POINT OF VIEW
BEHAVIOR
CLIENT
GY
Are banks prepared for a new turning point
in the retail banking landscape?
OCTOBER 2014
RA
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RETAIL BANKING
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RETAIL BANKING
ARE BANKS PREPARED FOR A NEW TURNING POINT IN THE RETAIL BANKING LANDSCAPE?
2
ROL AND BERGER STRATEGY CONSULTANTS
RETAIL BANKING
ARE BANKS PREPARED FOR A NEW TURNING POINT IN THE RETAIL BANKING LANDSCAPE?
Leveraging the Roland Berger Retail Banking
Wheel®, our analyses point to the start of a new
era in the retail banking landscape, driven by
client behaviour and business model changes.
Banks are continuously faced with the challenge of interpreting
the reality in which they operate and envisioning an appropriate
strategy and new positioning. In a vast universe of drivers and
influences, this is a particularly complex exercise in which prioritization and focus turn out to be key. The Roland Berger Retail
Banking Wheel®, a new and innovative methodology and tool,
has been developed to facilitate this kind of exercise.
The strategic focus of retail banks must
continuously adjust over time
Looking back on the past 25 years, many different factors and
events have shaped the evolution of the retail banking landscape. Main examples are the repeal of the US Glass Steagall
Act and the implementation of the EU Financial Services Action
Plan in 1999, which spurred banks to focus on growth through
new business models and geographical expansion. With the
financial crisis in 2008, the focus shifted to compliance and
management of legacy assets.
Banks encounter difficulties to anticipate these key turning
points, because at any point in time a large set of influencing
factors are at work. Banks should hence be able to first identify
all landscape-shaping factors and next assess them on their
relevance and focus correctly on the most influencing and disruptive ones towards the future A .
ROL AND BERGER STRATEGY CONSULTANTS
3
RETAIL BANKING
ARE BANKS PREPARED FOR A NEW TURNING POINT IN THE RETAIL BANKING LANDSCAPE?
A
INFLUENCING FACTORS AND KEY EVENTS IN THE FINANCIAL SECTOR OVER THE LAST 25 YEARS
2015
?
What will be next
Degree of influence
5
4
3
Regulation & legacy
2
1
2008
0
Financial crisis
5
4
Business model & market
3
2
1
1999
1. Glass Steagall act repealed
2. Financial services action plan
0
5
4
Technology
3
2
1
4
ROL AND BERGER STRATEGY CONSULTANTS
Business model
Legacy
Role of the sector
Competitors
Market
Government
Macroeconomy
Technology
Banking regulation
0 = Low - 5 = High
Demographics
Launch www
Client Behavior
1990
0
RETAIL BANKING
ARE BANKS PREPARED FOR A NEW TURNING POINT IN THE RETAIL BANKING LANDSCAPE?
The key question for
banks today is whether
we are approaching a
new turning point, i.e.
the start of a new
phase in retail banking. If the answer to
that question is yes,
banks should ponder
whether they are well
prepared for this new
environment.
So, what is next on the horizon?
Our intuition is that 2015 – 2016 will be looked back upon as a
turning point in the retail banking history, which will have been
driven by the factors client behavior and business model.
We highlight two evolutions which can cause a fundamental
change. First, there is an ongoing gradual and by many underestimated trend of disintermediation of banks in their core business: lending. There is a general belief that European corporate
funding relies on an overall funding mix of 80% bank funding and
20% capital market funding. Indeed, this general principle did
apply in Belgium before the crisis and it had been relatively stable for many years. However, our analysis showed that in a time
frame of merely three years, the debt funding mix of Belgian
corporates has shifted from 80/20 in 2010 towards 70/30 in
2013. If such trend continues, banks will need to redefine not
only their credit activities, but more fundamentally their business model as a whole.
Second, digitization has become the new normal. Internet penetration is over 80% and 70% of Belgians with an internet connection use it for online banking. Approximately 10% of Belgian
banking clients are client at a direct bank without branch network. If we take the year 1995 as the introduction of mainstream
internet, 50% of the population has witnessed the digital evolution from before the age of 21. The first generation to be in touch
with internet before adulthood is now increasingly occupying influencing positions, both in the corporate world and beyond.
