A gem of a challenge

This year, Febelfin’s leadership got a new look. Johan Thijs took on the role of President and Karel Van Eetvelt became the new CEO. The perfect opportunity for 360° to interview the two “newcomers”. The result is a conversation with lots of passion and vision about the financial sector today and – especially – tomorrow. “Digital transformation will be an even bigger challenge to the sector than the financial crisis.”

What has been your trajectory up until now?

Karel Van Eetvelt (KVE): “I come from the world of sports. I have a college degree in physical education, but I never did do much with that diploma. Right after my studies, I trained in economics. After a stint of about a year at the office of then Minister Gaston Geens, I ended up with Bouwunie and after that, UNIZO. From the start, I learned how to listen. That way, you get to know a subject and you can put it in the right context. Important in negotiations, but also in management. At the federations, 50% of my job was lobbying: a great way to learn how to get results.”

Such as?

KVE: “One of the most important lessons I learned was: when trying to get results for a specific group, try looking at things more broadly, beyond just your group. Prove the added value for other stakeholders and for society. Only then can you gain support for what you want to achieve. It is not always the easiest, but it is the best approach to achieve sustainable results.”

How about you, Mr Thijs?

Johan Thijs (JT): “I am trained in applied mathematics, with high focus on statistics and probability calculation. After that I did actuarial studies. My career started in the insurance business when I was recruited by one of KBC’s predecessors. A lot of the time, I was “the youngest ever”. The youngest manager ever, the youngest general manager, the youngest CEO. I was lucky to be given a lot of challenges, which I always took on as well. A lot of the time people told me not to. (laughs).’

Mr Van Eetvelt, do see mostly differences or mostly similarities between Febelfin and your former employers?

KVE: “There are definitely similarities. They are both associations with a Board of Directors consisting of – allow me to use the word – volunteers. Johan and his colleagues offer up a part of their spare time to help move along Febelfin. It was the same with Bouwunie and UNIZO. Of course, there are also differences. UNIZO had a broader aim, but at the same time was much more local. Febelfin works on more specific items, but on an international level.”

And as for challenges?

KVE: “Over the past few years, entrepreneurs have strongly been affected by technological transformations. The same goes for Febelfin. We must learn how to deal with a significantly changing world. We must also make sure that the climate for our members improves so they can spend more time on their own company. This is why it is our duty to create an environment as good and pleasant as possible. This involves several aspects, such as lowering administrative burdens. I was a little shocked last month at the volume of laws and rules the sector must comply with. A whole lot more than the average entrepreneur and they already had it bad. Don’t get me wrong: a regulatory framework is necessary, but the way it is created is baffling.”

JT: “I understand that Karel, when he’s comparing his new environment to his former work environment, thinks the administrative burden is massive. It is massive. However, we can say that regulation is necessary, as history showed us. The question is whether this increased regulation is also effective? When looking at the context for drafting regulations such as MiFID II (Markets in Financial Instruments Directive II) and PSD2 (Payments Services Directive 2), it makes sense. MiFID II for instance was created to better protect the consumer and PSD2 aims to increase competition in the payments market. It’s just that some provisions make things more difficult for the consumer or create even more risks for the client.”  

KVE: “The objectives of the regulations are good, but their complexity is overwhelming. It is too detailed, aimed at regulating every last hypothetical problem that will probably never present itself. That’s counterproductive and creates frustration, irritation and inefficiency. What’s more, it disturbs the level playing field in an open market, especially in an international context.”

Let’s talk about the current wave of digitalisation…

JT: “Digitalization is not a challenge in itself, but rather a consequence of changes in society the financial sector should capitalize on. The great challenge is the changing customer behaviour: consumers who would buy a washing machine at the shop around the corner four years ago, now order their washing machines online and expects it to be delivered and installed by a courier the next morning. They want the same experience at their banks. To be able to offer such service, the banks’ systems need to be adjusted. That costs a lot of money. However, it not only implies IT changes, it also requires a different way of thinking.”

