3. Preface
For the fifth consecutive year, Capgemini, ING, and the European Financial Management & Marketing
Association (EFMA) have cooperated to develop this latest annual examination of the global retail banking
market. As in previous years, it provides overviews and insights into the global retail banking industry’s
dynamics. This year’s edition adds two new countries, Singapore and Denmark, raising the number of countries
to 26 and increasing the banks studied from 180 to 194.
We continue to investigate the worldwide pricing of day-to-day banking products and services, and this year’s
edition continues to highlight the evolution of bank prices for these products and services around the world.
Our website, www.wrbr08.com, provides dashboards that offer more detail on each country’s national banking
industry. A sample dashboard is included later in this publication.
As in earlier editions, our 2008 report adds a spotlight section that focuses on a current retail banking issue.
This year’s spotlight highlights the problems banks face as they search for ways to maximise their retail banks’
growth in a changing market, and how some top performers are making strategic choices that ensure their
retail operations will sustain the bank’s market performance in the years ahead. Based on case studies, in-depth
interviews with banking executives in each market around the world, and quantitative analysis, the spotlight
section concentrates on the operational levers and client value propositions that can help retail banks grow in the
high-income domestic markets in which they operate today.
All of us welcome the opportunity to offer this 2008 edition of the World Retail Banking Report to the financial
services community. We hope it will stimulate debate and provide bankers with information they can use
effectively as they negotiate the difficult strategic terrain of today’s retail banking landscape.
Bertrand Lavayssière Patrick Desmarès Felix Potvliege
Managing Director Secretary General Head Strategy & Business
Global Financial Services European Financial Management Development of Retail Banking
Capgemini & Marketing Association ING Group
5. PRICING INDEx 5
PRICING INDEx
Key
Findings
ß This year the average annual price of core banking services across the 26 studied countries
was €70 for the local active user, with price levels ranging from €52 in Asia-Pacific to €79 in
North America.
ß The average price fell slightly (1%) from last year.
ß We have confirmed again that as a nation’s economy matures, the proportion of its GDP
per capita allocated to banking services declines.
ß From 2006 to 2008, in their struggle to compete, banks used price to influence
customer behaviour:
– Banks cut the price of sales influencers (e.g. current accounts, cards) by 0.8% a year to
promote sales.
– Behaviour influencers of two kinds—lower cost products (e.g. online banking or
withdrawals at ATMs), whose prices banks cut by 0.2% a year to encourage their use;
and higher cost products (e.g. cheques or withdrawals at desk), whose prices banks
raised by 0.9% a year to discourage their use.
– Unseen services (e.g. exceptions handling), for which prices remained unchanged.
ß North America’s price rose the most—averaging 5.7%—resulting primarily from higher
prices for payments and cash utilisation; its price had declined during the three previous
years due to fierce competition on account management fees.
ß Asia-Pacific’s price fell by 11.1% this year, essentially because of intensified competition in
Australia and India, particularly in payments and account management.
ß European prices remained stable, with only a 0.8% price increase across both the eurozone
and non-eurozone countries studied.
ß With the advent of SEPA, prices of pan-European payments have stabilised in the eurozone,
and (excluding Ireland) even decreased faster in Europe eurozone than in the rest of the world.
ß Price discrepancies between banks dropped significantly at both the country and region
levels; this was particularly striking in North America, although pricing differences in the
eurozone remained the smallest.
6. 2008 World Retail Banking Report
METHODOLOGY We collected most of the data for this 2008 edition
For this 2008 edition, we expanded the geographic of the World Retail Banking Report during the last
scope of the pricing index and spotlight to 26 three months of 2007. We continued to focus on four
countries, adding Denmark and Singapore, and the categories of banking products and services: account
number of participating banks rose from 180 to 194 management, cash utilisation, exceptions handling,
(see Figure 1.1). Once again, we compared retail and payments. Figure 1.2 shows the components of
banking in four regions: Europe eurozone, Europe each category.
non-eurozone, North America, and Asia-Pacific.
Figure 1.1
New Countries Countries in Number
Banks Surveyed Region
in 2008 WRBR 2007 WRBR of Banks
Austria 6
Belgium 4
France 10
Germany 7
Europe Eurozone Ireland 5
Italy 6
Netherlands 6
Portugal 6
Spain 18
Croatia 7
Czech Republic 5
Denmark 4
Norway 6
Romania 9
Europe Non-eurozone
Poland 11
Slovakia 6
Sweden 6
Switzerland 6
UK 5
Canada 6
North America
US 9
Australia 5
China 9
Asia-Pacific India 9
Japan 20
Singapore 3
TOTAL countries/banks 26/194
7. PRICING INDEx 7
To compare prices from the consumer’s point of To compare prices around the world, we also
view, a local expert defined a basket of products and developed a global profile. It is not governed by local
services reflecting the typical consumer’s banking product usage, which obviously varies by country,
behaviour in each country. We call these local but by a standard basket of products for all countries.
profiles, which we divided into three frequency-of- While it is not as precise as the local profile, it is the
use categories: less active, active, and very active users only practical way we can effectively compare global
(also shown in Figure 1.2). The price index built on banking prices.
these local profiles measures what consumers in a
particular country, at these frequency-of-use levels, When comparing prices over more than one year, we
pay annually for their day-to-day banking services. consistently use prices based on profiles as updated
for this latest edition.
