Test
case
Keys to success
Ireland's best buy
In the pipeline
Direct lifeline
In Ireland, there is a clear gap between what products and services banks are offering
and what the public wants. Anotheradvantage of the Irish market is it's relatively small
and isolated - an ideal testing ground. And it has an affluent population - the ideal target
market. Furthermore, Rabobank already has a presence in Ireland and some existing
synergy with ACC.
of Rabobank's Triple A rating, funds
obtained via the interbank market are
relatively cheap. At a low rate of 1.5%, the
longer-term goal is to generate significant
cross-sell to make the Internet bank profit-
able by itself (through offering personal
loans, mortgages, pensions and insurance).
There are four keys to success for a direct
bank: sales and local market orientation,
operational excellence, cost control and
a lean and responsive (knowledge)
organization. 'On one hand we should
be able to copy and share the operational
side of things, while on the other hand,'
Dekker explains, 'we should be able to
tailor sales, marketing, products and
services to the local market requirements.'
To ensure an absolute focus on the local
market, only the business elements such
as sales, marketing, site management,
product management and compliance
will be situated locally. Costs are kept low
and (process) efficiencies are realized by
centralizing the IT systems (which will be
outsourced and located in the Netherlands)
and centralizing the back office in Antwerp.
Dekker also adds, 'It is important to have
clear and short reporting and decision
lines both inside the different country
organizations as well as across. This calls
for a dedicated small central organization
in Utrecht which, in terms of governance,
is as separate from the existing wholesale
offices and international support functions
as possible. Gert Bouwman is responsible
for this new International Direct Banking
organization and all new and operational
direct banks including "Rabobank.be".
Gert Bouwman is reporting directly to me.'
RI's expansion is set to continue with the
launch of a Direct Bank in Ireland in April
2005. Reliable, transparent, trustworthy,
and easy banking is what the Irish market
appears to be demanding. 'RaboDirect's'
strategy for simple products at low costs
is expected to reap high volumes of
customers. The core products to be
offered are savings accounts and mutual
funds, which will represent the 'best buy'
option in the market. Dekker says, 'We
don't want to be a price fighter but we do
want to be in the top. We will be more
competitive than the established banks by
offering customers a better price. As we
won't provide statements or keep offices,
our costs will be kept low. We will be
customers' secondary bank. They will use
other banks for payments, invoices, debit
and credit cards.'
It will take some years before this latest
initiative in direct banking can bejudged
a success. Dekker predicts that the Irish
project will break even in three or four
years, but also anticipates that the Irish
market may pleasantly surprise our bank.
Meanwhile, feasibility studies are underway
in a number of other markets including
Germany, Australia, Turkey, Poland and
California. 'We don't have any megalo-
maniac ideas however,' stresses Dekker.
'We are taking a country-by-country
approach. There are such significant
differences between countries that each
market is examined as a completely new
investment proposal. Moreover, we have
structured it in such a way that we can
desist with the plan anytime.' In spite of
this cautiousness, Rabobank currently
plans to follow the Irish launch with a
launch in Germany by the end of this year.
In Dekker's long-term view he predicts
Internet banks will take over most of the
retail market. 'I wouldn't be surprised if
in the near future 50% of the retail
market share is in the hands of Internet
banks. Rabobank is extremely capable
and knowledgeable of direct retail
channels so we should export this.
Moreover, we are able to set up direct
channels quickly with a relatively small
investment. While currently viewed as
an experiment, this direct channel may
provide a very important lifeline for
Rabobank in the future.
10 The Word
