area of innovation is distributed ledger technology(DLT).We consider it unlikely that the technology underlying cryptocurrencies will trigger disruption in the banking market in the coming years.In the longer term,however,there may be implicat

227、ions on the infrastructure side if interbank payments can be processed using CBDC tokens.This is an issue that is currently being explored by a number of central banks.In its Helvetia project,for example,the SNB has been testing various ways of using a wholesale CBDC(“digital franc”)for financial in

228、stitutions since 2020.Other technologies with disruptive potential include quantum computing(which goes beyond the timeframe of this study)and developments in open banking interfaces.Retail banks should develop their own views on these areas of innovation,learn from leading institutions beyond Switz

229、erland,act in a forward-looking way and remain agile enough to take advantage of opportunities.Proposition 2:Innovative technologies will lead to greater competition in the medium term.30|Retail banking 2035 A study by EY and the University of St.GallenPoint of view on the issue of Artificial Intell

230、igenceIt is still the case that very few banks are attaching the level of strategic importance to AI that it will assume in the medium term,and not all banks are approaching the issue in a sufficiently cautious and forward-looking manner:the current disillusionment is not an indication of the techno

231、logys irrelevance,but of short-termist views of the benefits.A second issue is relevant too:the use of AI could lead to individual institutions suffering reputational damage and cause regulatory incidents.It is therefore advisable for banks to gain experience of the technology with simple use cases

232、in a protected setting.Creating a stable framework is even more important,however.Beyond the use cases,the aim is to sustainably prepare the bank for this technological quantum leap.This requires the following:An AI strategy to clarify what role AI should play in the business model,what capabilities

233、 should be built up over the next few years,and what investments are required to achieve this AI governance(including data governance)with appropriate risk management A training program for staff so they can use the technology responsiblySmaller institutions in particular are faced with significant

234、investments that will be very difficult to cope with on their own.To make sure they do not miss the boat,partnerships between institutions may make sense.AI will not fundamentally disrupt the business model of retail banks.Over the next ten years,we will not(yet)have a personal,virtual assistant to

235、optimize our financial affairs for us throughout our lives even if this will be technically feasible in a few years time.However,the technology will be a game changer for banking in the sense that it will raise front-office effectiveness to a new level and significantly increase efficiency in middle

236、 and back offices.By way of comparison:the internet has not fundamentally changed banks business model per se,but it has changed their operating model.The process of change with AI will be much faster by comparison.AI will thus further widen the gap between successful and less successful banks.Regul

237、ation is fundamentally technology-neutral,but does take current trends into account.FINMA sees particular challenges in the use of AI and expects risks to be managed accordingly,in particular in the following areas:Governance and accountability for AI decisions Robustness and reliability of AI appli

238、cations Transparency and explainability of AI decisions Equal treatment of financial market customers1919 cf.FINMA,2023Proposition 2:Innovative technologies will lead to greater competition in the medium term.Bild?31Retail banking 2035 A study by EY and the University of St.Gallen|32|Retail banking

239、2035 A study by EY and the University of St.Gallen3Pressure on retail banks from regulators and society remains high.33Retail banking 2035 A study by EY and the University of St.Gallen|Background Nowadays,retail banks in Switzerland face significant societal and regulatory challenges that keep press

240、ure on these institutions high.These challenges are wide-ranging and include both exogenous shocks and rising expectations on the part of policymakers,regulators and society.The international interconnectedness of the Swiss financial center and the growing criticism of FINMA in the wake of the CS cr

241、isis,combined with the question of whether a lack of,or too loose,regulation and supervision was one of the causes of the CS crisis,have raised the pressure on politicians and regulators to take action.Crises have increased regulatory pressureRecent years have been marked by global crises such as th

242、e COVID-19 pandemic,geopolitical tensions and military conflicts.On top of this have come economic uncertainties and the collapse of CS,which has shaken the perceived stability of the Swiss banking market.These events have led policymakers and regulators to demand ever-stricter capital and liquidity

243、 requirements to strengthen banks resilience to such exogenous shocks(see Figure 5 for summary).For example,the proportion of regulatory Tier 1 capital in risk-weighted assets increased by 23.5%between 2012 and 2022(see Figure 6).Further regulatory measures and increased capital requirements are cur

244、rently under discussion.20 Operational risks and resilienceIn addition to capital and liquidity requirements to strengthen resilience,operational risks,cyber risks and ICT risks have also become more important.Banks need to create a scalable and secure infrastructure to enable digital transformation