Figure 1.2 Scope of Products and Services in the Global and Local Pricing Indexes
Core Day-to-Day
Two Profiles Three Usage Patterns Nineteen Products Services
Banking Needs
Current account
Account
Products’ frequencies On-line banking
Less Represent 20% of Management
of use are estimated Call centre
Active users with the lowest
for each country
Users frequencies of use
to reflect local
Local consumption patterns
Profile
Measures cost
Deposit at desk
of basic banking
Deposit at ATM
needs for domestic
Withdrawal at desk
customers Cash Utilisation
Withdrawal at bank’s ATM
Withdrawal at other banks’
ATM networks
Active Account for 60%
Users of the population
Debit card stop payment
Exceptions Cheque stop payment
Handling Document search
Banker’s draft
Identical frequency
of use for all countries
Global
Profile Allows the comparison
Cheque
of price levels based Represent 20%
Very Debit card
on a single profile of users with the
Active Credit card
highest frequencies
Users Internal wire transfer
of use Payments
External wire transfer
Standing order
(fixed amount transfer)
Direct debit
Source: Capgemini analysis, 2008.
8. 8 2008 World Retail Banking Report
NEW COUNTRIES IN OUR 2008 REPORT GENERAL PRICING ANALYSES
Denmark Local Profile
Danish banks have a long-standing tradition of Local active users pay an average of €70 a year for
partnering, which facilitated a large consolidation their day-to-day banking needs. As Figure 1.3
move that started in the 1990s and continues. Four illustrates, price levels varied from one region to
banks now dominate Danish retail banking, and two another, ranging from a low of €52 in Asia-Pacific to
of them, Danske Bank and Nordea Bank Denmark, €79 in North America. The average price less active
control over 50% of the market. users of bank products and services paid was €35,
compared to the very active users’ much higher €122
Deploying new technologies, notably for credit (about 3.5 times more).
transfers, is an established industry strength in
Denmark. Danish banks recently successfully Again, these are averages, and the situation varies by
developed packages with free standard products region. In Europe eurozone, for instance, the prices
and services for Internet users, and as a result, most banks charge the three groups do not vary
Danish Internet prices are among the lowest in widely—very active users pay only twice as much
Europe eurozone. Its fee structure is similar to as less active users. In contrast, Asia-Pacific banks
other Nordic countries—heavily dependent on charge very active users as much as five times the
payments (79%) and, less so, on cash utilisation price they charge less active users.
(19%), with almost free account management.
Global Profile
Pricing between Danish banks varies significantly, To develop a price benchmark of banks regardless of
and cannot be explained by geographic their clients’ behaviours, we computed prices based on
fragmentation. This signals a market in which a single global active user profile, as detailed in the
customers view relationship quality as important, Methodology section above. Measured on this global
and where packaged offerings make it difficult for profile price index, Europe non-eurozone (118% of
customers to compare prices. the world average) and North America (141%) remain
the most expensive regions (see Figure 1.4).
Singapore
The Singaporean retail banking market is very
concentrated, with three banks—DBS Group, United
Overseas Bank, and Overseas Chinese Banking
Group—controlling 67% of the market. Transaction
banking is still the prevailing business model, with
fast-growing demand, but the large banks are trying
to develop cross-selling into the burgeoning mass
affluent market. Singaporean banks for many years
have been leaders in using new technologies in retail
banking, such as contactless payments and mobile
banking.
Singapore’s prices are comparable to Australia’s,
but its fee structure is closer to those of China and
Japan, with a very large share of fees derived from
payments (83%) and very limited fees from account
management (5%). The minor differences between
bank prices in Singapore reflect a very competitive,
transaction-oriented market.
9. PRICING INDEx
Figure 1.3 Average Local Profile Price for 2008 (€)
250
200 197
Very active user price
Active user price
Less active user price
150
136
122
101 104
100
74 79
75
70
50 52
45 49
35
31
22
0
Europe Eurozone Europe Non-eurozone North America Asia-Paci c Average
Source: Capgemini analysis, 2008.
Figure 1. Global Profile Prices for 2008 Active Users (€)
150
140
117
100 99
83
57
50
0
Europe Europe North America Asia-Paci c Average
Eurozone Non-eurozone
Source: Capgemini analysis, 2008.
