A few weeks ago, I was fortunate enough to be at the 9th Santander International Banking Conference. Now I say fortunate because, although I had registered, the previous days had seen me manning the Startup Europe booth at Web Summit, in between some great sessions at MoneyConf and standing in for a colleague at the Internet of Banking, as well as participating in a panel so I was pretty much networked out and had a long list of things waiting for me at the office.

But, as tends to be the case for many of us, I had a what-if-I-miss-something moment and decided to go. And I’m very glad I did. Here is a brief summary of the most interesting points that, from my non-banker perspective, were made during the day:

1.    Reinventing Banking

Led by Ana Botin, Executive Chairman of Banco Santander; Frank D’Souza , CEO Cognizant; Andreas Dombret, Member of the Executive Board, Deutsche Bundesbank

A scene setting session actively led by one of the most powerful and charismatic women in banking, Ana Botin. An early point in the debate addressed the issue of whether the banking sector needed reinvention or just consolidation, given that with returns of 4-5%, it is a challenge to even cover the cost of capital.

The panellists started by agreeing that profitability cannot be achieved through consolidation but must be sought via an in-depth review of current underlying business models. These business models need to be built on what the customer actually needs. The real question is to what extent can incumbents address these needs and adapt to changing expectations. Botin, to her credit, gave the example of her own son who chose to transfer funds overseas using Transferwise rather than Santander’s own facility (if you’ve ever had to this yourself, you would know it’s a no-brainer to use any alternative to your bank).

So business models are about content, but they are crucially also about delivery. Santander’s Open Bank serves 1 million customers through a team of 100 people. This lack of legacy has its advantages but also its disadvantages. De Souza recognised that while they don’t have to carry the burden of ingrained processes and super tanker technology, they do struggle with compliance: technology was 50% of the equation for reinventing banking but the other 50% is compliance and it is here that the incumbents have the lead. Here Dombret made the point that the Central Bank needs to remain technology neutral. Its remit as a regulator and supervisor is to look at and assess risk.

Technology is 50% of the equation for reinventing banking- but the other 50% is compliance

De Souza also briefly commented on Data: it is not a magic potion that will automatically reveal the path to reinvention. Given that 1% of data gathered is relevant, Banks find ways to sift through it and find its relevance in real time. Only then can it really be used to impact positively on the customer experience.

A final parting comment from Botin that served to introduce the next session: resilience and profitability are hard to achieve if there is no clarity on what capital requirements are expected. The availability of capital determines whether and where banks can invest. Without regulatory certainty, this is impossible.

2.    Profitability and Resilience

Presented & moderated by: José García Cantera CFO, Banco Santander; John Berrigan, Deputy DG, EC, DG for Financial Stability, Financial Services and Capital Markets Union; Mauro Grande, Director of Strategy & Policy Coordination, Single Resolution Board; Giuseppe Siani,  Deputy DG of Microprudential Supervision IV, ECB Single Supervisory Mechanism; Jose María Roldán, Chairman, Spanish Banking Association; Vice-President, European Banking Federation.

I must admit that I thought this was going to be a rather dry discussion only of interest to insiders but the quality of the panellists led to an interesting debate on the role of policy and regulation.

The first point to be made was the yin yang relationship between profitability and resilience: the former can only be achieved through the latter. And the way in which resilience is measured affects profitability. This notwithstanding, the panellists agreed that the real issue is how you re-balance profit and resilience; the crisis has shown that this balance needs to be re-calibrated and the public demands it.

From a policy perspective, the post crisis aims have been to (i) resume operations, (ii) achieve resilience and (iii) address resolvability *i.e. how to adequately address the issue of liability.

At present, one of the most important roles for policy makers is to ensure that capital allocation is fully consistent with the risk. The pre-crisis capital requirements have been shown to be insufficient.

With regards to future policy development, the weakest financial service players are driving perception of European Banking in the US. It is therefore in everyone’s interest to ensure systemic stability and strength.

The panellists also highlighted the differences between the financial services system in US and. What works in the US doesn’t necessarily work in Europe: 70% of the real economy goes through banks as opposed to the 30% in the US. In addition to this, the Capital Markets Union, which may provide a more level playing field for all financial service providers, is still 10-15 years away.

