Santander Improves Efficiency Powered by Investment in Digital Transformation

Banco Santander, a leading Spanish bank renowned for its heavy investments in digital transformation, has revealed an impressive surge in its digital customer base.
Santander digital transformation for efficiency
At the close of December 2023, Santander reported an increase of 5 percent, reaching 54.161 million digital customers, against a total customer count of 164.542 million. The number of active customers soared to 100 million, marking a significant uptick from 99 million in the previous year.

Embracing the digital shift, Santander, in its annual report, revealed that a substantial 57.7 percent of its total sales were attributed to digital channels, reflecting a burgeoning reliance on digital platforms for its business operations. However, this digital focus didn’t come without financial scrutiny.

The bank’s spending on information technology, though slightly reduced, still amounted to substantial figures, with EUR 610 million in Q4 2023 and EUR 2.471 billion throughout the year. Santander does not reveal the name of the technology partners.

Despite the incremental expenses, Santander remained vigilant about cost management, aiming to enhance operational efficiency. Operating expenses for 2023 totaled EUR 25,425 million, marking a notable 6 percent increase from the preceding year. However, the bank managed to improve its efficiency ratio to 44.1 percent by the end of 2023, surpassing the previous year’s performance by 1.7 percentage points.

Santander’s digital transformation efforts, encapsulated within the One Transformation plan, yielded promising results across its operational footprint. Notably, improvements in operating productivity and business dynamics were evident, signaling a positive trajectory for the bank’s strategic initiatives.

Regional breakdowns of operating expenses underscored Santander’s concerted efforts in different markets. In Europe, despite a marginal increase in costs, the efficiency ratio witnessed a commendable improvement.

Similarly, in North America, investments in digitalization and technology contributed to a rise in expenses, albeit with a higher efficiency ratio. Conversely, in South America, despite salary increases, costs saw a reduction, reflecting the bank’s cost-effective strategies in the region.

However, amidst its digital expansion, Santander made headlines with its decision to downsize its workforce in the U.S. The bank reportedly laid off approximately 320 employees, constituting about 2.7 percent of its U.S. workforce, primarily focusing on retail operations. This move aligns with Santander’s broader digital strategy, as it seeks to streamline operations and enhance its digital capabilities.

The bank’s commitment to digital transformation was further underscored by its plans to launch digital banking services in Mexico, as announced by Santander Mexico’s head of digital and innovation, Matias Nunez, earlier this year.

Additionally, Santander’s concerted efforts in enhancing digital services were evident through initiatives such as the adoption of a Group-wide Acquisition Tracking System and the introduction of a Digital Transformation Incentive scheme aimed at key employees.

In summary, Banco Santander’s robust growth in digital customers, coupled with its strategic cost management and workforce restructuring, reflects a concerted effort to navigate the evolving financial landscape and emerge as a frontrunner in the digital banking sphere.

Rajani Baburajan

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