245、 while ensuring the security of data and systems.For example,FINMA has published new guidelines on risk assessment and management to ensure that banks implement robust measures against cyberattacks and technical disruptions.In addition,institutions must conduct regular stress tests and security revi

246、ews to ensure their resilience to operational risks.These increasing demands pose significant challenges of implementation,particularly for small and medium-sized banks,in terms of staffing and funding,and are expected to become more complex in the future as technology advances rapidly.20 cf.Federal

247、 Council report,2024Increased public expectationsThe government has repeatedly intervened in times of crisis in the past,such as the rescue of UBS in 2008 and most recently the takeover of CS by UBS.Government support of this kind is fueling expectations,both in politics and society,that banks have

248、to exercise not just economic but also increasingly social responsibility,that they will comply with principles of good corporate governance and act responsibly when it comes to the remuneration of management and employees.There is also a growing focus on sustainability issues,which are now a high p

249、riority for all stakeholder groups.In addition,society is increasingly concerned with global issues(geopolitics,migration,global warming)and has clear expectations of policymakers and institutions in this regard including banks,for example their role in helping to achieve climate targets.Despite the

250、 rise in interest rates in 2022 and 2023,customers had the impression they were not benefiting equally from the hikes.The persistently low interest rates on customer deposits despite the SNBs rate hikes combined with the banks high profits gave rise to a widespread sense of injustice among the popul

251、ation,which increased societal pressure on banks to act more transparently and fairly.Proposition 3:Pressure on retail banks from regulators and society remains high.8085909510010511011512012513020222021202020192018201720162015201420132012+23.5%01/2012:Basel III introduced in Switzerland06/2013:Capi

252、tal requirements strengthened(CET1)11/2014:New liquidity requirements introduced(LCR)01/2015:Update of anti-money laundering legislation(AML)04/2016:Extension of banks disclosure obligations01/2017:Automatic exchange of information introduced(AEOI)09/2018:Promotion of open banking initiatives06/2019

253、:Tightening of risk management requirements03/2020:New rules on cybersecurity01/2021:Changes to sustainability reporting05/2022:Additional requirements for banks resilienceRegulatory Tier 1 capital to risk-weighted assets(index:2012=100)Significant regulatory changes in the Swiss banking sector34|Re

254、tail banking 2035 A study by EY and the University of St.GallenFigure 5:Significant regulatory changes in the Swiss banking sector(20122022).Source:Mondaq(2022)Figure 6:Evolution of regulatory Tier 1 capital to risk-weighted assets between 2012 and 2022.Source:SNBProposition 3:Pressure on retail ban

255、ks from regulators and society remains high.0%10%20%30%40%50%60%70%80%90%agreeneutraldisagree3%9%58%30%strongly disagreedisagreeneutralagreestrongly agreeProposition 3:Pressure on retail banks from regulators and society remains high.35Retail banking 2035 A study by EY and the University of St.Galle

256、n|Analysis of responsesExpert opinionSynopsisThe public expects a lot from banks:from being anchored in the region and fulfilling their economic role to assuming social responsibility and promoting sustainability.Overall,the industry is viewed with suspicion in meeting these expectations.The remuner

257、ation of top bankers and bank bailouts are controversial issues within society.The triggers for the growing regulatory pressure include the CS crisis,the tightening of capital and liquidity requirements since the 2008 financial crisis,cyber risks,data protection and sustainability requirements.Banks

258、 believe the regulation makes sense and is in their own interests,but criticize the volume of regulation.They say that all banks should not be lumped together and put in the same boat.The average score is 4.3(1=strongly disagree,5=strongly agree).Proposition 3:Pressure on retail banks from regulator

259、s and society remains high.36|Retail banking 2035 A study by EY and the University of St.GallenAnalysisTrust is banks most valuable asset,and therefore the image they convey of themselves and what customers think of them are all-important.The market participants who took part in the survey agree tha

260、t there will continue to be pressure on the industry from society because of the central role banks play in the economy.As the institutions that effectively implement the SNBs monetary policy,they sometimes even fulfill a quasi-state function,but this is difficult to communicate to the public becaus

261、e of its complexity.And people are suspicious of things they do not understand.You are being watchedThe public expects banks to be anchored in their region and to assume their social responsibility,including the promotion of sustainability.Here,the industry is suspected of merely engaging in greenwa