10. 10 2008 World Retail Banking Report
Price Analysis Based on this product categorisation, we analysed
The average price for active users decreased 1% this banks’ pricing policies from 2006 to 2008 to
year. Prices followed a similar evolution this year for understand their actions and underlying objectives
local less active users (-0.1%) and for local very active (see Figure 1.5). Banks built loyalty and won new
users (-0.9%). clients by reducing prices on sales influencer products,
which they cut by 0.8% a year. Banks also reached
To assess why banks have changed their prices for this objective in several markets by creating
for certain products, we have classified banking packaged offerings.
products into three categories according to their
impact on customers: Many banks reduced their cost of operations by
ß Sales influencers: Products whose prices primarily influencing clients’ behaviour, using the prices of
affect a consumer’s decision to buy banking services behaviour influencer products to move their customers
or change banks. Current accounts and credit/debit towards less expensive channels or payment means
cards fall into this category, because theirs are the and away from more expensive products and services.
only prices consumers commit to pay up front Banks cut the average price of the less-costly
when they open an account or buy a card. behaviour influencer products by 0.2% a year to
encourage their adoption. At the same time, they
ß Behaviour influencers: Products whose prices
increased the price of the more costly influencers by
inf luence a consumer’s behaviour, but fall outside
0.9% a year to discourage customers from using them.
the direct buying situation. We have split them
according to their production cost for banks:
They might also have enhanced their earnings by
– Less-costly products for banks: On-line banking, raising prices on unseen service products, yet most
deposits and withdrawals at ATMs, direct debits, banks let these prices stand, at least partly held in
transfers, and standing orders check by consumer associations or regulators.
– More-costly products for banks: Call centres,
deposits and withdrawals at desk, withdrawals
at other banks’ ATM networks, cheques
ß Unseen services: Services for which consumers have
to pay without having had any choice or decision,
such as exceptions handling.
11. PRICING INDEx 11
Figure 1.5
Average yearly change Product and Service Variations,
Products/Category
from 2006 to 2008
200–2008 (%)
Sales influencers -0.8%
Current account 0%
Debit card -1.3%
Credit card -1.0%
Behaviour influencers, less costly -0.2%
Call centre -2.3%
On-line banking -0.6%
Cash deposit at ATM 0.0%
Withdrawal at bank’s ATM -0.5%
Direct debit 0.3%
External transfer 1.1%
Internal transfer 0.9%
Standing order -0.3%
Behaviour influencers, more costly 0.9%
Cash deposit at desk -0.4%
Withdrawal at desk 0.2%
Cheque 1.9%
Withdrawal at other banks’ ATM networks 2.0%
Unseen services (exceptions handling) 0.0%
Banker’s draft 0.4%
Cheque stop 1.2%
Debit card stop -1.6%
Document search 0.1%
All products -0.1%
Source: Capgemini analysis, 2008.
12. 12 2008 World Retail Banking Report
Cost Based on GDP/Capita
Charges for core banking services consumed an
average of 0.55% of GDP per capita across the 26
countries we studied. As illustrated in Figure 1.6,
bank pricing as a proportion of per capita GDP is
higher in less-developed countries. The proportion
of GDP per capita allocated to banking services
declines as an economy matures, at least partly
because consumers in a mature economy begin to
regard these core banking services as a commodity.
Figure 1. Percentage Cost of Banking, by GDP per Capita
4.5%
4.0%
Country
Percentage of a country’s GDP per capita
3.5%
paid for core banking services (%)
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP per capita (€)
Source: Capgemini analysis, 2008.
13. PRICING INDEx 13
REGIONAL PRICING ANALYSES As illustrated in Figure 1.7, overall prices remained
In contrast to other banking activities, such as asset essentially stable across Europe (up only 0.8%), but
management or investment banking, retail banking they soared in North America (up 5.7%) and fell
is essentially a local business. National retail banking precipitously in Asia-Pacific (down 11.1%).
markets for the most part are not affected by other
national markets, although economic integration at Each region or even country is shaped by its history.
the regional level (European Community, NAFTA) is We have used the data collected for previous editions
beginning to have an impact. Based on what we have to put this year’s changes in perspective, as the
learned from past editions, we know that the regional regional analyses below indicate.
approach will generate the most accurate results.
Figure 1.7 Evolution of Local Profile Prices, 2007–2008 (%)
8%
6% 5.7%
4%
2%
0.8% 0.8%
0%
-1.0%
-2%
-4%
-6%
-8%
-10%
-12% -11.1%
Europe Europe North America Asia-Paci c Average
Eurozone Non-eurozone
Source: Capgemini analysis, 2008.
14. 1 2008 World Retail Banking Report
North America North America registered the biggest price increase.
The structure of North American pricing evolved North American prices went up by 5.7% (€4) for
slowly over the years, characterised by free account local active users over last year. This price increase
management since 2005, which was balanced by the was general across the whole continent, and reflects
importance of two other fee categories: payments the growing market power large banks have gained
(as much as 79% in the US, and still growing) and by growing, mostly through consolidation. North
cash utilisation (48% in Canada, higher than in any American banks are currently trying to compensate
other country) (see Figure 1.8). for their past low pricing strategies now that their
earnings ratios are threatened by the sub-prime crisis.
Figure 1.8 Sources of Fees for Core Banking Services in North America (%)
100%
90%
80%
49%
70% 57% 60% 63% 64%
79%
60%
50% 3%
40% 6%
7%
7% 7%
30%
31% 48%
20%
33%
29% 29% 10%
10%
0% 0% 0% 10% 1% 0%
6%
0%
2005 2006 2007 2008 USA Canada
Edition of World Retail Banking Report Country (2008)
Payments
Exceptions Handling
Cash Utilisation
Account Management
Source: Capgemini analysis, 2008.
