LUXEMBOURG
PASCAL MARTINO & FRANCOIS BADE

What is it that customers need and value these days? What are they looking for when visiting a branch? To answer these questions, Deloitte conducted a Consumer Survey. 17.200 respondents took part worldwide, including countries such as Germany, France, Switzerland and Luxembourg. The information gathered from the survey aims to help answer the following questions: Why do customers switch banks? Is the traditional branch network obsolete? What purpose, if any, will it serve in the future?

Customers in Luxembourg switch banks more often – but why?

33 percent of customers working in Luxembourg do not have a primary bank account here. However, 59 percent of them do have a Luxembourg banking account, but it is not their primary one. The reasoning behind this differs among the neighboring countries. 67 percent of Germans, 42 percent of French, and 20 percent of Belgian customers do not see any benefit in having their primary bank here in Luxembourg. 17 percent state that the offer in Luxembourg is simply more expensive.

In addition, only 64 percent of those already signed up for a banking account in Luxembourg, are actually satisfied with their primary bank. But what about the others? 50 percent believe that their bank does not know them and, most of all, does not know what they actually need. On top of that, only 45 percent think that their bank is meeting their expectations in terms of tailored advice.

Customers in Luxembourg appear much more likely to change their primary bank compared to other countries. 20 percent of the respondents changed their primary bank recently and 56 percent are likely to switch within the next two years. One of the main reasons cited by countries worldwide is that of a better pricing offer at another bank. On the other hand, Luxembourg respondents all agreed that another reason for switching bank is to look for a more personalized advice and offering.

As many banks have worked on their digital onboarding in recent years, switching banks has never been so easy. Hence, banks should pay attention to what their customers really value; otherwise they may disappear as quickly as they appeared.

The branch is dead, long live the branch?

The branch network is not dead – at least not yet. Customers still prefer human interaction for certain financial services, mainly when it comes to complex financial products or investment services. 84 percent of the respondents currently use the branch network to apply for a loan and they would still like to do so in the future. 64 percent note that they would prefer a branch visit for personal loan applications, 86 percent for closing or refinancing of a mortgage, and 70 percent would favor a visit to their branch to open an asset management account. For all these services, the personal and human element plays a major role.

In addition, customers in general liked the idea of having a digital self-service at the branch, with representative help on hand if needed. Banks these days should apply a combination of digital and physical banking to make it more convenient. Let us not forget that the main customers currently buying houses and applying for personal loans to purchase their first car are Millennials. This generation likes to be independent, but also to receive a bit of personalized advice in order to feel recognized. Having a digital self-service with representatives if required might be just the right response.

Digital banking has pushed the branch network to its fundamental inflection point. In order to compete in this changing environment, banks need to rethink what purpose the branches should fulfill within the coming years. The answer could be a hub and spoke model, differentiating branches between types of service. This could encourage retail banks to rethink their branch network in order to be more cost efficient and deliver a concentrated but valuable service.