What does the perfect bank look like then?

JT: “The ‘perfect bank’ or ‘perfect insurer’ is a constantly changing notion. Because the climate also constantly changes. Don’t forget: we don’t sell tangible products. If I were to strip our role to its essence, we are intermediaries between those who need money and those who want to invest money. That is the process we are currently digitalizing. The one thing we can’t digitalize however, is trust. The banker of the future is someone who anticipates client needs while upholding a trustworthy reputation. The perfect banker is different today than tomorrow, and tomorrow he will be different than the day after tomorrow. In other words: he doesn’t exist because he constantly needs to reinvent himself.”

Digital transformation brings in new competition as well. Google, Apple, Facebook and Amazon all offer payment services.

JT: “It’s funny you mention those industry giants and not the fintech players that are popping up everywhere. GAFA and fintechs are fundamentally different. Fintechs have the advantage of being flexible, able to adapt quickly and able to offer solutions that are a lot more attractive then what the bank sector used to offer. The downside is that they don’t have clientele and their solutions are difficult to measure. We may be more cumbersome, but we are able to move faster. I don’t automatically consider fintechs to be rivals or disruptors, but more to be potential partners. GAFA is a different matter. They are probably looking to take over a part of our business, but are unwilling to take on the complexities that come with it. I mostly consider them a threat when it comes to data analysis. They are very skilled at that.” 

KVE: “The big advantage of banks is that they know their business. The business in itself stays the same, it’s just the way of working that changes. Adopting these changes is not that easy. When companies venture outside of their field of expertise, it usually ends bad because they underestimate the circumstances. A lot of banks boast decades of experience, some even centuries. That is an invaluable asset. Those new players don’t have that. The trick will be to continue focussing on the things we are good at, unique at even, and on the other hand, to be very open to the many possibilities technological developments offer.  An open collaboration with fintech players is crucial in that view, besides a better level of cooperation between our own members.”

  Traditional banking has been under pressure for quite a while now, due to low interest rates. Will the new ECB policy make it easier for banks to normalise their interest income?

JT: “I don’t think so. The European Central Bank (ECB) adjusted the intensity of its purchase programme, but the fact is that not much has changed. The rates are still low and will continue to be so for years. The banks must keep reinventing themselves in a low-rate climate. At the same time, they should invest a great amount of money in digitalisation and deal with new competitors trying to swoop in on our business. It will be a gem of a challenge.”

Over EUR 2,000 billion was pumped into the euro area. Will that not cause for certain assets to be over-valued?

JT: “The market is dealing with excess liquidity, that’s right. The Organisation for Economic Co-operation and Development (OECD) has been warning our country for years about its real estate bubble. The National Bank of Belgium (NBB) puts this in perspective and I agree with their view. Today, there are no signs of a bubble, but we must keep an eye out for it. You can feel the pressure is starting to mount. Due to inflation and low rates, it is very tempting to buy a house.”

On to this summer’s government agreement. The securities account tax is met with suspicion in the financial sector. What do you think?

KVE: “In society, both civilians and companies are clearly asking for a more fairly distributed tax burden. We should not ignore this. If the tax burden is indeed so different that it disturbs a level playing field, measures must be taken. We must look for a solution, but preferably a solution that will hold up in the long run. We should develop one global solution instead of resolving one small problem at a time. Don’t forget that wealth taxes in Belgium are among the highest in Europe. There is not a lot more wiggle room in that. Most of all, we should avoid negative economic effects. I’m afraid the securities account tax doesn’t tie in with this aim.”

Bonus: do you have any words of advice for each other?

JT: “Keep cycling! (laughs). The sector is about to change substantially, so Karel will have his hands full. It is important to have an outlet outside of your job.”

KVE: “I see people in the sector are under pressure. We live in world that lives minute by minute, almost second by second. In such an environment, you must be able to put things into perspective, which you can do very well on your bike, by the way (laughs).”

Gentlemen, thank you for this conversation.