Are you a Swiss banker, how are banks changing in the age of computers and the internet?
Swiss banks have a huge problem adapting to these changes. For many years, their functioning was based on values that no longer exist: discretion and banking secrecy. What is worse, as a result of changes, many Swiss bank clients left for Singapore and Dubai, Hong Kong and the USA.
Is the abolition of banking secrecy the only problem?
No, not only. The Swiss FINMA regulator obliges banks and clients to practice due diligence which increases operating costs and reduces profits. In addition, technological progress has led to the fact that the client does not need a bank mediation in many financial activities – he can make transactions via the Internet himself and much cheaper and faster than in the case of the traditional banking method of securities trading.
I understand that other customers from banks have also become more demanding. So how do banks cope with this new situation?
Banks have found a solution that can be called a half-measure. They have created funds containing shares and bonds, which are supposed to theoretically ensure higher profits and, above all, ensure a guaranteed minimum profit. Banks also began to play with derivatives, or insurance and swaps, against those funds they sold to customers. All this works well only if the market continues to grow, but if the trend reverses it will lead to disaster.
That’s why banks need to deal with direct investment in Private Equity – some of them are already doing so. They should also switch from simple trading on the financial market – which will be completely taken over by Internet companies like Fintech – to more sophisticated forms of investment.
What do you mean by more sophisticated investments?
I am referring to direct investment in Private Equity, company financing or real estate financing. Such activities are much more labor-intensive than, conventionally speaking, setting up a trading table, employing young traders and trading in securities.
You mean that now banks will need business and real estate specialists?
Yes, of course, if they want to remain banks, they will have to hire specialists who can assess enterprises and real estate.
And this great business that has so far been taken over by online companies?
Exactly. Payments, Payments via PayPal or Revolut are just the beginning. In the near future, individual wallets will be created, thanks to which people will be able to pay among themselves without the assistance of banks.
It sounds a bit like science fiction, but it’s already happening somewhat.
Yes, but real fantasy is yet to come, e.g. cryptocurrency. Perhaps in a few years traditional money will be supplanted by Bitcoin or another Cryptocurrency.
Let’s go back to the banks. How do you rate Swiss banks today – especially those with many years of tradition?
Very bad. I recently had a meeting with one of the directors of an old Swiss bank. I couldn’t believe what he was telling me. They stayed where they were 30 years ago.
What exactly surprised you so much? Unclip the secret – of course without mentioning names.
I was shocked when I heard that his bankers are being paid, not from the number of clients they get, but from how long they have been working at the bank.
Does it mean that those who have worked longer earn more than those who bring more profits?
Worse. Those who gain new customers are as if robbed by their bosses (the commission does not go to the banker who acquired the client) who have a longer period of experience in the bank. So how do you want to motivate these young bankers? This is complete stupidity and lack of responsibility.
And how was the conversation with this banker?
I told him he gave him a maximum of two years to close his tank.
What he said?
He smiled and said he was 63 years old (retirement age in Switzerland is 65).
Did anything else outside the corroded social system surprise you?
Yes. When I asked him what the strength of his bank was, he said “discretion.” At this point, I had to hold back so I wouldn’t laugh. He apparently didn’t hear about the fact that the banking secret was abolished a year ago!
Well, what would you advise banks that are starting to get in trouble and should change?
First of all, they must forget the good old days for Swiss banks. This is the last bell to start building a new type of business with their reputation (not the worst yet). They must enter new markets, create new branches in developing countries. They have experience that they can use in these new markets.
In addition, as I have already mentioned, they must be closer to customers and entrepreneurs.
What do you mean by that?
That they must start financing the needs of customers, real estate, ships, planes as well as enterprises and factories. They also have to enter the countries where their clients come from.
Do you mean Poland?
Why not. Although some Swiss banks have been in Poland for several years now, it cannot be said for many others that they know what market Poland, Ukraine, Bulgaria or Romania are. I don’t know why they don’t use the Swiss Banker brand? Maybe they don’t believe in him anymore?
Thanks for the interview.