Rethinking Retail Banking GrowthEffective strategies for increasing revenue by building stronger connections to the post-crisis consumer |
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It’s no secret that revenue growth is one of today’s biggest challenges for the banking industry. Financial services CEOs ranked growth as their number one priority according to The Conference Board CEO Challenge 2011 survey1. As low interest rates and new regulations strangle traditional sources of risk-based and fee income, many once-attractive customer relationships are generating less revenue, causing some to become unprofitable.
Many bank executives are finding that the old tried-and-true strategies for organic market share and revenue growth are not sufficient anymore. Competing based on pricing, convenience and service is still fundamental, but more is required. The financial crisis created a trio of retail banking giants with approximately 30 percent combined market share and more than 18,300 branch locations – but even with their vast scale; they are also struggling to grow organically.
On the product side, retail deposits have significantly diminished attractiveness in today’s low interest rate environment. Even when banks succeed in attracting new deposit relationships, there are few profitable ways to reinvest those assets in today’s loan environment. Mortgage lending has dropped to the lowest levels in a decade and new fee and rate constraints on overdrafts and credit cards, along with consumer debt reduction, have silenced these traditional revenue growth engines. Increased regulation is already slowing another key revenue stream - debit card transaction fees - which could further strip away potential profits and make a generation of free checking accounts unprofitable.
Retail banks need new growth engines. They, along with other financial institutions, are more finely segmenting existing target markets and fine-tuning products to laser in on the remaining attractive opportunities. In addition, some are rising to the challenge by executing strategies and developing capabilities that allow them to effectively compete in still-promising profit sources – wealth management, retirement and insurance, for example – where banks have lost ground or have historically failed to establish significant revenue streams.
This article describes a three-step growth strategy:
- Identify and pursue under exploited revenue and profit sources
- Leverage analytics to identify and engage targeted customers
- Accelerating revenue growth
Download the attached PDF to know more.
1The Conference Board CEO Challenge 2011 survey
Rethinking Retail Banking Growth
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