262、shing and minimizing its own risks instead of those of nature and society.Excess profits and managerial salaries are another controversial issue.While retail banking is less in the spotlight when it comes to salaries,respondents were in no doubt that the public keeps a close eye on remuneration,and

263、not just at the large banks.Furthermore,consumer protection in Switzerland is not as strict as in the EU and banks can still assume that the customers are capable of making their own decisions.Nonetheless,in the view of respondents,personal responsibility is weakening in Switzerland too and calls fo

264、r regulation are becoming louder.It is understandable,however,that the population wants safe banks and does not want their managers to earn exorbitant salaries,because in the past the government had to support banks with taxpayers money(even though these bailouts ultimately cost the taxpayer nothing

265、).Demographics and the dilemmas of digitalizationThe aging of society presents the industry with a dilemma:the older generation still wants to talk to advisors in person or over the phone.At the same time,the next generation is increasingly demanding digital solutions.It is getting harder to establi

266、sh the connections with society and the population that are being asked of banks,as personal contact points are becoming fewer and fewer and are increasingly being handled digitally.Institutions expect an increase in internet fraud and deep fakes and although customers often make mistakes,they expec

267、t the bank to protect them and reimburse them in full in the event of any losses.There is another dilemma:banks depend on immigration,and not just because of the shortage of skilled workers.Their business model is based on population growth,since everyone needs a bank account,a roof over their head

268、and financial advice.Nonetheless,they also have to be sensitive to societys fears,such as of a population of 10 million in Switzerland.Referendums to limit immigration could have a negative impact on the banking center.As society is becoming more and more fragmented,the number of different interest

269、groups is increasing and pressure from them is growing via social media channels.Retail banks breathe a sigh of relief when it comes to rural regions,which our changing much more slowly.Special case:cantonal banksCantonal banks are faced with special,sometimes contradictory requirements in the manda

270、te they have to fulfill:they are supposed to remain rooted in their region,maintain a dense network of branches,give SMEs access to attractive financing solutions and avoid taking risks outside the canton which the home canton would ultimately have to stand in for due to the cantonal guarantee.At th

271、e same time,they are expected to generate as much profit as possible and pass some of it on to their cantonal owners.Regulatory pressure also remains highRegulation transmits a range of societal,operational and legal requirements to the banks.The CS crisis,the tightening-up of capital and liquidity

272、requirements as part of the too big to fail regulation since the UBS rescue in 2008,cyber risks,data protection and sustainability requirements are mentioned by respondents as the background for the growing pressure.Even the banks themselves rarely think ahead,their representatives admit.Open bankin

273、g and PSD2(Revised Payment Services Directive)will pose major challenges and increase innovation and competition in payments.Proportionality principle under threatAccording to the consensus among the surveyed institutions,the banking world will be preoccupied with the CS crisis for a long time to co

274、me and it will lead to stricter regulation.The Financial Market Supervisory Authority(FINMA)is likely to be geared towards taking action more proactively and more Trust is the most important asset,and that is something you cannot regulate.“Proposition 3:Pressure on retail banks from regulators and s

275、ociety remains high.37Retail banking 2035 A study by EY and the University of St.Gallen|As a result of the CS crisis,we are facing a tsunami of regulatory changes.It will be more expensive,but not safer.“quickly.FINMA is also increasingly focusing on corporate governance.Under a potential senior man

276、agers regime,the board of directors will take on more responsibility as a companys highest body,reporting to it will increase and responsibilities will have to be assigned even more clearly.As UBS has a dominant position in the retail banking market,it is right to tighten the screws here.However,the

277、re are fears that CS,which collapsed due to very specific problems,will lead to the rules being tightened up for all institutions.Things that are different should not be treated in the same way,say respondents.Support for regulation,including as self-protectionThe current regulation is seen as too r

278、igid and sometimes lagging behind events.In general,politicians do not sufficiently understand the complexity of the business and too often are on the lookout for rules to avoid being accused of doing nothing.However,regulation is not seen by retail bankers as harmful per se.It protects the banking

279、center from market entrants and forces banks to know their customers,monitor transactions and promote sustainability,which is in their interests anyway.Criticism tends to focus on the amount of regulation:bank representatives are convinced that once jobs have been created in regulation,they will nev

