World Retail Banking Report 2008

2008
WORLD RETAIL
BANKING REPORT
Contents
5 Pricing Index
27 Organic Growth in Domestic Markets
53 Appendix: Methodology
58 About Us
© 2008 Capgemini. All rights reserved. No part of this document may be reproduced or copied in any form
or by any means without written permission from Capgemini.
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
2008 World Retail Banking Report
pricing index
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.
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

pricing index
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.

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.
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-Pacific Average
Figure 1.4 Global Profile Prices for 2008 Active Users (€)
150
140
117
100 99
83
57
50
0
Europe Europe North America Asia-Pacific Average
Eurozone Non-eurozone

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.
pricing index 11
Figure 1.5
Average yearly change Product and Service Variations,
Products/Category
from 2006 to 2008
2006–2008 (%)
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%

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 1.6 Percentage Cost of Banking, by GDP per Capita
4.5%
4.0%
L 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 (€)
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-Pacific Average
Eurozone Non-eurozone

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)
N Payments
N Exceptions Handling
N Cash Utilisation
N Account Management

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 1.9 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 (fixed
ATM banks' ATM cheque) amount
networks transfer)
Cash Utilisation Payments

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
N Payments
N Cash Utilisation

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 (€)
1
-1.6 -0.5 -0.4 -3.0
-1
-3
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 (fixed

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

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
N Payments
N Cash Utilisation

pricing index 19
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
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

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 1.14 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

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
N Payments
N Cash Utilisation

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 1.16 Product and Service Price Variations vs. Last Year for Local Active Users in Europe Non-eurozone (€)
1 0.5 0.4
-0.2 -0.1
-1
-3
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

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

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%
N 2005
N 2006
10% N 2007
N 2008
0%
Europe Eurozone Europe Non-eurozone North America Asia-Pacific

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.
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.
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 2006 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)

N 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-Pacific 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.
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, 2002–2006
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.
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
2002–2006 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, 2002–2006 (%)
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.
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 2.4 The Four Pillars of Sustainable Development
Profitable 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

accommodate accelerated time to market. It also calls Through its product innovation strategy, Crédit
for a concerted marketing effort that ensures the new Mutuel–CIC has substantially increased the number
products meet customer expectations and needs, and of products its clients buy. While it was achieving
relays that message effectively to the marketplace. 4.3% annual growth in net banking income (NBI)
per client from 2002 to 2006, it decreased its annual
Crédit Mutuel–CIC has consistently shown its cost per active customer by 5.5%. This outstanding
ability to be a prime mover in the French market, economic success was combined with excellent client
moving faster than others to introduce new banking relationship management, highlighted by the top
products and services. Using the regional power of its award in its sector, given by TNS-Sofres, for the
two brands, it has maximised the effectiveness of a “Best Client Experience”.
flexible, common platform, shared back offices, and
aggressive marketing operations, supported by well- Crédit Mutuel–CIC offers a wide range of products
managed local branches. designed to meet customers’ needs throughout their
lives, including those in savings, automotive, health,
real estate, and pensions, among others, many of
which feature new technologies (see Figure 2.5).
The bank has effectively used the motto, “Proximity,
listening, and innovation” (“Proximité, écoute et
innovation”), to sustain its momentum.
Figure 2.5 New Product Introductions at Crédit Mutuel–CIC, 2006–2007

Pilotage Professions Libérales (Services for Professionals)
Assurance Tout Protection Accidents (Insurance P&C)
Lancement Marque VIP (Young Customer Services)

Extension fonctionnalités internet (Multichannel)
Carte Collector Exclusive TGV (Credit Card)

Mandat Excelsius (Wealth Management)
Domi-Confidens (Real Estate Services)
Carte Mastercard Plan 4 (Credit Card)

Immosouple 10 (Real Estate Services)
Acti-Trésorerie (Wealth Management)

Livret Fidelité Livret Sup (Savings)
“Payez Mobile” (Mobile Payment)

Carte Cadeau CIC (Credit Card)
Partenariat NRJ Mobile (Phone)

Epargne Evolutive (Savings)
Duo’s Cartes (Credit Cards)

Créd’ Opportunité (Credits)
Facil’ AccèS (Multichannel)

Carte Avance (Credit Card)
Crédit Vie à Deux (Credits)
Epargne Quattro (Savings)
Epargne Force 3 (Savings)