15. PRICING INDEx 15
The main price increases over the year were in policy to influence customer behaviour towards
payments and cash utilisation (see Figure 1.9). In more cost-efficient means of payment. In the cash
payments, raising external and internal transfer utilisation category, withdrawals at other banks’
prices rather than prices for cards or cheques reflects ATM networks accounted for most of the increase,
the banks’ competitive intent to keep prices low because raising this price was unlikely to impair a
on products that are most important in customers’ bank’s competitive edge, and consumers might even
minds when choosing their banks, rather than a blame a bank’s competitors.
Figure 1. Product and Service Price Variations vs. Last Year for Local Active Users in North America (€)
3 2.7
1.4
1
0.0 0.1
-1
-3
Account Cash Exceptions Payments
Management Utilisation Handling
2.5
2.0
2.0
1.5
1.1
1.0
1.0
0.5
0.2 0.2
0.1
0.0
-0.2
-0.3
-0.5
Withdrawals Withdrawals Withdrawals Cheque Direct External Internal Standing
at bank's at desk at other (price per debit wire transfer wire transfer order ( xed
ATM banks' ATM cheque) amount
networks transfer)
Cash Utilisation Payments
Source: Capgemini analysis, 2008.
16. 1 2008 World Retail Banking Report
Asia-Pacific
The Asia-Pacific region has had a more consistent
pricing structure across the four product and service
categories (see Figure 1.10). Its overall structure
results from the combination of two sets of countries:
China, Japan, and Singapore, which follow the
US pattern of free account management and heavy
payments fees, in contrast to Australia and India,
where fees derived from exceptions handling greatly
overshadow those from payments, much like in the
UK. Account management fees, which have fallen
from 22% to 15% since our 2005 report, may be on
a downward trend.
Figure 1.10 Sources of Fees for Core Banking Services in Asia-Pacific (%)
100%
10%
90%
80% 43% 44% 49% 47% 44%
70%
51%
60% 84% 92% 83%
50%
24% 24%
40% 23% 26%
11% 43%
30%
11%
16% 13% 13% 1%
20%
28% 0%
10% 2%
10% 22% 14% 13%
16% 16% 15% 1% 0%
8% 0%
5%
0%
2005 2006 2007 2008 Australia China India Japan Singapore
Edition of World Retail Banking Report Country (2008)
Payments
Exceptions Handling
Cash Utilisation
Account Management
Source: Capgemini analysis, 2008.
17. PRICING INDEx 17
Asia-Pacific’s price declined the most. The local active First, the decrease in account management prices can
user price in Asia-Pacific fell by 11.1% (€5.5). This be traced to the Australian national market, where
decrease resulted mainly from price cuts in payments two large banks launched flat-fee accounts in a fierce
(reversing a previous trend) and account management competitive bid to acquire new clients, drawing
(see Figure 1.11). Both these changes reflect specific down the average fee charged for the region’s current
national market situations. account. Second, cuts in payments fees (external
wire transfers and credit cards) occurred primarily in
India, where state-owned banks were attempting to
align their tariffs with those of private banks.
Figure 1.11 Product and Service Price Variations vs. Last Year for Local Active Users in Asia-Pacific (€)
3
1
-1.6 -0.5 -0.4 -3.0
-1
-3
Account Cash Exceptions Payments
Management Utilisation Handling
1.5
0.9
1.0 0.7
0.4 0.5 0.5
0.5
0.0
-0.2 -0.3
-0.5
-1.0 -0.9
-1.1 -1.2 -1.1
-1.5
-1.6
-2.0 -2.0
-2.5
Withdrawals at other
banks' ATM networks
Cheque (price per cheque)
Standing order ( xed
amount transfer)
Cheque stop payment
Current account
Withdrawals at
bank's ATM
Banker's draft
(cashier's check)
Debit card stop payment
Document search (desk)
Credit card
Direct debit
External wire transfer
Internal wire transfer
Account
Manage- Cash Exceptions
Payments
ment Utilisation Handling
Source: Capgemini analysis, 2008.
18. 18 2008 World Retail Banking Report
Europe Eurozone
The Europe eurozone fee structure is not
homogeneous, although a slow price convergence
trend is evident as Germany, Italy, and the
Netherlands progressively reduce their emphasis on
account management fees (see Figure 1.12). Cash
utilisation fees have increased steadily over the past
three years, a clear signal that euro unification has not
significantly reduced the cost of using cash. It is not
surprising that, given SEPA, the cost of using cash
is a major item on the agendas of both the European
Commission and the European Central Bank.
