RCI Banque, Renault Group’s captive finance house, has launched a UK savings bank called RCI Bank.
Speaking to Motor Finance, Steve Gowler, managing director of RCI Financial Services (RCI FS) and now also chief executive officer of RCI Bank, said the launch was part of a global strategy for RCI Banque to diversify its funding, a decision taken on the back of the financial crisis.
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The first example of the strategy was a savings bank in France, which launched in 2012, followed by a launch in Germany in 2013 and Austria in 2014. "The UK was the next country in terms of progressing towards a situation where the Group could have at least 30% of it’s funding from savings deposits," says Gowler.
RCI Bank in the UK is a branch of the bank in France, which Gowler said meant the launch was able to happen about a year after its inception. The fact it is a branch of a French bank also means RCI Bank’s primary regulator is with the French banking authorities, and it is also regulated by UK regulators, including the Financial Conduct Authority (FCA).
However Gowler says that because the product itself is pretty simple, and there are no intermediaries involved, in some respects the regulatory side of things was not as complicated as it could have been.
Since the launch of these banks, RCI has raised more than 6bn (£4.3bn) in deposits, 4bn of which came from Germany.
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By GlobalDataGowler said there was currently a good opportunity in the UK market to launch a bank. He says: "It’s a country where online banking is quite prevalent, people are happy to do that, so it’s quite mature in that respect. Also savings rates are pretty low. There’s a lot of what you might call moribund savings – I think the FCA came out with a statement that there could be as much as £160bn of savings in accounts earning less than half a percent. So we thought there was an opportunity to come in and shake up the market."
Products
The UK branch is also to follow a similar pattern to the mainland European examples in terms of product offerings by launching with a simple easy-access savings account, and introducing fixed-term accounts once the bank becomes established. "Obviously in each country there are different markets in terms of where your rate positioning needs to be," Gowler added.
In the UK, RCI Bank settled on an interest rate of 1.5% APR. Describing why this rate was chosen, Gowler said the company had looked around the market to see what directly comparable products were on offer, and looked to provide a market-leading rate. At the time of writing, BM Savings was the only other bank to offer 1.5% interest for a comparable savings account. However this includes an introductory 12-month bonus rate, after which the rate reduces to 0.5%. Other nearest accounts offered up to 1.35%.
The RCI Bank savings account also has a £100 starting rate. As the bank is a branch of the French bank, savers are protected under the French guarantee scheme, FGDR, up to the value of 100,000 (£72,839).
Choosing a rate which was able to capture business was one of the challenges. Others included making sure the website was well designed, as well as making sure the right systems and software were in place for the bank, and that the right partners were chosen.
"We believe we have a product that people will love. Over the next 12 months we plan to follow this up with further product launches," Gowler added.
When asked how RCI Bank and RCI FS will operate together, Gowler said: "The car financing business, RCI FS, is a limited company in the UK and the bank is a branch of RCI Banque in France. So from a legal entity point of view they are completely separate. The funds that are deposited will be used to fund the car financing business, so there’s a relationship between the two companies in that respect.
"And we’re using all the resources that we’re got in RCI FS. We’ve got over 200 people in a building in Watford, including HR and IT. So we haven’t replicated all of that within the branch; we’ve got a few dedicated employees within the branch supported by the resource sand infrastructure of RCI FS."
As a result, RCI Bank won’t have a dedicated HR team or IT team, but instead the teams from RCI FS will now also work on RCI Bank. This goes up to senior levels, with Gowler in charge of both RCI FS and RCI Bank, and Alice Altemaire acting as chief financial officer at both.
Future plans
Assuming the UK bank follows a similar trajectory as its European counterparts, Gowler said the deposits from the bank would enable RCI FS to become more competitive in the marketplace. He said: "It gives us access to more funds and security of funds, and this will enable us to be more competitive. In reality that means with our manufacturer partners. Most of our offers in the market, on new cars, are on some sort of manufacturer promotion scheme.
"So it enables us to extend those schemes, make them even better and it means those manufacturers can get even more for their money, in terms of what there do for offers in the market."
In the used car market, where RCI FS competes with the likes of Black Horse and Santander, Gowler suggested that access to funding will help the company compete in this space as well.
Over the past year RCI FS has grown based on a combination of growing sales of the manufacturers it supports, such as Renault and Nissan, as well as increasing penetration in new car finance for these brands and an increase in used car business.
For Gowler, RCI Bank is an important part of RCI FS’s future business proposition as, in order to continue to grow its core activity, access to more funding will be required.
He said: "We don’t have a specific time frame in mind, but we think that within a reasonable time period we could get to
a situation where 100% of our car financing business could be funded by savings deposits."