280、er be abolished.Not sustainability policeIn the area of sustainability,banks feel pushed into a role they should not be asked to fulfill.They expect regulation of ESG reporting to remain an ongoing issue and that banks will need to know a lot about their customers climate impact.However,they do not

281、want to become their customers sustainability police.They also warn against“solo runs”by regulators.Switzerland will have to follow what is done in other countries and,in particular,the EU(see also proposition 4).Our point of viewReputation management has become significantly more important for bank

282、s in recent decades.Negative news,especially for larger institutions,spreads faster,as both social and traditional media act as accelerators,rather than having a calming effect.What is already making waves is rebroadcast across the media and the amplitude is further increased.Every news provider is

283、on the lookout for supposedly shocking news that grabs peoples attention.The collapse of CS exemplified many of these challenges.Thanks to mobile banking,a bank run now takes just a few days or even hours,without any queues at the branches.A key question for every CEO is how to protect their institu

284、tion from reputational damage.Getting out of a crisis of confidence once it has started is extremely difficult,the outcome is unpredictable,and the risk of a self-fulfilling prophecy as a result of actions by stakeholders is by definition almost unmanageable.As a result,the greatest possible buffer

285、of trust needs to be created in“good times”but this takes years or even decades.Trust should not be confused with a high profile.Proposition 3:Pressure on retail banks from regulators and society remains high.38|Retail banking 2035 A study by EY and the University of St.Gallen4ESG initiatives do not

286、 produce any material added financial value for retail banks.39Retail banking 2035 A study by EY and the University of St.Gallen|Background Although sustainability is increasingly important to many clients,these initiatives fail to significantly improve banks financial results.Increased customer int

287、erest and expectationsThe importance of ESG has increased dramatically in retail banking in recent years,driven by changing client requirements and a growing awareness of environmental and social responsibility.A number of representative surveys show that over 40%of customers surveyed are interested

288、 in sustainable financial products,with half of this group stating that their interest is based on a fundamental change in behavior rather than just temporary curiosity.21 In addition,such surveys show that around 20%of respondents are willing to pay an additional premium for green financial product

289、s.A field study of several thousand members of a Dutch pension fund shows that around two-thirds indicate a clear preference for sustainable investments,even if they expect lower financial returns.22There has been a sharp increase in the number of ESG funds in Switzerland:between 2018 and 2023,the n

290、umber of funds increased by a factor of 5,from 423 to 2,155.At the same time,aggregate fund assets under management increased 17%over the period.23 A survey conducted by the Lucerne University of Applied Sciences and Arts(HSLU)and PostFinance revealed that 54%of the 3,100 respondents regard ESG inve

291、sting as important.Despite the increase in ESG offerings,29%of investors feel that there are too few sustainable investment opportunities available to them.24 These results suggest that sustainability issues play a key role for a growing number of bank customers and are therefore relevant for retail

292、 banks.At the same time,however,industry experts report that customers in Switzerland have so far shown less pronounced demand in this area compared to customers in other countries.21 cf.e.g.BCG,2022;McKinsey,202322 cf.Bauer,Ruof and Smeets,202123 cf.Stttgen and Mattmann,202324 cf.HSLU,2024dThe SBAs

293、 new ESG guidelines also entered into force at the beginning of 2024.Under these guidelines,financial institutions are required to establish the ESG preferences of new customers from 1 January 2024 and of existing customers from 1 January 2025 and adapt the proposed investment solutions accordingly.

294、In addition to this self-regulation,there are projects at various levels in and outside of Switzerland addressing the regulation of sustainability and climate targets.Backlash against ESG initiativesDespite the definite increase in customer awareness and demand,ESG initiatives are not a permanent va

295、lue driver for retail banks.In the US and some European countries,there is a backlash against ESG initiatives,questioning both their effectiveness and their economic and environmental value.In the US,Republican states such as Texas and Florida have passed laws that restrict government funds from bei

296、ng invested in ESG-focused companies.25 In addition,there is a growing debate about the effectiveness of ESG investments,with critics arguing that they often fail to deliver the desired results or even amount to greenwashing.26 If ESG initiatives are perceived as not authentic,ineffective or even fr

297、audulent greenwashing,this can damage the banks reputation and undermine customers and investors confidence in the bank and in ESG investments in general.25 cf.The Wall Street Journal,202226 cf.Harvard Business Review,2022Proposition 4:ESG initiatives do not produce any material added financial valu

