Trends and challenges
The Swiss banking market has been undergoing a structural transformation for a number of years. Market pressure continues to mount in the face of macroeconomic challenges, client expectations, digitisation and stringent regulatory requirements. At the same time, banks face increased competition from new market players and consolidation pressure in the banking market.
Business: Upturn of the economic environment
The global economy continues to grow solidly despite ongoing political risks. This trend, along with the weaker Swiss franc, has helped to gradually stabilise the economy in Switzerland. While low interest rates keep demand for residential real estate high, excess capacity is beginning to emerge among investment properties. This development is being monitored on an ongoing basis, however. Nevertheless, we do not expect Swiss (residential) property prices to drop across the board in the near future, although we cannot rule out price corrections in individual regions.
Prudent lending practices are always essential for a sustainable business trajectory, but particularly so in the current environment, where many market players are still struggling to find investment opportunities. Raiffeisen has therefore chosen to adhere to its proven, conservative lending policies and cautious market assessments. It also continues to seek out and develop new sources of growth and income to offset falling margins in the core business.
Clients: high client expectations and changing client needs
Clients enjoy greater transparency around products and services and therefore have high expectations about the range of services provided by banks. Today, clients assume and expect anytime, anyplace access to services. Clients increasingly communicate with their banks through various channels, and demand for mobile banking is increasing. Banks must take care to coordinate physical and digital channels and develop innovative advisory and sales models to meet changing client needs.
The optimisation of digital and physical sales channels will play a big role in future. As a digital local bank, Raiffeisen offers clients online services while still maintaining a strong physical presence through local Raiffeisen banks.
Competitors: Fierce competition in the banking market
Pressure on margins will continue to rise in the Swiss banking market. Today, traditional banks not only have to defend their market share against other banks, but also against competitors from outside the industry, such as insurers, pension funds and technology firms. In this environment, traditional banks have realised that collaborating with fintech companies can give rise to new, innovative and comprehensive services that target client needs with a laser focus. At the same time, banks are challenged to re-engineer their business models and business processes from the ground up, drive digitisation along the entire value chain and differentiate themselves from the competition. This requires clear positioning as well as a comprehensive range of services.
Raiffeisen successfully strengthens its position as Switzerland's leading retail bank by clearly positioning itself in its core business and entering into carefully selected partnerships that augment its service offering in the core business. It also aims to expand the investment and corporate client business further. Raiffeisen wants to satisfy client needs by collaborating more with partners (in and outside the banking industry) in digital ecosystems (e.g., the "home" ecosystem).
Regulation: High regulatory pressure
Regulation continues to increase for Swiss banks. Regulators are currently focused on two issues – maintaining the stability of the financial industry (systemic importance, Basel IV) and improving client protections (FinSA). Furthermore, Swiss laws are continuing to be harmonised with international regulatory standards. The implementation of regulatory provisions will therefore continue to require significant financial and human resources. Additional regulatory changes have taken place as well. For example, the Federal Council decided to improve the regulatory environment for fintech companies. In its "regulatory sandbox", the Financial Market Supervisory Authority is tearing down regulatory obstacles to new business models and promoting innovative solutions in the Swiss financial industry.
Regulatory compliance is a central requirement for Raiffeisen. At the same time, it actively participates in the regulatory debate, living up to its responsibility to society in this area as well.