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By Steve Slater
LONDON, May 2 (Reuters) - A boom in mobile banking,regulatory change, pressure on costs; bankers are not easilyexcitable but the rate of change is prompting some to detect a"historic moment" for the industry.
Among senior executives at this week's Reuters FinancialRegulation Summit, the talk was of ripping up business modelsand prioritising digital services, with branches closing ortaking on a technological new look.
"This is a big shift," said Graham Beale, chief executive ofNationwide, one of Britain's top-three providers ofhome loans and savings products.
"There are not many historic moments when you look at thenature and shape of retail financial products and I think we'reon the cusp of a big change here," Beale told the Summit.
"It (mobile growth) really is quite incredible. I can see inthe not-too-distant future the dominant channel will become theinternet bank, with access through mobile devices, with otherchannels becoming supplementary to that digital channel," Bealetold the Summit, which took place in Reuters' offices in London,New York and Washington.
Christian Clausen, chief executive of Sweden's Nordea, said executives face strategic decisions on theirbusiness models due to the jump in digital use by customers,alongside demands to hold more capital and more stringentregulation in other areas.
"It's a huge change ... you will come out with a completelynew banking sector," said Clausen, head of the biggest bank inthe Nordic region, where customers use online or smartphonebanking more than anywhere else in the world.
The surge in the take-up of mobile banking has taken manybanks by surprise, prompting some to accelerate plans to closebranches or adapt how their costly bricks-and-mortar branches are used.
Granted, some executives said talk of the death of thebranch is premature. Banks will push routine transactions on totablet PCs or other automated platforms, but some branches willstay - albeit with a new look.
POSITIVE TREND
Many lenders have introduced remote services where customersat a branch get advice on mortgages, other products and morecomplex transactions from consultants at a central location viaa TV screen - cutting costs and providing a quicker response.
Beale said his remote service had led to Nationwide keepingopen some branches whose viability was declining. "We've foundit is bringing life back to the smaller, remote branches," hesaid.
Many lenders are wary about the risk of public or politicalbacklash when branches are shut, but Clausen said it is anatural and inevitable outcome.
"I don't think there's a political problem with us beingmore efficient," said Clausen, asked about the reaction to theclosure of hundreds of branches.
Bank executives said the pace of change is being dictated byconsumers, who were taking to banking via smartphonessignificantly faster than they adapted to online banking. Mostmobile banking services are barely two years old.
The trend is good news for banks. Handling a transaction ata branch can cost 50 times the same transaction on a mobilephone, or 20 times its cost on an online platform, according toa study of U.S. transaction costs by Diebold.
It also opens up options. Establishing a leading digitalplatform will make Nordea more nimble and give it greaterflexibility on strategic options, including in mergers andacquisitions (M&A), Clausen said.
Nationwide has been considering expanding into small andmedium business banking and Beale said if it proceeds it islikely to be with an online platform only, which can be set upand run on far lower costs.
FEWER VISITORS
Nationwide, whose 700 branches represent the sixth-biggestnetwork among UK lenders, said its customers will now on averagevisit a branch once a month and use internet banking six timesand a mobile app 18 times.
UK rival Barclays said it had 59 million mobilebanking transactions last year, a six-fold increase on 2012.
Such trends are driving a sharp drop in "footfall" or visitsto branches. In Britain, the reduction in branch usage isrunning at between 8 and 10 percent a year, industry sourcessaid. Royal Bank of Scotland said it has seen a 30percent fall in branch transactions since 2010.
Banks across Spain, Italy, Britain, the Nordics and beyondare expected to shrink branch networks to cut costs, potentiallysaving up to 15 percent of their retail banking expense.
Nordea has cut its number of branches to 800 from almost1,400 at the end of 2010; that represents a 32 percent cull injust two years, excluding branches sold in Poland, and Clausensaid more will go.
Europe's top banks shut or sold 5,300 branches last year andconsultancy Bain & Co reckons as many as 40 percent of theregion's branches could close by 2020, which could see 65,000fewer outlets.
"It is not an issue because this is what is wanted," Clausensaid. "They (politicians and regulators) want us to providecheap services and have a lot more capital, and the only way wecan absorb that equation is to be more efficient. Otherwise wehave to increase margins, and that's not popular." (Editing by David Holmes; Follow Reuters Summits on Twitter@Reuters_Summits)