298、e for retail banks.40|Retail banking 2035 A study by EY and the University of St.GallenHigh implementation and running costsImplementing and communicating about ESG initiatives requires significant investment in technology,data,training and infrastructure.These high up-front costs can have a negativ

299、e impact on short-term financial results,while the subsequent economic added value is uncertain.In addition,the ongoing spending on maintaining sustainability programs,including compliance,reporting and risk management,places additional strain on banks budgets and means that ESG progress does not pr

300、ovide a good return on investment for institutions.27The increased requirements for sustainability reporting in Switzerland and the EU further complicate the situation.Particularly in the area of Scope 3 emissions,banks will in future have to disclose the CO2 emissions resulting from their lending.H

301、owever,banks have only a limited influence on the emissions of the projects they have financed.They are therefore critical of these regulations on the grounds that setting clear targets for emissions is a political responsibility that should not be shifted onto the banks.Thus they are calling on pol

302、icymakers to establish a clear division of responsibilities and ensure that the banks operate within a clearly defined framework.Sustainability as a potential hygiene factorBanks are aware of the increasing importance of ESG and prioritize ESG initiatives.Many are heading in a similar direction,for

303、economic reasons and because the regulatory framework demands it.However,this may lead to sustainability initiatives becoming a hygiene factor for banks rather than a way to differentiate themselves.27 cf.Hohn,2022Attitude-behavior gapAlthough survey results show consistently that interest in sustai

304、nable products is growing,actual buying behavior does not always correspond to this interest,which limits the economic benefits for banks(attitude-behavior gap28).Results from surveys that show a supposed willingness to pay for ESG products should therefore be interpreted with caution and often do n

305、ot match up with actual purchasing decisions in practice.Research shows that the willingness to pay even for a real positive impact on sustainability is fairly low.Although many investors are willing to pay for some impact,their willingness to pay for additional impact units(e.g.CO2 emissions saving

306、s)quickly starts to decline.29 Such studies are consistent with the observation that fees and costs remain key criteria for decisions when choosing and switching banks.28 cf.Ajzen,1991 and Carrington et al.,201029 cf.Heeb,Klbel,Paetzold and Zeisberger,2023Proposition 4:ESG initiatives do not produce

307、 any material added financial value for retail banks.0%10%20%30%40%50%60%70%agreeneutraldisagree9%12%21%21%37%strongly disagreedisagreeneutralagreestrongly agree0%10%20%30%40%50%60%70%80%90%100%ESG reporting Adhering to their own ESG objectivesAvailability of attractive products/services Identify cu

308、stomer preferences very lowlowaveragehighvery high13%34%25%6%22%6%16%19%19%40%16%13%22%24%25%19%9%28%38%6%Proposition 4:ESG initiatives do not produce any material added financial value for retail banks.Sub-question on proposition 4:In your opinion,how big are the challenges for retail banks in the

309、implementation of sustainability issues in these areas?41Retail banking 2035 A study by EY and the University of St.Gallen|Analysis of responsesExpert opinionThe biggest challenge is reporting.Overall,establishing the customers preferences is seen as less of a challenge.The average score is 3.5(1=st

310、rongly disagree,5=strongly agree).Proposition 4:ESG initiatives do not produce any material added financial value for retail banks.42|Retail banking 2035 A study by EY and the University of St.GallenSynopsisThe verdict on the integration of sustainability into the retail banking business is a soberi

311、ng one:client demand is mediocre and selling ESG products is not financially attractive for the bank.And ESG does not offer any differentiation from the competition.There is a great deal of uncertainty due to the many different standards and reporting is a mishmash without any real information value

312、.On top of this,there is a risk that any action taken by the bank will be regarded as greenwashing in ten years time.The industry describes the cost of complying with regulation as huge.Nevertheless,it anticipates even more regulation and has its own demands of legislators:it is not up to banks to c

313、onvince customers of the merits of sustainability.Laws are needed here.AnalysisThere is broad support in the industry for the proposition that ESG initiatives create little added value.ESG and sustainability efforts in general have become standards,something“you have to do or else you are gone”.Alth

314、ough useful products such as ESG funds have been developed,the segment is financially unattractive for banks in view of the costs involved.And clients also lose interest if performance is not better than in traditional asset classes.Sustainable disillusionmentBanks seem to have abandoned the illusio

