With interest rates so low, selling savings products such as Livret A passbook savings accounts or mortgages is no longer a very profitable business for banks. They are now offering new products, moving away from financial hypermarkets to personalized sales. Let's take a look at this new horizon.
A traditional pattern
Although financial institutions continue to generate income and margins in the short term, they are lower. However, this effect needs to be qualified, as it is offset by substantial business volumes and a level of delinquencies that has been historically low for several years. On the other hand, low interest rates are changing the traditional banking model and weighing on its profitability. Popular bank products such as loans and savings products are no longer as lucrative or differentiating. A case in point is the decline in the highly popular Livret A passbook savings account, which saw its annual interest rate cut from 0.75% to 0.50% on February 1, 2020. Today, managing this type of financial product has become less profitable for banks. Even if these funds are guaranteed, they are becoming increasingly expensive in terms of equity capital, due to the sustainability of low interest rates. This observation is prompting bank advisors to identify those customers most willing to accept riskier investments, and to review their offers for traditional financial products.
Offer a customized catalog
The banking world is trying to renew its offers. Alongside traditional savings accounts and loans, there are now offers for property and casualty insurance, long-term vehicle leasing and even alarm systems. Life insurance contracts are also undergoing a profound transformation. Insurance companies are already beginning to draw the first conclusions, with the 2019 return on equity once again on the decline. For all these products, the question of obsolescence has been raised.
The advisor, the bank's new Swiss army knife
The customer advisor relationship is currently undergoing profound change. Advisors are proposing new low-cost offers, while trying to remain as close and responsive as possible to their customers. They are becoming a kind of Swiss army knife, acting as bankers, car salesmen and telephone plan salesmen, as well as wealth advisors and home specialists. The persistence of low interest rates is forcing banks to move into customized sales and the shelving of financial products. Banks are trying to renew their offers and evolve the way they advise their customers. They understand that it's no longer enough to offer only mortgages or property insurance. It is necessary to highlight offers related to housing and vehicles.