Between digital and local branches, the strategic dilemma of French banks

[AVIS D’EXPERT] Retail banks are trying to streamline their branch networks, while accelerating to digital. But customers struggle to change their habits. Decoding with our expert Guillaume Almeras, founder of the monitoring and advisory site Score Advisor.

Societe Generale recently unveiled its plan to merge its retail banking networks in France with those of Crédit du Nord. The whole will be restructured in 2023 under one umbrella brand “SG”, split into eleven regional entities and will thus represent a fairly new brand realignment in France in the banking sector.

Announced sixteen months ago, when the Societe Generale group’s results were half-mast, this merger seemed mostly defensive at the time. The main thing, it seemed, was to reduce costs. With the recent announcement and in a context where Societe Generale, having just lost its Russian subsidiary, is effectively refocusing on the French market, the outlook seems much more strategic.

The first step is to eliminate duplication of systems and points of sale (when 60% of Crédit du Nord entities are located less than a kilometer from a Societe Generale branch). Indeed, the development of digital banking will require significant investment and it would therefore make no sense to maintain two independent networks.

But taking advantage of the complementarity of customers and the strong local roots of the Crédit du Nord group (in which Courtois & Cie, founded in 1760, is the oldest surviving bank in France), it is also a matter of Société Generale’s retail bank with a free new regional base.

Cultivating physical and digital proximity

In two words and in the same motion, the challenge is to reconfigure a sofa that combines physical and digital proximity. But will this be enough to deal with a dilemma facing all retail banks, especially in France?

Today, in fact, banks are subject to two distinct and contradictory temporalities. On the one hand, digital banking is accelerating, creating new applications and you are constantly seeing new players emerging, which requires major investments to stay in the race. But on the other hand, the behavior of the customers evolves very slowly towards the earnings, which does not detract much from the traditional mechanisms of sales and treatment.

According to a Panorabanques survey published in April, 6% of French people have their main account with an online bank and 1% with a neobank. These numbers are low, very low, even if we compare them to other countries and if we consider that online banks appeared 20 years ago. Above all, these numbers have not changed for five years!

An incomplete strategy

Today, it is necessary both to allow clients to talk to their account manager via video conference (almost half of the French branches now offer this) and to maintain a large number of desks. This is a good illustration of the expensive middle ground that retail banks find themselves in. A situation that, if it stayed that way, could turn out to be quite disastrous, at the very least paralyzing.

Faced with this situation, French banks remain rather expectant at this stage. They strive to reduce what can be reduced without major upheavals. For example, the new “SG” will see its network reduced from 2,100 to 1,450 branches by 2025. Which is important, but which may still seem like a lot on this horizon.

However, will the banks be able to avoid accelerating the transformation of their own model? Shouldn’t they strive to change their customers’ behavior faster than they do now? From this point of view, the strategy of the new “SG” seems incomplete in that it ignores one of the essential pillars of Societe Generale’s retail banking business. Can the latter really initiate a realignment of its brands that does not concern Boursorama and does not fully integrate into the whole?

By Guillaume Almeras, founder of the monitoring and advisory site Score Advisor

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