Figure 1.12 Sources of Fees for Core Banking in Europe Eurozone (%)
100%
90% 25%
34%
80% 43% 45%
52% 49%
58% 55% 54% 5%
70% 63% 71%
11% 1% 78%
60% 82% 13%
5%
50% 0%
5% 9% 8%
6% 6% 24%
40% 6% 5% 8%
5% 8% 9% 6% 1%
30% 4% 1%
59% 57%
42%
20% 37% 34% 22%
31% 31% 31% 27% 14% 29%
10% 19% 2%
0%
4% 6%
0%
2005
2006
2007
2008
Austria
Belgium
France
Germany
Netherlands
Portugal
Spain
Italy
Ireland
Edition of World Retail Banking Report Country (2008)
Payments
Exceptions Handling
Cash Utilisation
Account Management
Source: Capgemini analysis, 2008.
19. PRICING INDEx 1
In Europe eurozone, prices remained relatively stable, Figure 1.13 Product and Service Price Variations
with only a 0.8% (€0.6) rise. The changes in Europe vs. Last Year for the Local Active User
in Europe Eurozone (€)
eurozone were much smaller than those outside
Europe. They were mainly related to payments (see
Figure 1.13). Banks raised the price of internal wire 3
transfers at desk to compensate for the development
of Internet origination (generally free), while the
price of external wire transfers decreased under the 1 0.5
influence of SEPA. Account management prices 0.0
0.2
remained essentially stable, because a price increase -0.1
in current accounts was offset by a cut in the price of -1
on-line banking.
-3
Account Cash Exceptions Payments
Management Utilisation Handling
1.4
1.2 1.1
1.0
0.8
0.6
0.4
0.4
0.2
0.0
-0.2 -0.1
-0.4
-0.6 -0.5
-0.6
-0.8
Current
account
On-line
banking
Cheque (price
per cheque)
External
wire transfer
Internal
wire transfer
Account
Payments
Management
Source: Capgemini analysis, 2008.
20. 20 2008 World Retail Banking Report
The Single Euro Payment Area (SEPA) will lead to The price of this basket of products has stopped
lower prices. We have continued last year’s effort to decreasing in Europe eurozone, and stabilised at €48.
track SEPA’s impact on prices. The expected result The result would be much better except for turmoil
is that a standardised payments structure across the in the Irish market, without which the price would
eurozone will lead to tougher competition and lower have fallen by 6.3%—from €41 to €38 (see Figure
prices. To check this hypothesis, we created the 1.14). As a comparison, outside Europe eurozone the
“pan-European payments means”, which we defined price of this same basket of products has dropped
as the basket of products that will progressively be by only €1, from €34 to €33 (a 3% drop). SEPA,
governed by SEPA’s pan-European standards and therefore, is probably still drawing prices down in
regulations. These include internal and external wire Europe eurozone.
transfers, direct debits, credit and debit cards, and
their underlying current accounts. This year these
products accounted for 64% of the fees paid by local
active users in Europe eurozone.
Figure 1.1 Price of Pan-European Payment Means for the Local Active Profile, 2008 (€)
140
130.0
120
100
Average Eurozone
80 €48, similar to 2007
73.7
63.7 Average Rest of the World
60 56.7 57.1 56.8 €33 vs. €34 in 2007
50.8 50.8
39.3
40 37.3
33.0 33.4 32.4 32.0 31.9
30.6
26.2 26.2 24.3
19.3 18.1 16.5
20 14.8
12.2
8.1
3.5
0
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Europe Eurozone Rest of the World
Source: Capgemini analysis, 2008.
21. PRICING INDEx 21
Europe Non-eurozone
The fee structure in Europe non-eurozone falls
between North American and Europe eurozone
patterns (see Figure 1.15). This results mainly from
the combination of Nordic countries, which feature
US-style fees heavily dependent on payments, along
with Eastern Europe countries, where banks charge
relatively high prices for account management and
cash utilisation. The UK, however, does not fit in
either of these categories, but instead features an
original pattern that relies on exceptions handling.
Figure 1.15 Sources of Fees for Core Banking Services in Europe Non-eurozone (%)
100%
12% 1%
90%
33% 32%
80% 44% 43%
56% 55% 55% 58% 1%
70% 59%
4% 41%
75% 79% 75%
60% 2%
27%
50% 99%
1% 32%
21%
40% 9% 9% 9%
9%
15%
52%
30% 12% 2%
16% 16% 1%
14%
46%
20% 11% 40%
32% 32% 1%
26% 4% 19% 0%
10% 23%
18% 19% 20%
2% 1% 0%22%
10% 0%
5%
0%
Czech Republic
2005
2006
2007
2008
Croatia
Switzerland
Denmark
Romania
Slovakia
Sweden
Norway
Poland
UK
Edition of World Retail Banking Report Country (2008)
Payments
Exceptions Handling
Cash Utilisation
Account Management
Source: Capgemini analysis, 2008.
22. 22 2008 World Retail Banking Report
In Europe non-eurozone, prices increased by 0.8%
(€0.6) for local active users. In payments, banks
increased credit card fees, but this was offset by
cuts in the prices of external and internal wire
transfers (see Figure 1.16). While call centre
fees decreased, prices of the two other account
management products—credit account and on-line
banking—were raised across Europe non-eurozone.