3.    Conversation on geopolitics

Led by: Fiona Maharg-Bravo, Madrid Correspondent, Reuters BreakingViews; Robin Niblett, Director, Chatham House; Baroness Shriti Vadera, Chairman, Banco Santander UK.

This conference was held the day that the US elections results had been announced, so I’ll leave it to you to imagine the backdrop. Baroness Shriti summed it up nicely: “Voters are angry.  Two-thirds think that immigrants take their jobs; 18% think that Muslims increase danger of terrorism. We’ve left people behind and we are entering a post-globalisation world.”

In terms of the inevitable debate on Brexit, the panellists were unequivocal in their belief that the UK would continue have access to the EU market (China has access). There is of course of uncertainty as to the conditions attached to this access: Art. 50, after all, is designed as a deterrent.

The panel ended with an admission that the financial services sector has contributed to the creation of huge social and economic inequality. It is time to realise that the sector is part of the social contract and to remember the “service” part of financial services.

4.    Serving the customer & financial inclusion

Presented & moderated by: Jaime Pérez Renovales, General Secretary, Banco Santander; Liliana Rojas-Suárez, Senior Fellow , Center for Global Development; Christopher Woolard ,Director of Strategy and Competition, UK Financial Conduct Authority; Silvia Marques, Director of Financial Regulation, Central Bank of Brazil.

The central argument here is that many low income consumers globally do not have access to financial services. They can neither transfer assets, save or access loans securely. Many do not even have the skills to manage their money. Not being part of the system makes people poorer when there are problems. This presupposes that there has to be a functioning and open banking system. Regulators tend to have a specific mandate: integrity and stability. The FCA has an additional mandate to foster financial inclusion across the retail banking sector: 38 million people in the UK do not have regular internet access; 1 million people don’t have a driving licence or ID card. In the absence of photographic ID, how do these people prove who they are?

Woolard also strongly argued that regulators must base their policy making on evidence and gave the example of the Bank of England’s requirement that the penalties charged by banks to their customers should be prominently indicated in bank statements. The effect of this on overdraft charges was minimal. The practice of sending a text or using an app to warn customers that they were about to incur charge for becoming overdrawn reduced the charges by 24%.

5.    Conversation on digital transformation

Led by: Ezequiel Szafir, CEO, Openbank; Robert Frohwein, CEO, Kabbage; Eileen Burbidge,  FinTech Envoy, HM Treasury

Fintech is enabling true transformation in the sector. That banks are even discussing the concept of a distributed ledger is evidence of a cultural shift, as is the fact that Kabbage is part of the panel. This openness to working with partners is great for start-ups. Kabbage’s relationship with Santander has meant that they have been able to reach more customers, more quickly. In fact, adoption outside the US has been much greater that in the US.

The big question for many banks is whether to build or buy. Frohwein (not unexpectedly) was of the opinion that start-ups would offer solutions free of legacy and cultural restrictions. In any event, the market opportunity has to be clear and this can only be achieved by continuous interaction with customers.

Frohwein also made the point that start-ups need to evolve. Kabbage have 100,000 customers and two products. A year from now, they hope to have as many products as customers thanks to machine-learning. Much as each iPhone is standard but the selection of apps is unique to each owner, hyper-personalisation will become the overriding aim of consumer-facing Fintech.

Ultimately, blitzing consumes with so many products is not effective. It leaves customers bemused with the wide array of choices on offer. The role of the sales team should be to understand what the customer is looking for and then present the product that meets these needs. Customers want simplicity. They want relevance.

(Darn. Could have done with that panel before I presented at the Internet of Banking event where I gave some examples of the customer problems Kabbage is solving).

Now this article isn’t meant to be exhaustive. I just hope to give a flavour of what was discussed because I do believe that some of the issues transcend banking.

A word to the organisers, next time please organise a hashtag so that we can tweet. I used #sibc but I’ve no idea whether there was an official alternative (and neither did anyone else I spoke to). Just a thought.

Finally, a disclaimer, the above post is based on my memory and notes and interpretation of what was said. Please do feel free to provide your own take on the discussions or correct as necessary.