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Banks cast nets for clients
In the anticipation of a retail banking boom, Russian banks decided to modernize their branch network. The participants of the banking services market believe that the retail banking sector will be developing rapidly this year. Some even expect a boom. Indeed, the retail banking sector began growing last year, forcing banks to take a more hands-on approach to the development of their branch network. Last year, retail banks were unprepared for a massive demand for their services, which led to long lines in many bank offices. Experts say the best strategy is to develop automated offices. According to experts, the number of retail bank clients will increase 5-7 times in 2004. Valery Kardashov, Director of Banking Products and Marketing at Impexbank, told RBC that this was a very modest estimate. In his opinion, the number of clients will rise much more due to the development of all kinds of retail banking services and lower prices as a result of strong competition. In other words, Russia will see a real retail banking boom in 2004. Experts say the demand for retail banking services will increase thanks to rising living standards. “Personal incomes increased, which allows more people to apply for, say, bank loans,” says Dmitry Lepetikov of the Center for Development. “Lending to individuals develops quite rapidly and is ahead of lending to businesses. Loans to individuals account for 10 percent of the credit portfolios of Russian banks. A year ago, they made up only 5-6 percent,” he noted. As the lending to large businesses becomes less effective, banks have to find other sources of profit. In this respect, a rise in the demand for retail banking was well-timed. “The retail banking sector has not been embraced. The development of retail banking is a labor intensive process in itself, requiring a large number of staff,” believes Mikhail Kromov, analyst at the Center for Macroeconomic Analysis and Short Term Forecasting. In this situation, banks decided to allocate additional funds and develop retail banking. Last year, some banks were not prepared for a rise in the demand for retail services, and clients had to queue up in such banks. “Banks did not expect that the demand for their services will rise so much. Some banks…did not pay enough attention to the organization of business processes,” said Alexander Koloshenko of Reiffeisenbank. According to Mr. Khromov, some banks decided to expand their branch networks last year. Anticipating a retail banking boom, experts believe that that the most effective strategy would be to develop various automated offices and financial supermarkets, requiring a small number of employees and insignificant costs. “The process of giving consumer loans is standardized as much as possible, and it does not require a profound conversation with a customer,” Mr. Lepetikov says. “If we expect that the Russian economy will continue growing and living standards will be rising, the optimal strategy would be to create automated offices, and not ordinary offices which are expensive to open and run,” he stressed. Some banks have already realized the advantages of automated offices. So, Alfa Bank officials told RBC Daily that the bank was going to gradually abandon ordinary offices and shift to automated offices. Impexbank also plans to develop a network of financial mini-markets, located in various trading centers, retail chains and service centers. “Today, banks are actively developing partnership programs, where they can effectively open their mini offices and even departments,” Mr. Kardashov. Banks are ready to open their offices next door to each other in the same trading center. In Mr. Kardashov’s opinion, the booming development of the retail banking sector will lead to a rise in competition in 2004, which will force banks to expand their range of products and devise new marketing strategies. However, Russian banks do not have much time for modernization and developing new strategies. Last year, a number of foreign banks, including Societe Generale, showed their interest in the Russian retail banking sector. But these plans remain on paper so far: foreign banks are not very interested in Russian customers because of their rather low incomes. This provides an opportunity for Russian banks to modernize themselves and meet foreigners fully armed.
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