Offre Clic-Clac (Credits)
Carte 3F (Credit Card)

CréaCIC (Financing)
JAN-06 FEB-06 APR-06 JUL-06 JUL-06 JUL-06 OCT-06 DEC-06 JAN-07 MAR-07 APR-07 SEP-07 DEC-07
JAN-06 MAR-06 MAY-06 JUL-06 JUL-06 SEP-06 NOV-06 JAN-07 FEB-07 MAR-07 JUN-07 NOV-07

Pillar 2: Ensuring full multi-channel integration Figure 2.6 ING’s Internet Banking Strategy
and optimisation
ING Netherlands has used the Internet and its
seamless integration with other channels to transform
300
its subsidiary Postbank into a multi-channel bank. It
has taken its place as a major player in the Netherlands
retail banking market without damage to the business
250
or its profitability. ING
Indexed number of Internet payment

CAGR = 62%
Since 2000, ING Netherlands has used a
accounts (base = 2004)

200
multi‑channel strategy with a strong Internet
emphasis. It improved results, increasing its NBI by
25% from 2002 to 2006. The bank managed to cut 150
costs over the same period, reducing its cost/income
ratio, excluding risk costs, from 83% to 68%. ING’s
Dutch Market
Internet banking grew at an annual rate of 62% from 100
CAGR = 22%
2004 to 2006, much faster than the Dutch banking
market as a whole, which posted a 22% CAGR (see
Figure 2.6). In three years, ING raised its Internet 50
account rate from 8% to 42%.
As it boosted Internet use, ING also had to create 0

2004 2005 2006
the infrastructure required to deal with the explosion
of its utilisation. It made all products and services
available through the Internet via information
Source: CBS (Dutch market) and company data (Postbank).
platforms and a portfolio of capabilities, using fine
segmentation and central processes.
ING cut the number of branches severely, reducing

customer usage in the last fifteen years. The
remaining branches are used for recruiting, selling
complex products, and promoting the brand. ING
has developed an integrated sales force with trained
specialists, who move freely between the remaining
branches to meet specific customer needs when
face‑to-face advice is necessary.
As a last step in its multi-channel strategy, ING has

announced in 2007 the merger of Postbank with its
branch operations in the Netherlands, in order to
combine their data bases and branch networks.
Pillar 3: Increasing sales productivity through dynamic By increasing its number of branches by 212 in 2006,
branch management to 5,186 at the beginning of 2007, La Caixa has
La Caixa has successfully answered the productivity implemented a physical network hyper-segmentation
challenge in Spain. Its high-quality commercial strategy. It has launched very innovative products
management in the branches is a key differentiator, aimed directly at new residents, customers abroad,
driving up sales productivity and enabling the bank students, and others. Along with its branches, it
to develop its branch network effectiveness without has initiated an aggressive multi-channel strategy,
increasing headcount. offering a wide range of products and services—not
only financial ones—through its branches, the
La Caixa has offered customers a wide range Internet, ATMs, land lines, and mobile phone access
of fine-tuned, customised products and service points. In a startling example for the banking world,
offerings for the past five years, making the products La Caixa sells half of the entertainment tickets sold
readily available to its customers by transforming its in Barcelona (theatre, film, music, etc.) through its
branches into a denser network of small points of distribution network.
sale, without increasing headcount. In addition, it
developed a rich on-line banking service.
Between 2004 and 2006, La Caixa increased its

branch productivity ratio (NBI per branch) by
32.7%, and raised its employee productivity ratio
(NBI per employee) by 39.9% (see Figure 2.7),
reaching this goal while holding the employee/
branch ratio at 4.5. During this period, the bank
added 477,000 new clients, reaching a total of 10.1
million by the end of 2006. Its NBI growth rate
of 12.3% greatly exceeded its operating costs, which
rose by only 3.3% over the previous five years.
Figure 2.7 La Caixa Productivity Increases, 2004–2006 (€000)
Productivity Ratios per Branch
80,000 600
65,033
60,000 56,071 429
48,997 352 400 Recurring net financial
operating income per branch
286
40,000 N Business volume per branch
200
20,000
0 0
2004 2005 2006
Productivity Ratios per Employee
14,804
15,000 100
97.7
12,393
10,620 77.8
10,000 Recurring net financial operating
income per employee
61.9
50 N Business volume per employee
5,000
0 0
2004 2005 2006

