Cooperative banks in Switzerland are seeking to develop a single app to bundle their online offerings. Roland Altwegg, who is responsible for this at Raiffeisen Switzerland. finews.com spoke to him about that and mortgages.
One app to rule them all. This is not a fantasy at Raiffeisen Switzerland but something that will become reality in the medium term. «On the agenda is the Raiffeisen App, where e-banking and other existing tools will be brought together,» executive Roland Altwegg tells finews.com.
Altwegg has been in charge of Raiffeisen's products and investment services department for a year, which encompasses a broad field ranging from classic offerings like savings accounts and mortgages to Raiffeisen funds and apps for saving for retirement.
Sharpening the Strategy
After Raiffeisen was preoccupied for years due to the affair surrounding former CEO Pierin Vincenz, the St. Gallen-based headquarters of Raiffeisen Switzerland was been able to push ahead with digitization in recent years. Announcements about new online offers, fintech cooperations, and the launch of the Liiva living ecosystem with the Mobiliar insurance company were launched in rapid succession.
Altwegg, who has been with the group since 2007, has always been in the thick of it, both as head of new business models and ecosystems and in his current role. Following the digital awakening at cooperative banks, a phase of «strategy sharpening» has begun. Accordingly, the new offerings will focus even more on the Raiffeisen brand, its channels, and customers.
Liiva Sold
The Raiffeisen app is a prime example of these efforts. As Altwegg looks to the future, he says the integrated portal solution should replace e-banking in the medium term. «Our goal is an app for all digital Raiffeisen services, optimized for the smartphone.» To be sure, a physical bank presence continues to be of central importance for the banking group, which has the largest branch network in Switzerland, and «the online channel must interact with it.»
Strategy sharpening is the background against which the banking group's departure from the joint venture with Liiva needs to be understood. After Raiffeisen Switzerland and the Bern-based insurer launched the joint venture in the summer of 2021, Mobiliar took over all shares in October. «We decided last year to only broker bank-related services in the residential business segment in the current strategy period, not be the gardener who mows the lawn,» Altwegg reported.
Not Altering DNA
Instead, the purchase and sale of properties are offered, which is also covered by the brokerage subsidiary Raiffeisen Casa. In addition, the group advises on modernizations or the inheritance of properties. «So we are sticking to our DNA, which comes from financing,» he continued. Such a strategy is also easier to communicate to customers, while the bank's brand offers many economies of scale.
By rejecting a broad digital ecosystem, Raiffeisen has likely overtaken other players on the fintech learning curve in the local market. The dilution of its brand, the opening of the interface to third parties, and the high investments are the most important arguments against such future models from the company's point of view.
Observers have been assuming for years that there would have to be a shakeout of such offerings in the local financial sector. The Raiffeisen Group has now apparently pulled the ripcord earlier than its competitors.
Local Bank Investment
This contrasts with the rather wait-and-see attitude in the area of traditional offerings, especially in the interest business. Raiffeisen banks have reacted cautiously to the Swiss National Bank's (SNB) key interest rate increases, and tend to offer lower savings rates compared to the broader industry, with cooperative members enjoying a better deal. Raiffeisen Switzerland decided in mid-February to once again increase its recommended interest rate for savings accounts starting April 1.
«It helps us that we as a group already have a large base of stable deposit money to refinance our interest business,» Altwegg says, explaining the move. Likewise, the largely rural group benefits from customers feeling closely connected to their Raiffeisen bank. «The money is invested with the local bank in turn finances regional projects,» says Altwegg.
Variable Interest Rates
When it came to mortgages, Raiffeisen banks were quick to follow the rates of the capital market higher and add their margin, resulting in a significant increase in rates and, Altwegg believes, «a total change in customer behavior.» Longer terms are no longer in demand for mortgages, while at the same time, there is a run on lower variable rates, he says. «Saron mortgages account for about half of all renewals and new contracts with us.»
Swiss homeowners make up the bulk of Raiffeisen borrowers and are taking an interest rate bet where the outcome is uncertain. They are hoping interest rates will soon peak, but if they are wrong, the cost of their variable-rate mortgages could continue to rise.
Saron Safety Net
In light of that, Raiffeisen Switzerland decided to put a safety net in place by allowing borrowers «to exchange their Saron mortgages at any time for a fixed-rate product with at least the same remaining term,» says Altwegg.
While recent surveys indicate increasing nervousness among borrowers, the Swiss market leader in the mortgage business remains calm. «I'm not worried about Raiffeisen because of possible loan defaults,» says Altwegg. The group has a robust portfolio and, unlike in the past, has grown with the market in recent years. «Also, we're diversified across Switzerland and exposed to properties that can be sold relatively easily.»
Thinner Margins
Altwegg also has an answer to the broad accusation made against Swiss retail banks that they have been skimming off of a greatly increased margin since the turnaround in interest rates. During the negative interest rate era, interest margins fell steadily to 1 percent or even lower. Now, banks are experiencing a counter-effect of sorts. «But margins of 1.6 percent and higher are a thing of the past,» the banker points out.
In the end, it's a healthy mix of interest rate products on the balance sheet that counts, not the yield alone. The Group will report on how all of this turned out last year on March 2.
