Retail banking trends 2009
For the second year in a row, Roland Berger Strategy Consultants, EFMA and Nordea have conducted a study on retail banking in Europe, comparing recent trends with past developments. The results of the study will be presented at the 37th EFMA Congress in Paris on October 29-30, 2009.
In the "Retail banking trends 2009" report, Christophe Angoulvant, Senior Partner at Roland Berger Strategy Consultants, Paris, and his team analyzed detailed information on the business and financial performance of 59 large retail banks in 24 countries in Europe and North Africa.
"Our key questions were: How do banks cope with a distressed environment? How can they emerge from crisis in a better position, and finally, what are the industry's best practices?" says Christophe Angoulvant. "The main conclusion was that success will come from personalized services."
Looking at the retail banking world, it is amazing to see how emerging markets are becoming increasingly similar to mature markets. While differences obviously remain in terms of growth, more and more similarities can be found in product mix, transaction breakdown, branch density and cost-income ratio. Industry best practices are being applied at a faster pace in all clusters. Some emerging markets are even becoming innovation labs for banks, thanks to more flexible regulatory or social environments.
Besides the downturn in the financial markets and the economic crisis, retail banking profitability has been hit by increased commoditization. The study highlights the stagnation of revenues per client in mature markets, the decrease in net banking income originating from fees and commissions and the stagnation of the cost-income ratio despite multiple cost-reduction programs.
Commoditization is fueled by the proliferation of newcomers (especially full direct providers), the battle on rates and yields and the changes in regulation (SEPA, transparency, etc.). But it is also driven by a lack of innovation, not so much in products but in the way banks interact with their customers.
The survey reveals that many opportunities can be exploited to bring differentiated services to customers and avoid cannibalization. Many of these initiatives are based on increased customization. They include remote access with more ways for customers to interact with their banks, services with affinity offers, pricing with de-packaged solutions and staffing branches with more specialized advisors.
Success in customization will require banks to tackle the challenge of customer knowledge. The study shows that much progress can be achieved by recording customer share of wallet or simply compiling contact telephone numbers, fine-tuning the methods used to get customers on board during the first months of the relationship and defining the optimal number of customers per advisor.
Customization comes at a cost, but fortunately the survey shows that a number of cost reduction opportunities remain. Mutualization is probably the most important such opportunity, one that can be leveraged at different levels. The rule here is "one step beyond" – from local to regional, regional to national and national to multinational. This evolution requires functional mobility rather than a geographical move.
Key findings of the study are:
• Differences still remain between mature and developing countries, but emerging markets are catching up fast and show increasing similarities with developed countries
• Recent developments show increased rivalry between banks on pricing and rates and some difficulty in differentiating their offerings, due mainly to a lack of customer knowledge
• The best-performing retail banks are increasingly customizing their offerings, prices and customer service
• To finance this customization strategy, banks are pooling production and support function centers, from local to regional, regional to national and national to global
In the "Retail banking trends 2009" report, Christophe Angoulvant, Senior Partner at Roland Berger Strategy Consultants, Paris, and his team analyzed detailed information on the business and financial performance of 59 large retail banks in 24 countries in Europe and North Africa.
"Our key questions were: How do banks cope with a distressed environment? How can they emerge from crisis in a better position, and finally, what are the industry's best practices?" says Christophe Angoulvant. "The main conclusion was that success will come from personalized services."
Looking at the retail banking world, it is amazing to see how emerging markets are becoming increasingly similar to mature markets. While differences obviously remain in terms of growth, more and more similarities can be found in product mix, transaction breakdown, branch density and cost-income ratio. Industry best practices are being applied at a faster pace in all clusters. Some emerging markets are even becoming innovation labs for banks, thanks to more flexible regulatory or social environments.
Besides the downturn in the financial markets and the economic crisis, retail banking profitability has been hit by increased commoditization. The study highlights the stagnation of revenues per client in mature markets, the decrease in net banking income originating from fees and commissions and the stagnation of the cost-income ratio despite multiple cost-reduction programs.
Commoditization is fueled by the proliferation of newcomers (especially full direct providers), the battle on rates and yields and the changes in regulation (SEPA, transparency, etc.). But it is also driven by a lack of innovation, not so much in products but in the way banks interact with their customers.
The survey reveals that many opportunities can be exploited to bring differentiated services to customers and avoid cannibalization. Many of these initiatives are based on increased customization. They include remote access with more ways for customers to interact with their banks, services with affinity offers, pricing with de-packaged solutions and staffing branches with more specialized advisors.
Success in customization will require banks to tackle the challenge of customer knowledge. The study shows that much progress can be achieved by recording customer share of wallet or simply compiling contact telephone numbers, fine-tuning the methods used to get customers on board during the first months of the relationship and defining the optimal number of customers per advisor.
Customization comes at a cost, but fortunately the survey shows that a number of cost reduction opportunities remain. Mutualization is probably the most important such opportunity, one that can be leveraged at different levels. The rule here is "one step beyond" – from local to regional, regional to national and national to multinational. This evolution requires functional mobility rather than a geographical move.
Key findings of the study are:
• Differences still remain between mature and developing countries, but emerging markets are catching up fast and show increasing similarities with developed countries
• Recent developments show increased rivalry between banks on pricing and rates and some difficulty in differentiating their offerings, due mainly to a lack of customer knowledge
• The best-performing retail banks are increasingly customizing their offerings, prices and customer service
• To finance this customization strategy, banks are pooling production and support function centers, from local to regional, regional to national and national to global
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