Figure 1.1 Product and Service Price Variations vs. Last Year for Local Active Users in Europe Non-eurozone (€)
3
1 0.5 0.4
-0.2 -0.1
-1
-3
Account Cash Exceptions Payments
Management Utilisation Handling
1.0
0.8
0.8
0.6
0.4 0.4
0.4
0.2
0.0
-0.2
-0.2 -0.2 -0.2
-0.4 -0.3
-0.6
Call Current On-line Withdrawals Credit card External Internal
centre account banking at desk wire transfer wire transfer
Cash
Account Management Payments
Utilisation
Source: Capgemini analysis, 2008.
23. PRICING INDEx 23
PRICE DISCREPANCY IS DECREASING Retail banking is still mainly a national business,
An important feature of banking markets lies in and we examined price discrepancy first at the
the differences between national banks’ prices. country level (see Figure 1.17). Large discrepancies
Prices are closer together in more mature markets, are usually associated with fast-changing markets,
because consumers consider banking services to be such as Spain and Ireland in Europe eurozone;
commodities, and tough competition prevails on Denmark, Romania, and Slovakia in Europe non-
standardised products. eurozone; or China and India in Asia-Pacific. For
the countries we studied both last year and this year,
the average national price discrepancy decreased
from 27% to 25%.
Figure 1.17 National Price Discrepancy for Local Active Users (%)
160% 154%
140%
120%
100%
80%
68%
60%
51% 50%
46% 47%
40% 37%
27% 27%
23% 23% 23% 21%
20% 17% 18% 17% 20%
16%
12% 12% 12% 12% 10%
9% 7%
4%
0%
Germany
Italy
Netherlands
Portugal
Croatia
Czech Republic
Ireland
Spain
Austria
Belgium
France
Switzerland
Singapore
Denmark
Romania
Australia
Slovakia
Sweden
Canada
Norway
Poland
Japan
China
India
USA
UK
North
Europe Eurozone Europe Non-eurozone Asia-Pacific
America
Source: Capgemini analysis, 2008.
24. 2 2008 World Retail Banking Report
At the regional level, the general trend was also The evolution in Asia-Pacific has been very different.
towards reducing discrepancies, although quicker It reflects Australian prices (the highest of the region)
than within national boundaries (see Figure 1.18). moving downward, and Japanese prices (the lowest)
It was especially fast in North America, where price going up. In the European regions, the trend towards
differentials were cut almost in half in two years. reduced price discrepancy has slowed in Europe
This result is consistent with our earlier interpretation non-eurozone, and even stopped in Europe eurozone,
of price increases led by fast-growing retail banks. despite SEPA’s intended harmonising effect.
Nonetheless, price discrepancy in Europe eurozone
remains the smallest today.
Figure 1.18 Regional Price Discrepancy for the Local Active User, 2005–2008 (%)
100%
90% 86.6%
83.5% 84.2%
80%
75.5%
70%
60% 59.0%
57.1%
50%
46.2%
44.7%
41.7%
39.1% 39.5%
40% 37.6%
34.1% 33.8%
30.4%32.0% World Retail
30%
Banking Report
Edition:
20%
2005
2006
10% 2007
2008
0%
Europe Eurozone Europe Non-eurozone North America Asia-Paci c
Source: Capgemini analysis, 2008.
25. PRICING INDEx 25
Conclusion
On a global scale, the price for core banking services, based on the local active user profile, declined by 1% from
last year, averaging €70 in our 2008 study.
Our results indicate that price evolution at the product level can effectively be categorised according to the way
customers perceive them. Prices of sales influencers (current accounts, cards) decreased fastest (0.8% per year),
reflecting the banks’ desire to remain as competitive as possible with the product prices customers can see clearly
and rely on to make their “buy” and “leave-or-stay” decisions.
The behaviour influencers (channels and payment means), which banks can use to attract customers towards or
repel customers from certain products or services, were clearly being used for that purpose based on the pricing
data. Banks cut the prices of those they found to be less costly by 0.2% per year, and raised prices on the more
costly ones by 0.9% per year.
Prices for unseen services (such as exceptions handling), which customers incur without choice or intent, remained
flat. Although they have often been used in the past as an easy way to raise revenue without impairing sales, not
using them now probably reflects a reluctance to further provoke concerned regulators and consumer associations.
A geographic analysis revealed radical and persistent discrepancies in banking fee structures. Important price
variations between countries and world regions are hidden behind a quasi-stability at the global level. This is
particularly true for Asia-Pacific and North America, the first of which experienced an 11.1% price decrease,
while the second saw a 5.7% price increase. European prices, meanwhile, remained stable.
Although retail banking is still essentially a local business, there are a few signs of internationalisation and an
increase in competition at the regional level. Under the influence of SEPA, prices of pan-European payment
means decreased faster in Europe eurozone than in the rest of the world (excluding Ireland). Price discrepancies
between banks decreased significantly this year, at both the country and regional levels. This trend was
especially fast in North America, but the price discrepancy in Europe eurozone is still the smallest.
27. ORGANIC GROWTH IN DOMESTIC MARKETS 27
ORGANIC GROWTh IN
DOMESTIC MARKETS Key
Findings
ß The world retail banking market, based on net income, was €1,280 billion in 2006, and forecasts indicate
it will rise to €1,900 billion by 2017, with half of the new income coming from high-growth markets.
