Modern banking was born in 14th century. Since then, they became non-separable parts of the world economy.
Globalization became a key factor for success in business and banks provided the necessary tools for that. In order to help the circulation of money in a most efficient way, banking systems started to set their models accordingly.
One of the common banking models used in Europe is local or regional banking. Local banks, despite their limited territory of operation, have shown to be very effective in boosting the economy of their region.
Gianluca Benatti, managing director of Banca Popolare di Cividale, believes that local banks are able to compete with national banks thanks to their quickness in responding to clients and their geographically closeness to them.
“Quickness is one of our success keys. When a client submits a loan or credit request, depending on its amount, relative director of the branch, region or general manager should approve that. Sometimes, however, the board of directors should approve the request.
Here a local bank has a great advantage respect to national one. In a local bank, clients can submit their requests up to a day before the board meeting, which for our bank, is held twice a month.
But imagine how many requests are submitted monthly to the board of directors in a national bank! It may take months until the request is considered and by then it is very probable that the client would have lost a new business opportunity.”
Indeed, for business owners, suspending situation prevents them to look for other possibilities or solutions. Benatti continues: “Clients hate having no response. They appreciate a negative response more than having none, as this forces them to find another solution.”
Beside this quickness, local banks stay much closer to their clients. Being concentrated on a certain region, their picture and understanding from local needs, opportunities and challenges, is by far sharper than their colleagues staying in capital cities.
“Take our region: Friuli Venezia Giulia. This region due to its strategic situation enjoys a great deal of the government attention. Italian government tries to provide facilities to businesses here, in order to keep their value added inside Italian boarders.
A local bank, like ours, has a dedicated team who studies these facilities provided by the Government. We do not miss any new regulation to our favor. Using that we can offer new products to our clients at a lower cost respect to what national banks offer.
Additionally, we also provide consultancy to the Government on what is most needed in the region. This creates a two-way collaboration and its advantage goes directly to our clients”, explains Benatti.
Clearly a national bank needs huge resources to assign a team to each region of the country to study and learn to the bottom of the regulations. Its costs would go such high, that they prefer to leave this part to local banks.
Local banks also use their presence in the region, as a tool to allocate their resources in the most efficient ways. They put together both “mathematical rating systems” results with deep knowledge of a client. This creates a true win-win situation. This is possible only for local banks, which know clients’ families, history and their future plans.
But Benatti warns about this closeness too: “Friendship created between clients and bankers in a region is an advantage, but can turn to a threat too. Sometimes it becomes hard to say “No” to people you meet day and night. Failing in this, you put all the bank in a serious risk”.
That could at least partially explain why once in the while a local bank is listed for bankruptcy. Having a tight control on this is the key to remain in balance.
Banca Popolare di Cividale with 125 years operation history has shown to manage this situation perfectly well. About 19% of businesses in this industrial region are its clients: a proof for what its managing director mentions.
However, banks like other businesses should try for an expansion and attract more clients. For this Benatti believes that banks should change their marketing strategies to some extent: “once a bank branch looked like a post office. Today they should look like a “mobile phone shop”. When you enter, sales experts try to sell you something. They put three or four products in front of you, and do their best to convince you choosing at least one of them. This is the way, branches should be today, if they want to survive in this competition”.
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