Pillar 4: Leveraging a multi-brand portfolio to create strategy, in the five years 2002-2006, helped HBOS
attractive value propositions for each market segment increase its customer base by 20%; raise NBI per
HBOS is a prime example of how a bank can use customer by 24.5%; add 180% to its on-line customer
a well-targeted, multi-brand portfolio to meet the base (increasing it to a fifth of its overall customers);
challenge of developing and diversifying a customer and achieve a C/I ratio of 55%, the best among retail
base without alienating current clients. HBOS banking market leaders.
has succeeded in bringing to market a portfolio of
differentiated value propositions that attract new A shared IT architecture has helped HBOS develop
customers in several market segments. and manage its portfolio of retail banking brands,
reflecting different client value propositions, to
The HBOS brand portfolio strategy has captured all grow balances and support margins (see Figure
kinds of consumers while limiting the side-effects on 2.8). Halifax, as noted earlier, is the low-cost brand,
the customers it has already attracted into its fold. It offering modestly priced products on the high
offers low-cost products/services under the Halifax street; Bank of Scotland guarantees good rates from
brand, without putting at risk the goodwill of the a reliable direct provider; BM is a best-buy, direct
existing Bank of Scotland or BM clients, who are price fighter; and Intelligent Finance appeals to more
accustomed to a higher standard of products. This financially sophisticated clients.
Figure 2.8 HBOS Brand Portfolio Strategy
Strategy Channel Marketing

Positioning
Margin Balances Relationship Branch Internet Phone/Post Affinity
Consistently
Halifax well-priced on
the high street
Guaranteed
Bank of good rates
Scotland
Hx from a reliable
direct provider
Best-buy direct
BM
price fighter
Offsetting for
Intelligent
the financially
Finance
sophisticated
Source: Presentation at HBOS Retail Investors' Seminar, 2003.

From cases to consensus We also asked, “What are the levers you intend to
The four pillars of profitable growth highlighted use to grow in the future?” The unanimous response
in the cases also reflect our core findings from our asserted their trust in continuing to rely mostly on the
interviews with the 52 world retail banking market same four pillars to grow in the future.
leaders. Their answers to our question, “What were
the past levers you used to grow?” were: offering Traditional levers will certainly remain essential,
development, distribution optimisation, quality of especially for banks that have not yet generated the
management, and shared systems/back offices (see most benefit available from using them. The question
Figure 2.9), matching our four pillars. They also remains, however: Will they be efficient enough in
mentioned technology and staff resources, but they the future to secure sustainable growth?
made clear in the interviews that these are really
enablers of our four pillars.
Figure 2.9 Interviewed Retail Banking Executives’ Past and Future Growth Levers
30%
25%
N Past
N Future
20%
15%
10%
5%
0%
Distribution Offering Management Shared Customer Resources Pricing
Optimisation Innovation System Production Segmentation (IT & HR)
Source: Capgemini World Retail Banking Report 2008 survey on growth levers.
Note: The four highlighted levers correspond to the four pillars.
CHANGING MARKETS The sub-prime turmoil of 2007, which led to a cash

shortage in Europe and the US and froze inter-bank
The 2007 crisis credit, has ushered in a new era in which banks will
The banking market changes fast. Over the last no longer be able to rely on real estate or capital
ten years, many banks, such as KBC, Unicredit, market bubbles to fuel their growth. The low interest
RBS, and Société Générale, have focused on rate period seems to be finished, and with it the easy
internationalisation, and some new entrants, such lending market. Banks will need to develop a growing
as PayPal, exploded on the financial market scene and sustainable retail business to avoid being an
and quickly became intermediation giants. PayPal acquisition target open to attack from larger banks
is revolutionising the payments systems industry, or even non-banks.
attracting significant, fast-growing financial flows.
Other IT providers have become payments leaders in Middle East funds entering Citigroup’s or UBS’s
Europe. Non-banks, including retailers and insurance equities, or Chinese banks entering the top 100
companies, meanwhile, are also distributing more assets ranking, have taught banks a hard lesson.
and more banking products, and they constitute real From now on, banks will be living by the mottoes,
competitive threats as they win market share. “There is no easy money” and “Get back to basics”.
Figure 2.10 Relative Evolution of Bank Index/Market Index, 2002–2007 (Points base 100)
180
160
140
120
100
80
EuroStoxx 50/bank
Nasdaq 100/bank
Nikkei 225/bank
ASX 200/bank
60
Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07

