Back-to-the-future retail banking: New paths to greater profitability in European retail banking (FOTO)

Münster (ots) -

Customers feel that the relationship of trust with their bank has
taken a hit / Revenue stagnation on the European retail banking
market / Opportunities through positioning as a customer-oriented
provider

Both branch and direct banks can considerably improve their
profitability if they concentrate on their traditional strengths. If
they head "back-to-the-future" and follow the right strategy, they
will create genuine added value for their customers and also
compensate current revenue deficits. These are the key results of the
current European Retail Banking Study from zeb. For the study, the
strategy and management consultancy specializing in the European
financial services industry conducted customer surveys and
comprehensively analyzed income flows on the European banking market.
The study can be seen as a guideline for retail banks who wish to
return to long-term and sustainable profitability.

Self-image and external perception in stark contrast

All retail banks responded that they want to put their customers
at the center of all efforts. However, the contrast to what customers
say about banks could not be any larger: the exclusive survey results
show that there is a major gap between the expectations customers
have of banks and the reality from their point of view. There is
consensus that banks should offer their customers tailor-made
solutions. Respondents, however, criticized that banking products did
not offer much personal benefit and they are therefore unwilling to
pay more for the existing offers.

"Our study shows that most customers see the banks' claim that
they are customer-centric as a promise they hardly ever keep.
Customers also believe that banks put corporate interests first and
have little understanding for their needs. It would be easy to read
the survey results as predicting a dark future for retail banks. But
that is not the case. On the contrary, branch and direct banks can
expect a more profitable future if they act in a more
customer-centric way in the digital economy," said Dr. Florian Forst,
zeb Partner and co-author of the study.

Dramatic decrease in revenue from deposits expected

Retail banks in most European countries are facing revenue
stagnation caused by falling credit and deposit margins in an ongoing
low interest rate environment. If institutions do not fundamentally
overhaul their business model, the study predicts a dark future for
the most important European banking markets: based on current trends,
zeb expects a decrease in deposit revenues by more than 40 percent
over the next five years.

Regardless of national differences, the persisting low interest
rates will ensure that revenues from fee-generating products will
become more important within the overall bank income pool. New
perspectives are required in order to understand the full scope of
challenges European retail banks are facing and to find new paths for
customer-centric business models.

Profitability for retail business demands realignment

The European Retail Banking Study identifies three pathways for
traditional branch and direct banks to achieve more profitability:
branch banks should focus on the only traditional offer that has
revenue growth potential-holistic advice on complex banking products.
Digital solutions such as big data and artificial intelligence make
returning along this path easier than ever before. Banks that follow
this course will be able to offer customers significant value
generation potential as "trusted advisors" long-term.

Direct banks can use their size domestically and abroad to achieve
cost efficiency and become B2B product specialists with B2B
partnerships to accompany their core B2C business. A modern brand, a
growing customer base as well 24/7 accessibility to own services,
technologically advanced banking and operational excellence can serve
as levers which result from scale and cost efficiencies.

Moreover, branch and direct banks that successfully become trusted
advisors or product specialists can develop into ecosystem players.
They can then offer a full customer journey that uses B2B
partnerships and contains both banking products and services as well
as non-banking offers.

In the study, zeb calculated the potential effects of this kind of
process on typical branch and direct banks. The P&L statement
improved by approx. 19 percent, while product specialists and/or
direct banks achieved P&L growth of 23 percent. For players within a
functioning ecosystem, the study authors even calculated a positive
P&L effect of 25 percent. "Branch banks are excellently positioned to
return to their traditional role as trusted advisors and to address
customer needs even better by using new, digital technologies. Direct
banks can quickly scale, compete in pricing as B2B product
specialists and gain market shares. Our analysis shows that each of
these pathways promises a return to long-term profitability for large
branch banks or a boost to profitability for direct banks," remarked
Dr. Olaf Scheer, Partner at zeb and co-author of the study.

Request more detailed information about the European Retail
Banking Study 2019 from zeb at www.zeb.eu/retailbanking.

zeb was founded in 1992 and is one of the leading strategy and
management consultancies for financial services in Europe. More than
1,000 employees work for the zeb group at 18 office locations in 14
countries. zeb operates offices in Amsterdam, Berlin, Copenhagen,
Frankfurt, Hamburg, Kiev, London, Luxembourg, Milan, Moscow, Munich,
Münster, New York, Oslo, Stockholm, Vienna, Warsaw and Zurich.
Clients include European large-cap and private banks, regional banks
as well as insurers. Several times already, zeb has been classed and
acknowledged as "best consultancy" for the financial sector in
industry rankings.

Pressekontakt:
Franz-Josef Reuter
Head of Public & International Affairs
Phone +49.251.97128.347
Fax +49.251.97128.520
E-Mail Franz-Josef.Reuter@zeb.de

Original-Content von: zeb, übermittelt durch news aktuell