315、n that they will be compensated for launching sustainable products.ESG products do not attract a premium on the market and are only used by a small proportion of customers.On top of this,there are the regulatory costs,and survey respondents describe the reporting requirements as high,including for c

316、ustomers.The costs are out of proportion to the revenues.No differentiation;it is about your own reputational riskIt may be financially unattractive but could it perhaps be an important marketing tool?Unfortunately not,according to the experts,who claim it is difficult to differentiate oneself throu

317、gh sustainability.ESG is now a commodity that everyone has and everyone expects.The experts also note that interest is already beginning to ebb.People are taking a more pragmatic approach again and have realized that there are other problems in the world apart from sustainability.At the moment,the f

318、inancial industry is not providing end customers with any real added value or anything tangible.“When you meet customers today,you notice a certain disenchantment,”says a banker.The customer is asking themselves:is what Im doing really worthwhile?There is therefore skepticism about highly specialize

319、d sustainability banks that have set themselves up as purely digital financial service providers with a focus on sustainable products.All traditional banks have ESG products at this stage.The only differentiation is a negative one:a banks reputation could be damaged if it failed to comply with susta

320、inability standards.Those who are not there will lose,but there is nothing to win as such.The primary aim is to protect oneself against reputational risks,the experts say.Regionalism and making things tangibleNevertheless,the surveys reveal a number of ideas for positioning based on sustainability,f

321、or example by making loans and investments more regionally based.Clients are apathetic and sustainability therefore needs to be made more concrete for example through certain types of mortgage where property owners,businesses and the environment benefit from sustainable behavior,such as through loan

322、s for energy-efficient construction or renovation.ESG is at the top of the hierarchy of needs.“Proposition 4:ESG initiatives do not produce any material added financial value for retail banks.43Retail banking 2035 A study by EY and the University of St.Gallen|We have been turned into the police on m

323、oney laundering,taxes and now on ESG as well.“If the customer is not interestedAnother challenge in the banks view lies in explaining to customers what they mean by sustainability and then reconciling this with the customers preferences.According to survey participants,the discussions are often emot

324、ional,customers interest is usually low and the topic is not very relevant to them except when they are forced to replace the heating system or install solar panels on the roof.The expected return remains the more important criterion for investing.According to respondents,banks have effectively been

325、 made responsible not only for reducing their own carbon footprint but also that of their customers with a view to achieving net-zero greenhouse gas emissions by 2050.Moreover,there are some clients who have no interest whatsoever in sustainability,particularly in the private client business.Demand

326、for legislationIf politicians believe that financial intermediaries are the right people to enforce sustainability requirements on their customers,then problems are inevitable,the experts warn.Banks feel pushed into a role they do not think they should be playing the role of the sustainability polic

327、e.It is not the job of the banks to tell customers how to build their houses they say.Politicians should not simply offload this task on the banks.If the government does not want oil heating,it needs to ban it by law.Bank representatives believe that the net-zero targets for 2050 can only be achieve

328、d through legislation.Lack of clarity increases risk of greenwashingThe industry complains that there is a lack of clear guidelines at present,and that regulation is developing rapidly but remains unclear.That is why it is not advisable to move quickly in this area.It may become apparent later that

329、many ESG products were not green at all the risk of greenwashing is omnipresent,according to respondents.Some institutions even doubt that there are actually any real ESG products at the moment.The products are often different from what they promise and have no real impact on sustainability.Sustaina

330、bility reporting:each copying the otherESG reporting is described by all banks as very costly in terms of time and effort,and the requirements are constantly increasing.Producing adequate data quality and collating for reporting is time-consuming.The reports are not comparable due to the inconsisten

331、t standards.This leads to the banks copying what each other says,and at the end of the day the result is a mishmash of general statements with no real information value.Without international harmonization of the legal framework and clearer guidelines,there will be no progress on this front even in t

332、en years.My job in the investment business is to find out clients interests and protect or grow their assets.I do not need to run an environmental policy with my customers money.“Proposition 4:ESG initiatives do not produce any material added financial value for retail banks.44|Retail banking 2035 A

333、 study by EY and the University of St.GallenOur point of viewDemand for sustainable investment products is lower than previously expected across all client segments;growth rates are shrinking after the first wave.Impact investing has performed disappointingly,while sustainable investing is becoming the new ESG but with more challenging conditions.Products that go beyond the“hygiene”requirements of