Note: Base point, June 2002 ratings.
Successful banks will rely on stable and loyal private New technologies derived from Internet standards,
customers and do a better job of managing credit risk, solutions, and practices have dramatically transformed
while finding and adopting renewed ways to support banking information systems from necessary and
continued growth in their domestic markets. clumsy infrastructures to enablers of new services
and processes. For instance, new technologies
Banking’s golden past, therefore, may be over. The that make it possible to separate distribution and
US led the way, with the Nasdaq 100/bank index production systems have fathered new business
falling off precipitously in June 2006 (see Figure models that unbundle retail banking’s value chain
2.10). The three other major indexes—EuroStoxx and facilitate shared back offices and factories. New
50/bank (Europe), Nikkei 225/bank (Japan), and software packages built in an open architecture are
ASX 200/bank (Australia)—soon began to follow getting easier to roll out, with a powerful effect on
suit. The continuing US tailspin over the past six standardisation and industrialised processing.
months clearly indicates the need for retail banks
to sit up and take notice. A changing customer: Less loyal, more demanding,
in an increasingly disintermediated context
The rise of risk and a shrinkage in liquidity are now In a rapidly changing and risky market, consumers have
limiting growth opportunities for banks in high- become more risk-averse. Due to the Internet’s readily
income markets. Some forward-looking banks will available information, better-informed clients expect
focus on retail banking as a stabiliser. To succeed, more clear information fast, and they want results
however, they will need to understand and respond quickly, even when seeking credit. And the increasing
effectively to structural changes resulting from demand for sophisticated investment products requires
legal and regulatory constraints, radical advances in more senior and skilled financial advisors.
technology, changing customer behaviour, and new
competitive threats. Consumers also expect to have several potential
points of contact with their banks, available where
Structural Changes and when they choose. Today’s retail bank must be
ready to provide several non-branch access points,
More costs, more constraints from regulators deal with fewer contacts with clients, and use
Regulators will encourage competition by trying to customer relationship management and other tools
level the playing field across geographies and opening to help them meet their customers’ varying needs
the market to new entrants. Current examples include across several channels.
the Payment Services Directive (SEPA), consumer
credit regulation, and the McGreevy Green Book. As they become better informed, some consumers
Others, such as MIFID, Basel II, Solvency II, and are developing new buying behaviour patterns. In the
Sarbanes-Oxley, will aim directly at preventing risk. past, bank clients could be expected to be “delegators”,
The sub-prime crisis, which has wreaked havoc in the eager to get advice before buying banking products
marketplace, is very likely to spark new regulations in they perceived as complex and risky. Many customers
the near future. All these regulations will have direct now bring a self-directed attitude to the bank, taking
impacts on retail banks that want to succeed in high- advantage of the Internet (plenty of information,
income domestic markets. easy comparisons, click-and-buy) to make their
own purchase decisions, often with a strong focus
Fewer advantages from legacy investments in technology on finding the best price. Many clients are bifocal:
Technology today enables customers to manage their delegators in certain situations, self-directed in others.
own banking operations from a distance, which Such dual-focused customers create new problems for
decreases the frequency of contact. It also makes banks, because their needs from one case to another
it possible for new entrants to build new systems can be diametrically opposed.
from scratch very quickly, often leap-frogging the
technologies of existing players.
A new generation of competitors on the retail banking between products. Competitors like these can price
playing field in a way that undercuts a bank’s most profitable
In high-income markets, retail banking has developed products, depriving banks of needed earnings.
a diversified offering portfolio that combines both asset
and liability products, along with advisory and logistics Distribution specialists (e.g. retailers, post offices)
services (see Figure 2.11). Each of these offerings will also pose a competitive danger. These competitors
have to face challenges from specific competitors. already have access to consumers through their
existing point-of-sale networks, a website (e-
Product specialists in assets, liabilities, and logistics merchants or on-line brokers), or even a brand.
services are poised to strike. This latest generation of The main differentiator they are likely to claim is
specialists leverages new technology to deliver fully independent advisor, as they will not be producing
automated services at low cost compared to existing the products they sell or recommend. They will also
banking systems and processes. They enjoy less challenge traditional bank branches with alternative
expensive distribution channels than traditional bank channels, such as visiting advisors or fully automated
branches, and can price aggressively. Retail banks comparison websites. The major threat retail banks
are vulnerable to this kind of competition because must cope with is losing client relationships and
their pricing policy often conceals cross-subsidising opportunities to cross-sell additional products.
Figure 2.11 New Generation of Competitors in Retail Banking
Advisory Services
Private
MLP
Bankers
Independent Comparison
Financial Advisors Websites
Bankrate.com
Asset
Managers
Real Estate
Fidelity
Specialists
Insurance Portfolio
Companies Management
Mutual
AXA Pension Funds Credit Insurance
Liability Products
Asset Products
Consolidation Companies
Life Mortgage AAA Financial
Insurance Retail Loans Services
P2P Saving Banks P&C