ß Although the high-income portion of the world retail banking market will drop from 75% in 2006 to 65%
in 2017, it will remain very important to banks.
ß Over the past five years, most of the world’s leading banks have grown their domestic retail banking
revenues faster than their costs, significantly improving their cost/income ratios.
ß Four pillars have supported leading banks’ efforts to achieve profitable organic growth in their domestic
markets: combining fast time to market, innovation, and local client intimacy; full multi-channel
integration and optimisation; increasing sales productivity through dynamic branch management; and
leveraging a multi-brand portfolio to create attractive value propositions for each market segment.
ß A large proportion of the 52 top banks’ executives in 15 countries told us they have used these four
pillars, and expressed their continuing confidence in them.
ß Most assumptions on which past retail banking growth strategies were based are challenged by
today’s structural changes in the market, including tougher regulations, more flexible technology, more
demanding clients, and new competitors.
ß Recognising that structural changes will increase competition and draw prices down, we simulated this
effect in eight western European countries; the simulations indicated that banks would lose 36% of their
projected net income (and lose more than 50% in certain markets).
ß Banks that have already built strong client relationships, and captured from their clients a good share of
wallet, need to renew their distribution strategies and develop business organically in today’s saturated
and slowly growing domestic markets.
ß Successful banks can use three distribution strategies to grow beyond the traditional retail banking
business model in high-income markets: “Better sell”, to better fit diverse clients’ needs; “Larger offer”,
extending the offering to non-financial products and services; and “Indirect business”, selling through
other distributors.
ß The 52 interviewed bankers selected three models as the most likely to happen: Trust Operator,
Discount Bank, and General Broker. Many banks even admit to having their own projects using the first
two models.
ß Banker interviewees identified Discount Bank, General Broker, and Open Source Bank as potentially
the most disruptive models in the retail banking business, because these models could cause their two
worst fears to come true—a price war and competition for client relationships.
ß The best performers will combine several of these distribution models—and perhaps still others—to
succeed in the future retail banking market.
28. 28 2008 World Retail Banking Report
Retail banking is a major activity for most large THE IMPORTANCE OF
banks, helping them grow profitably and maintaining DOMESTIC RETAIL OPERATIONS
their stock value. Succeeding in the past has never The global retail banking market is huge, with 2006
been easy, but severe challenges lie ahead. Our teams net income of €1,280 billion, and it is expected to
in the 15 countries we studied for this year’s spotlight reach €1,900 billion by 2017 (see Figure 2.1). The
have interviewed 52 banking executives to understand potential increase of €620 billion will be generated in
how they intend to succeed in the future. Using these nearly equal amounts in high-income and other high-
observations, combined with the views of Capgemini growth markets. Despite a slower growth rate, we
experts in the field, this year’s spotlight outlines some expect retail banking to remain a major force in high-
of the best paths banks can take to remain major income economies over the next ten years, falling only
retail marketplace players in the years ahead. slightly from its current 75% of global net revenues to
65% in 2017.
Figure 2.1 Retail Banking Revenues in 200 and 2017F (€bn)
Y2006: €1,280 billion Y2017F: €1,900 billion
580
33% 31%
2%
10%
460 28% 1% 25%
8%
433
High-income Markets High-income Markets
€900bn = 75%a €1,200bn = 65%a
350
Revenue 2006 (€bn)
Forecast Revenue
2017 (€bn)
160
145 145
125
110
95 85 90
63 65
50
40 35 35
30 25
North Western Japan Australia Rest of Rest of China India Rest of ME and
America Europe America Europe Asia-Paci c Africa
Source: Capgemini analysis, 2008; World Bank statistics; UNDP.
Notes: Revenue = net interest income + net fees and commission income + other income; 2017 forecast calculated based on each country’s GDP
growth forecast; fees and interest rates based on Capgemini price index research; ME is Middle East; Rest of America is all America excluding
the US and Canada.
a
high-income markets definition by United Nations human Development Research; here they are North America, Western Europe, Japan, and Australia.
29. ORGANIC GROWTH IN DOMESTIC MARKETS 2
The top worldwide banks’ retail banking operations Because a few large banks hold dominant positions in
are primarily located in high-income markets, and high-income markets, regulators now tend to discourage
these banks have but little potential for further further mergers and acquisitions. They want to ensure
external expansion. Moreover, except for six banks— fair competition and avoid excessive concentrations of
BNP Paribas, ABN AMRO, BBVA, Santander, risk. Domestic growth through acquisition, therefore, is
HSBC, and Citigroup—the proportion of domestic no longer a viable option in most high-income markets.
net revenues for most banks is greater than 50% (see Alternatives are also limited, and in any case promise
Figure 2.2). Their market development has up to now only moderate returns.
been achieved mainly in their domestic markets.
A bank’s organic growth in its domestic market is,
therefore, likely to hold the key to a bank’s success
over the next ten years. This year’s spotlight is trained
on that issue, and investigates the challenges banks
face as they attempt to grow organically in saturated
markets during a period of sluggish economic growth.
