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Spanish banking giant Santander unveiled its midterm strategic plan this week, where it earmarked €20 billion ($22.5 billion) in investments for digital and technology over the next four years, per a press release.
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The group said it’s aiming to enhance the customer experience and lower its cost of delivery with the investment; it added that operational improvements and better capital allocation will drive €1.2 billion ($1.4 billion) in annual cost cuts.
Here’s what it means: Agility and online banking are in focus as Santander looks to evolve and become more customer-centric.
- Santander will try to replicate the nimbleness of neobanks. The bank is moving its IT infrastructure to a "multi-cloud environment with gloabl platforms" and implementing robotics and machine learning at scale to become more agile. Further, Santander said it would cut the number of executives on its management committee from 24 to 11 in hopes of being able to make decisions faster.
- It will also look to improve customer satisfaction with its digital focus. The banking giant said it plans to enhance and personalize consumer experiences, as well as expand many of its digital offerings, including in the payments space, where it sees a significant global opportunity. Neobanks’ consumer-centric approach ups the pressure for banks to focus on meeting customer demands and desires, and Santander hopes these initiatives will help improve customer loyalty.
- Santander confirmed it plans to expand its online bank, Openbank, to 10 new markets. In Spain, Openbank has over 1 million customers, while over its expansion period it aims to reach 2 million customers. As neobanks continue to attract customers — Revolut and N26 in Europe boast 4 million and 2.5 million users, respectively, while Chimein the US counts over 2 million — focusing on expanding its online bank makes sense.
The bigger picture: Traditional banks increasingly model their strategy, structure, and process changes off nimble challenger banks.
A number of major banks have been unveiling digital transformation plans, with more expected to do so in the future — and neobanks should take note. Digital-only banking rivals are forcing incumbents to react: JPMorgan and Goldman Sachs, for example, have both launched digital offshoots, while an Economist Intelligence Unit report found that one-third of global retail banks have plans to build digital brands.
Further, many banks are becoming digital to the core, and not solely on the customer interface level, such as DBS, ING, Citi, and BBVA. As incumbents become more attuned to the changing customer demands and the winning strategies of digital-only banks — and deploy their capital and scale to respond — neobanks should double down on agility and innovation to ensure they remain at the forefront of change.
While some banks will be too slow to react or successfully implement their costly digital overhauls and some upstarts will be unable to achieve sustainability, the current competitive dynamics across the global banking landscape will continue to drive sector improvements that primarily benefit the consumer.
Here’s an industry opinion, as told to Business Insider Intelligence:
“We’re seeing new digital entrants putting downward pressure on margins for incumbent banks like Santander, who are encumbered with legacy technology, distribution, and operating models. The €20 billion spend on digital over four years is reflective of a trend we’re seeing across the industry towards digitization to serve customers better and at a lower marginal cost.” — Jake Tyler, Finn AI cofounder and CEO.
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