(investor) Accounts Insurance P2P
Consumer (borrower)
Zopa Current Credit
Accounts Zopa
Payments
Low Cost & Investment
Direct Banks Services Retailers
Virgin Carrefour
Money
Payment
Specialists Core to non-core banking
On-line
Brokers
PayPal products and services
Cards
Operators
VISA
Logistics Ser vices

Consequences of structural changes retail markets—Belgium, France, Germany, Italy, the

All of these structural changes add up to a real sea Netherlands, the Nordics, Spain, and the UK—we
change in the market, full of new competitors, more based the simulation scenarios on a key assumption:
demanding customers, and regulators protecting prices and interest rate margins will equal the average
consumers while lowering barriers to competition. To of their two lowest prices in the eight studied markets.
help understand the implications of these structural
changes, we developed an economic simulation. It The results are startling. As shown in Figure 2.12,
measures what could happen to retail banking’s net the simulation indicates that the aggregated net
banking income over the next ten years if prices and banking income across the eight countries would fall
interest margins fell due to competitive pressure. drastically, by 12% (due to the alignment of fees with
the low average noted above) plus another 24% (due
The simulation focuses on the European market, to interest margin alignment with the low average).
which—due to SEPA and other European The impacts would, of course, be different in each
Community regulations—is the most likely to face country due to discrepancies between their starting
such an eventuality. Using eight of the main European situations, but the overall picture is not bright.
Figure 2.12 Impacts of Severe Competition in Europe, 2006–2017F (€Million)—Price Harmonisation
90,000
-15%
80,000
-8%
70,000
60,000
-22%
-16%
-9%
50,000
-12%
40,000
+11%
30,000
20,000
-8%
10,000
Belgium France Germany Italy Netherlands Nordic Spain UK
N 2006
N Forecast 2017
N Impacted forecast

Note: All volumes of transactions producing fees and of stocks of loans, and deposits producing interest, are forecast to evolve proportionally to GDP growth.
Countries in the most risky position are Belgium, FINDING A GROWTH PATH BEYOND THE
Germany, Italy, and Spain, where net banking income UNIVERSAL RETAIL BANK
could drop more than 50%. In this simulation, the An effective future growth strategy for a bank
UK appears to be the sole winner, although the depends on the characteristics of that bank’s
simulation assumes that banking services are equal market. The retail banking development paths in
across the eight markets. various markets have been determined to a great
degree by the level of regulatory restrictions placed
Major banks have the most to lose in these scenarios. on universal banking.
They depend heavily on their high-income domestic
markets, which generate the bulk of their retail When unregulated, retail banks were free to grow by
banking revenues. Add in the shrinking number of developing a trust relationship with the clients they
new clients a new branch can acquire using the old acquired in their branches, selling them more and
value propositions, and the rising cost of selling an more products on top of their current account
additional product to an existing client, and there is (path a in Figure 2.14).
no doubt that banks wanting to prosper in the future
will be seeking better approaches to growth.
Figure 2.13 Impacts of Severe Competition in Europe, 2006–2017F (€Million)—Interest Rates Harmonisation
90,000
-16%
80,000
+47%
-42%
70,000
-35%
60,000
-45%
50,000
-43%
40,000
-28%
30,000
20,000
-46%
10,000
Belgium France Germany Italy Netherlands Nordic Spain UK
N 2006
N Forecast 2017
N Impacted forecast

