In recent years, the retail banking landscape has morphed dramatically with banks turning into one-stop shops. Insurance, car or house loans, and invoice domiciliation have all become staples in the life of the everyday modern bank client.
Joumana Bassil Chelala, deputy head of the Byblos Group consumer banking division dates the origins of Lebanese retail banking to the early 1990s. “Byblos Bank first introduced the personal loan concept in 1992, as the country was slowly emerging from war. The population was in need of small loans in order to renovate shops, homes and cars. At the time, banks were still primarily focusing on commercial banking and trade finance activities. After launching the personal loan, we also started offering housing loans,” she said.
By the mid-nineties, the retail banking sector was also familiarized with ATMs (Automated Teller Machines), which started mushrooming around Lebanon through LINK, the company responsible for putting in place the first POS (point of sale machines) and launching awareness campaigns around the country.
“Today, retail banking has gone beyond the frontiers of traditional banking, as products and services were streamlined under one brand and one roof,” added George Aouad, head of the retail banking division at Bank of Beirut (BOB).
For Chelala, in addition to a structure built on products and services, the success of retail banking relied essentially on other intangibles such as a wide branch network, customer focused service, staff knowledge and ethics, a strong brand identity, IT support, simple and clear procedures, proper training, real time support and the credibility born from years of experience
“Retail banking is a combination of all the previous ingredients that define a bank’s savvy. What is the use of offering new and innovative products without proper follow up and sufficient customer support? What added value can excellent products bring, if customers’ requests are not answered and if they are not provided with real time assistance?” pondered Chelala.
According to Aouad, the primary role of banks is to respond to client needs while facilitating them. “Basic products, namely individual loans, credit cards and salary domiciliation for employees have significantly altered the face of retail banking forever,” he added.
In order to better adapt to their client needs, banks have started segmenting their market more efficiently. Aouad pointed out that BOB has developed different bundles of products, which are customized to meet the needs of various categories of clients. “A typical example that comes to mind is that we do not offer gold credit cards to clients falling in the lower income bracket,” said the BOB manager, who underlined that anyone eligible for a loan needs to satisfy certain important requirements such as having a secure job and source of income and belonging to a stable sector.
Reflecting the need for further market segmentation, vertical cards developed by BOB have targeted such stable economic sectors and independent professionals including doctors, engineers, teachers and bankers. “Vertical cards offer holders certain perks and advantages such as redeemable points, lottery tickets as well as discounts in specialized stores,” Aouad said.
HSBC is another bank that has been following a careful segmentation of its client base. According to Tony Graham, Senior Manager Personal Financial Services (PFS), the bank is built around the concept of PFS and HSBC Premier, dedicated to the more affluent class targeting individuals boasting liquid assets of $100,000 to $4 million. “Usually, Premier customers do not have a great need for personal loans and thus we provide them with high end products or real estate financing. We still, however, provide regular services to our other clients, along our Premier services,” Graham highlighted.
HSBC has also taken its approach to market segmentation a step further by engaging Lebanese dual nationals. “Premier services are provided in 37 countries, and Cross Border Premier allows our clients to access our different offers wherever they are. Hence, a Gulf client has the possibility to contract a loan at our Beirut office if he wishes to buy real estate in Lebanon,” explained the manager who believes the HSBC joined-up structure and wide network grants the institution a competitive advantage when compared with other players.
In spite of Lebanon’s relatively small size, the presence of banks varies greatly among the different regions. Chelala holds that penetration levels may have reached as much as 75% with branches in rural areas and automated teller machines sprawling into the most underdeveloped region. “We have contributed to the development of rural areas by providing the local population with products and services that are adapted to their needs and environment such as kafalat and small loans addressed to small businesses,” she underlined.
At BOB, Aouad emphasized however that in spite of its positive performance the Lebanese banking sector still lags behind other countries in the region, where relationship ratios remain higher. The manager estimates that while there are about two products for each customer in Lebanon, this ratio rises to 3-to-1 in the Gulf.
“Retail banking clients are becoming increasingly more sophisticated. Therefore banks need to increasingly adapt products and services to needs of each of their targeted segments,” underscored the manager. HSBC’s Graham believes that among the new trends shaping the retail banking sector is the separation between two distinct types of markets: a mass market and a more premier market. “Successful banks segment their customers. It is very difficult for banks to be all things for all people,” he added.
According to Aouad, there are also other trends such as the more frequent use of POS machines that may ideally lead to an automation of retail banking. “Retail banking has been evolving for decades. However, in recent years we have fallen far behind Europe, the US and even the Gulf, which have been relying on new technologies and heavily invested in retail banking. The nature of the Lebanon market risk hinders the proper advancement of the retail banking sector,” he pointed out. “Nonetheless, if Lebanon was to be granted stability, many opportunities would be laying ahead.”