In an attempt to grow its
market share of the growing mass affluent segment, the Mexican arm
of Santander is to open 150 Select branches by 2013. Jose Antonio
Alonso Mendivil, co-managing director of retail and business
banking at Santander Mexico, sets out his stall with Ivan
Castano.
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The stakes do not come much higher.
In what is potentially one of the most important strategic
decisions taken by Spain’s largest bank, Santander, it is to target
the mass-affluent segment via its new sub-brand, Santander
Select.
In addition to the new brand,
Santander is rolling out Santander Select branches, containing
class leading design features, offering enhanced levels of customer
service.
In Mexico, Santander aims to open
150 Santander Select branches by 2013.
For Santander, the potential
benefits to be accrued from getting its mass-affluent strategy
right, cannot be under-estimated.
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By GlobalDataIn its sights are global rivals
such as HSBC, which has enjoyed phenomenal success via its
mass-affluent, HSBC Premier service.
Santander’s targeting of the mass
affluent segment comes as Mexico’s premier banking clientele grows
at the rate of 10% per year. For its part, Santander is aiming for
15% annual growth from the key mass market segment in the next two
years to help its boost its retail banking profits.
Jose Antonio Alonso Mendivil,
co-managing director of retail and business banking at Santander
Mexico met up with RBI to discuss the bank’s ambitious
targets.
“It is a very important project for
us,” said Alonso.
He added that Santander’s Select
clients do 60% more business with the bank than its regular premier
customer base, meaning this is a potentially lucrative venture for
the lender to develop in coming years.
Alonso won’t provide ROI targets
for the fledgling franchise but says break even point will be
reached in 18 months and payback in 36 months.
“We can sell many more credit,
investment and insurance products that generate higher
commissions,” he says.
“The Select offering is working
very well and we are very excited about it.”
The Select model will end the year
with 35 dedicated branches. It is now operating in eight wealthy
neighbourhoods across Mexico’s largest cities including Mexico
City, Guadalajara and Monterrey.
Future openings will include other
key Mexican cities such as Cancun, Villahermosa, Acapulco, Torreon
and Tijuana, according to Alonso.
Alonso said that one third of the
branches will be located in Mexico City and a large number in
Guadalajara and Monterrey, Mexico’s second and third-largest cities
respectively.
In terms of getting its branch
design strategy right, Santander turned to UK-based design
consultancy, allen international.
Founder Michael Allen told
RBI: “We wanted to develop a more contemporary and unique
premier banking environment for Santander Select and not the usual
business type lounge that most banks have.
“Using the existing corporate
values of Santander we expanded them to be more prestigious,
distinctive and with more of a lifestyle image that would appeal to
the affluent customer.
“We developed a branch environment
that would attract customers to the branch by using complementary
lifestyle brands in art, fashion and technology, while designing
the branch to be a venue for seminars, social events and
third-party luxury brand launches.”
Big growth
Currently, Santander Mexico has around
6,500 Select clients representing 2% of its 320,000 premier client
network. Alonso hopes that number will grow to represent 25% of the
bank’s premier client base by 2013 which in turn is forecast to
grow 15% annually.
Overall, Santander’s Mexican unit
is the second-biggest in Latin America accounting for 6% of group
net profits of €3.5bn ($4.7bn) in the first half of 2011.
Latin America accounts for 43% of
group’s profits with Brasil accounting for 25%.
In Mexico, the bank has 9.1m
clients, served by 1,100 branches and ranks third in the market
with a 15.5% market share in the first half.
According to Alonso, Select spaces
are currently located inside Santander’s best branches straddling
wealthy Mexico City quarters such as Polanco, Perisur and Satelite,
as well as similar locations in other key cities.
The sections are usually located in
the back of the branch or upstairs to provide banking
exclusivity.
Alonso says most spaces will be
located inside branches but there will also be some independent
ones opened next to branches in key markets, particularly Mexico
City where three such offices are planned at the moment.
Unlike Brazil and Chile (where
Santander also has Select corners), Mexican premier customers are
more concerned with privacy than atmosphere, Alonso said.
“In Chile, Select spaces are open
while in Mexico they are more enclosed and private,” he
explained.
“Clients want privacy here. They
don’t want other people to know they are there because they can be
managing a lot of money.”
In Brazil, Santander calls the
select service ‘Van Gogh’ as spaces are wrapped inside glass
dividers featuring etched images from the Dutch painter’s art.