Figure 2.2 Domestic as a Percentage of Global Retail Banking Net Revenues, 2002–200
100%
80%
60%
50%
40%
20%
0%
Santander
HSBC
ABN AMRO
BBVA
BNP Paribas
Citigroup
Deutsche Bank
Société Générale
KBC
Fortis
UniCredit Banca
Barclays
RBS
ANZ
Rabobank
ING
HBOS
Swedbank
Crédit Agricole
NAB
Westpac
CBA
Banca Intesa
Sanpaolo
Dexia
La Caixa
Handelsbanken
Banques Populaires
Caisse d'Epargne
Crédit Mutuel–CIC
Dresdner Bank
Postbank
Caja Madrid
Bank of America
Wachovia
Wells Fargo
MUFG
Mizuho
SMBC
Resona
SEB
Nordea
Source: Capgemini analysis, 2008; World Bank statistics; UNDP.
Notes: Revenues = net interest income + net fees and commission income + other income; 2017 forecast calculated based on each country’s GDP growth
forecast; fees and interest rates based on Capgemini price index research.
30. 30 2008 World Retail Banking Report
RETAIL BANKING’S BEST PERFORMERS’ By plotting the results (see Figure 2.3), we soon
STRATEGIES IN DOMESTIC MARKETS, learned that most of the banks we chose appeared
2002–200 in the white part of the chart, above the line where
income growth is equal to cost growth. We bore in
Benchmark and market analysis mind, however, that retail banking is still strongly
World-leading retail banks1 have performed well influenced by purely national market features, such
globally in their domestic markets, increasing as local and national laws, banking regulations,
revenues while controlling operating costs, and customers’ habits and behaviours, culture, and so on.
in this way, reduced their cost/income ratios. 2 To
assess this performance, we isolated the domestic We focused our in-depth analysis on four banks (red-
retail banking activity of 37 top worldwide banks circled in Figure 2.3)—Crédit Mutuel–CIC (France),
using annual report data. ING (Netherlands), La Caixa (Spain), and HBOS
(UK). All are top global domestic retail performers
and have outperformed their national competitors.
Figure 2.3 Domestic Retail Banking: Growth of Revenue vs. Cost for Selected Banks, 2002–200 (%)
0, 2
Bank of America
0, 15
La Caixa Wachovia
Revenue Growth CAGR 02–06 a
KBC
Sumitomo
Mitsui HBOS
0, 1
Banques Populaires
CBA
ANZ RBS
CM–CIC
Caja Madrid
ING
ABN Wells Fargo
Banca BNPP
AMRO BBVA
Intesa Dexia Santander
0, 05 Citigroup HVB
SocGen Crédit
Mizuho Barclays Nordea Caisse d’Epargne
Sanpaolo Agricole
Fortis Rabobank
UniCredit
LCL
0
Deutsche Resona Dresdner Bank Westpac
Bank
-0, 05
-0, 15 -0, 1 -0, 05 0 0, 05 0, 1 0, 15
Operating Cost Growth CAGR 02–06 a
Source: Capgemini analysis, 2008, and bank annual reports.
Note: CIR before impairment losses. Circle sizes are proportionate to revenue in 2006.
a
CAGR calculation using 2007 currencies.
1
Retail business is defined as financial products and services (both core and non-core banking) distributed through physical and non-physical networks to
private customers and SMEs.
2
Cost/income ratio before impairment losses.
31. ORGANIC GROWTH IN DOMESTIC MARKETS 31
Four pillars enable profitable growth Each of the major banks we selected for study has
While analysing the best performers we selected strong business basics, including a reliable capacity to
from the local market leaders, we identified the deliver a variety of products and services, combined
four pillars on which they based their profitable with relationship management know-how. This
and sustainable growth: (1) combining fast time includes trust development and risk assessment, which
to market, innovation, and local client intimacy; have always been essential to successful banking.
(2) ensuring full multi-channel integration and
optimisation; (3) increasing sales productivity Pillar 1: Combining fast time to market, innovation,
through dynamic branch management; and (4) and local client intimacy
leveraging a multi-brand portfolio to create Crédit Mutuel–CIC has succeeded in France in being
attractive value propositions for each market a first mover and market leader, even when customers
segment (see Figure 2.4). Closely examining the perceived financial services as commodities. The
approaches our four top performers took, each bank became a market leader by offering innovative
focusing specifically on one of these pillars to products ahead of the competition, combined with
greatest advantage, helped us understand the a strategy focused on maintaining a close working
importance these strategies hold for banks seeking relationship with local clients. This strategy requires
to improve their performance in domestic markets. strong centralised systems and a back office that can
Figure 2. The Four Pillars of Sustainable Development
Pro table Growth
Crédit Mutuel ING La Caixa HBOS plc
Combining fast Ensuring full Increasing sales Leveraging a
time to market, multi-channel productivity multi-brand
innovation, and integration and through dynamic portfolio to
local client optimisation branch create attractive
intimacy management value propositions
for each market
segment
Source: Capgemini analysis, 2008.
