New ten-year study from A.T. Kearney predicts that 1 in 10 banks will
disappear over the next 5 years as revenue from traditional banking
models stagnate whilst leaner, so-called neobanks increase their market
reach
LONDON–(BUSINESS WIRE)–A ten-year study from global management consultancy A.T. Kearney has
found that the profit of European retail banks/divisions is at an
all-time high, driven by a positive economic environment and lower risks
(risk costs relative to total income at lowest level 5% compared to 12%
in 2008).
Yet, the topline stagnates at (+ 1% in western Europe). A.T. Kearney’s
‘Retail Banking Radar 2019’ analyzes data from 92 banks across Europe
and found that despite continued strong growth in volumes, income
remains weak with a dramatic drop in income per client (-1.1% 2018 vs
2017; -11% 2018 vs 2008). Meanwhile, a quarter (24.6%) of bank branches
across Europe has closed since 2008.
The study shows that the industry faces a critical transformation amidst
rising consumer demand for digital banking and the growing possibilities
of open banking, revealing four key areas:
-
Redefine target operating models, accelerate cost reduction and
introduce new agile ways of working -
Rebalance the organization both in terms of headcount and skills in
the context of a changing branch paradigm - Prioritize customer experience as a way to retain and grow income
- Embrace open banking, artificial intelligence and partnerships
Simon Kent, partner and global head of Financial Services at
A.T. Kearney comments:
“Our ten-year study shows that whilst the industry is stronger, it is
stagnating. Not all banks will survive the tide of change as customers
increasingly favor digital banks and innovative products and services.
Branch closures is a short-term fix to steady the books but it is not
enough – traditional institutions need to consider strategic
transformation to improve cost and top line and also offer more
innovative products and services if they are not only to survive – but
thrive – in the new retail banking landscape beyond 2019.”
The rise of “neobanks”
The rise of so-called “neobanks” in
Europe offering solely digital products has led to customers
increasingly heading to these new models in favor of traditional retail
banks. The Radar showed that neobanks’ customer bases across Europe have
grown by over 15 million since 2011, compared to a decrease in 2 million
customers for retail banks. Up to 85 million Europeans will be customers
of these banking models by 2023 according to the study – which equates
to around 20% of the population over 14 years old.
Indeed, some ‘star’ neobanks such as the UK’s Revolut already have
upwards of 4 million customers, and with several newcomers already
hitting the market in 2019, these banks are catching up with traditional
bank offerings. Others, such as Monzo, are planning expansions into
other markets including the United States, showing the popularity of
these models on a global scale. Ultimately, this has been one of the
driving forces in the closure of bank branches across Europe.
The impact of Open Banking
Perhaps surprisingly, the Radar
also showed that up to 50% of European customers are ready to share
personal data with their banks. Under initiatives like the Second
Payment Services Directive (PSD2), Open Banking has meant more
information sharing between banks, third parties, and their customers –
and it looks like consumer trust is growing to want this collaboration.
A trend revealed in the study is the transformation of traditional banks
into lifestyle platforms, becoming a ‘one stop shop’ for customers’
daily needs – purchasing, travel, entertainment, utilities etc, even
integrating social media into these solutions to provide a true
lifestyle experience.
Daniela Chikova, partner at A.T. Kearney comments:
“The shift towards digital banking, only compounded by the introduction
of Open Banking, has caused a transformation in how and where customers
want to bank. They’re more open to sharing their data with third
parties, have greater trust in banks’ ability to hold their data safely
and, particularly amongst younger generations, don’t have a need for
in-branch banking any more. Open Banking has been a key driver in
banking innovation, and we expect this to continue into September as the
new Regulatory Technical Standards come in.”
ENDS
Notes to editors
About the Retail Banking Radar 2019
The Retail Banking Radar 2019 tracks 92 retail banks in 22 European
markets, comprised of 50 banks in Western Europe and 42 banks in Eastern
Europe. The data is taken from official bank records from January
2007-December 2018, including annual figures, forecasts and Q3 2018
results, and publicly available industry data.
About A.T. Kearney
A.T. Kearney is a leading global management consulting firm with offices
in more than 40 countries. Since 1926, we have been trusted advisors to
the world’s foremost organizations. A.T. Kearney is a partner-owned
firm, committed to helping clients achieve immediate impact and growing
advantage on their most mission-critical issues. For more information,
visit www.atkearney.com.
Contacts
Pia Murray
Rostrum
[email protected]
020
7440 8670