Spaces are also more private such
as in Mexico. However, they are staffed by an average of 5 banking
executives who offer slightly more sophisticated banking and
investment products.
Privacy please
Each Mexico Select branch is served by
an average of 3.5 full-time banking executives, offering a range of
premium and sophisticated banking and investment services.
The latter include special fixed
income and stock investment funds only available for select
customers.
In addition, clients can hire
meeting rooms to conduct business and are offered creature-comforts
such as iPads, free internet access and TV.
Receptionists are bilingual,
especially in locations which attract a high number of business
clients, and they can do all their banking while sitting down in
chairs and desks. Premium coffee are always available.
“It is a totally different,
elegant, very selective and private atmosphere,” Alonso said,
adding the units are very modern with contemporary furniture and
artwork.
Mexico’s growing mass-affluent
customers appreciate the exclusive and more upscale atmosphere, he
says.
MXN35,000 per month entry
barrier
The Select service is only available
to customers who earn at least MXN35,000 per month($2,600).
For MXN220 a month, Santander
offers an account package offering a new Visa Black unlimited
credit card without having to pay its standard MXN1,500 annual fee,
free checking and double reward points for each card
transaction.
For customers with deposits in
excess of MXN500,000 between checking and investment accounts, the
Select service is completely free.
Asked why Santander launched Select
in Mexico, Alonso said the country’s expanding number of customers
earning over than MXN35,000 per month means such customers “needed
a differentiated treatment”.
He said Santander can attract more
premier customers in Mexico, where word of mouth works wonders in
new client recruitment.
“When these clients receive special
treatment, they call their brothers, mother in laws and other
family members to try it out,” Alonso notes.
Naturally, customers stay with
their banks and as their wealth builds up, so does their capacity
to sign up for more premium investment and banking products.
Tough
competition
Mexico’s growing number of premier
customers has of course not gone unnoticed by competitors such as
HSBC and Santander’s Spanish compatriot BBVA, as well as Banamex (
a unit of Citigroup) and other leading international banks. These
include Scotiabank and ING, which are beefing up their premier
offers with some also offering selective banking spaces.
HSBC has long been regarded as the
global leader in the mass affluent segment, with more than 4.5m
Premier customers around the world.
HSBC has estimated by the end of
2011 it can achieve average revenue per Premier customer of over
$1,000 a year, meaning that, with more than 4m clients, the segment
could be worth over $4bn to the bank.
Alonso said Santander has a number
of key competitive advantages as it looks to tap into this
segment.
“The concept is pretty similar at
the other banks but we have a very strong selection,” Alonso
said.
“All our Select staff have a
university degree and at least four years’ experience in retail
banking.
“They also hold the ‘Amif’ Mexican
certification for investment management and advice, similar to the
US’s Series 7.”
Alonso added that Visa Black’s
anti-fraud protection is also higher than the other banks.
“If you have a 200,000 client line
and your card is stolen, you will receive reimbursement of your
losses in full. With the other banks you get a lot less,” he
said.
With an eye to the future, Alonso
expects Santander’s select Model to develop on par or surpass
growth experienced in Chile’s in coming years, though it is
unlikely to outstrip Brazil’s customer growth because of that
economy’s much bigger size and growth rates.
In the premier banking universe,
“Brazil is Santander’s biggest [Latin American] customer and the
Select officers are bigger and more numerous than in Mexico”,
Alonso said.
“But Santander’s earnings are
bigger in Mexico than Chile,” he added.
Alonso said Santander is very
satisfied with how Select is working so far and that a new and more
ambitious growth plan will probably be introduced after 2013 when
the bank hopes to achieve at lest the same growth dynamic expected
for the next two years.
“We will see how things go by 2013
but we will very likely come up with a more aggressive plan,”
Alonso said.
He added: “The strategy is working
very well and we are very happy and enthusiastic about it. It is
probably going to provide a big boost to our retail banking
results.”
It looks as if Santander has found
a way to continue boosting its earnings in Mexico, a country where
the financial sector has become deeply competitive in recent
years.
For the Iberian bank, staying ahead
of rivals in the fast-growing and lucrative premier banking segment
will be a key growth strategy in coming years.
Analysts expect the lender also to roll out its premium
offerings in other potentially lucrative Latin American countries,
in sharp contrast to the gloomy economic conditions prevailing in
its Spanish domestic market.