Banks will feel the impact of massive digitization through all aspects of their business model. The most visible today is on the
bank's distribution channel strategy. An important impact of
massive digitization towards the future is that it stimulates more
and more people to adapt their shopping behavior and compare
prices as a natural reflex, also outside the financial world. This
significantly reduces the traditional value of advice and relationship in the banking sales process. The bank-client relationship
will also be put under further stress in the payments domain,
where the increasing interconnection between telecom, credit
card companies and banks will rephrase the question on the
physical presence of money and the role of banks in the payments value chain.
ROL AND BERGER STRATEGY CONSULTANTS
5
RETAIL BANKING
ARE BANKS PREPARED FOR A NEW TURNING POINT IN THE RETAIL BANKING LANDSCAPE?
THE ROLAND BERGER
RETAIL BANKING WHEEL®
HELPS NAVIGATE CHANGES IN STRATEGIC PRIORITIES
The Retail Banking Wheel® is a methodology and a tool to stimulate strategic assent at executive level about the key drivers of the
financial sector. It is linked to a two-day board-level workshop and backed up with extensive analysis and industry insights. A similar
development is ongoing for the insurance industry.
The added value of the Roland Berger Retail Banking Wheel® is twofold:
1. Providing a universe of strategy drivers
2. Incentivizing strategic focus
The Retail Banking Wheel® aims at providing a structured and
exhaustive view on the external and internal drivers to be taken
into account in a strategy exercise. Due to its coherent structure,
it's also a powerful way to standardize strategy making across
countries or entities.
The second added value of the Retail Banking Wheel® lies in its
ability to create consensus on the strategic focus. Through its
structure, CxO's are encouraged to reflect and prioritize factors
with the highest relevance to their own, specific context. This is a
crucial step in the strategy workshop. In order to accomplish this
prioritization, two steps need to be taken. First, criteria to identify the relevance of influencing factors need to be determined.
Next, the assessment of these criteria needs to be performed
through discussion and the support of underlying analysis.
The Retail Banking Wheel® is composed of four layers which influence a bank's strategy:
SOCIETY: macro evolutions relevant to the financial sector, including client behavior, technological and demographical trends
OPERATING ENVIRONMENT: factors shaping the world in
which banks operate, including government, regulatory framework and the macro-economic trends
BANKING SECTOR: sector-specific evolutions, including role
of the sector in society, market dynamics and competitive trends
INDIVIDUAL BANK: an internal bank-specific layer, including
business model and legacy
The figure below displays the full Roland Berger Retail Banking
Wheel®, including its subcategories. The Wheel is accompanied
with a document outlining what is meant with each factor mentioned on the wheel and examples of how these factors have influenced the direction of the financial sector in the past and
analysis for the future.
6
ROL AND BERGER STRATEGY CONSULTANTS
RETAIL BANKING
ARE BANKS PREPARED FOR A NEW TURNING POINT IN THE RETAIL BANKING LANDSCAPE?
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ROL AND BERGER STRATEGY CONSULTANTS
7
Conclusion
Continuous change and adaptation is inherent to the financial
sector. In a world with a vast universe of trends and influencing
factors, successful retail banks correctly anticipate key turning
points in the banking landscape and identify, prioritize and focus
on the most important trends in society, the operating environment, the sector and the bank itself.
In order to facilitate this complex task, Roland Berger developed
the Retail Banking Wheel®, aimed at stimulating strategic assent
at executive level about the key drivers of the financial sector.
We believe that a new turning point is ahead of us for which
many banks are ill prepared: the era of client behavior and business model changes.
Publisher
The authors welcome your questions,
comments and suggestions
ROLAND BERGER
STRATEGY CONSULTANTS SA/NV
Vorstlaan 100 boulevard du Souverain 100
B-1170 Brussels | Belgium
+32 2 661 03 00
www.rolandberger.be
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BRUNO COLMANT
Partner
[email protected]
GRÉGOIRE TONDREAU
Partner
[email protected]
KASPER PETERS
Principal
[email protected]
JOERI GUSSE
Consultant
[email protected]
This publication has been prepared for general guidance only. The reader should not act according to any information
provided in this publication without receiving specific professional advice. Roland Berger Strategy Consultants SA/NV
shall not be liable for any damages resulting from any use of the information contained in the publication.
© 2014 ROLAND BERGER STRATEGY CONSULTANTS NV/SA. ALL RIGHTS RESERVED.