Note: Interest margins are estimated as average credit interest minus average deposit interest, with no provision for gaps between loan and deposit
balances. All volumes of transactions producing fees and of stocks of loans, and deposits producing interest, are forecast to evolve proportionally
to GDP growth.
At the other extreme, in more regulated markets, As a result of their history along one of these paths,
retail banks became financial product specialists most retail banks are today running in their domestic
who had to share the market with outside brokers, market one of the two opposite business models listed
insurance companies, or investment specialists. below (some large groups are even consolidating
Their growth path was consequently more driven entities of the two kinds):
by product innovation and economies of scale ß Branch-supported, relationship-oriented
(path b in Figure 2.14). distribution of diversified financial services.
ß Specialised supplier of one category of financial
Path a is structurally more rewarding in the long services combining direct and indirect sales.
run for retail banks. Although banks taking path b
have achieved high profit levels, gains have only been
Although some banks might still take the obvious
temporary, and have occurred in less-competitive
and appealing growth path based on cross-selling the
situations. There is, however, no barrier between
full scope of traditional financial products to their
paths a and b. If banks are not able to meet and
clients—provided regulators would allow it—we have
defeat broker competition, a market with universal
no doubt that the future ultimately will require the
banks typical of path a might evolve towards a
invention and adoption of new distribution models.
disintermediated market typical of path b. Conversely,
a market previously held on path b by regulatory
constraints might evolve towards a universal banking
market as legal constraints are loosened, provided the
banks in such markets succeed in regaining a strong
relationship with their clients.
Figure 2.14 Retail Banking Markets’ Development Paths
Revenue per client
Non-core banking
products
Credit and savings

products
in g Scope
a nk
lB of actual
e r sa
U n iv markets
Customer acquisition, of
th
current accounts & Pa
a cialised
Banking
basic financial Spe
h of
transaction services Pat
b
Economies of scale
Retail banking
market maturity

Distribution Models to Grow beyond the Each of these is discussed in more detail below.
Traditional Retail Banking Business Model
By examining the newest and most original initiatives “Better sell” to better fit diverse clients’ needs
launched worldwide today, and by identifying their Three distribution models, all of which aim at
inherent features that have the potential for a large increasing a bank’s share of wallet by adapting to client
roll-out, we identified three distribution strategies to diversity, have come to light as a result of our research.
enable a bank to grow beyond the traditional retail
banking business model in high-income markets
(see Figure 2.15):
ß “Better sell”: Better fit diverse clients’ needs
(hyper‑segmentation)
ß “Larger offer”: Expanding the offering to include
non-financial products and services
ß “Indirect business”: Sell through other distributors
(B to B to C through e-merchants or retailers)
Figure 2.15 New Distribution Strategies
Advisory Services
COM
PE T
ITO
RS
RS BETTER SELL
O
T IT
PE
M
CO
LA
ES
RG
SIN
Financial Advisor Community Bank

ER
for Mass Affluent

BU
Portfolio
OF
Trust Operator
Management
COM
CT
Mutual
FER
Pension Funds
INDIRE
Credit
C O M PE TITO R S
Liability Products
Asset Products
PE TITO R S
Consolidation
General
Broker Life Mortgage
Insurance Retail Loans
Saving Banks P&C
Accounts Insurance
Consumer
Current Credit
ELL
Accounts
Payments
Discount Bank
RS
Investment Open Source Bank

Services
IND
TTE
IR
BE
EC
CO
T
BU
Core to non-core banking
M
SI
PE
NE
S
R SS TO
TI products and services
TO I RS
ET
MP
CO
Logistics Ser vices

Financial Advisor for Mass Affluent Customers Figure 2.16 Financial Advisor for Mass Affluent
A common sore point for retail banks is having a Customer Model
group of high-potential clients who have bought only
a limited share of the bank’s product portfolio. The
model shown in Figure 2.16 provides a direct answer
ß Taking care of the customer’s
to this issue, using for the mass affluent segment financial life as a financial advisor
some of the techniques private bankers use with their ß Bringing to mass affluent clients
Value proposition
high-net-worth customers. to customers some services usually restricted
to private banking, e.g.: pension
advice, fiscal optimisation, risk
We focused on this topic in the World Retail Banking management, asset review
Report 2005 edition, and identified best practices
for growing share of wallet in what we called the ß Intensifying client’s relationship
“untapped gold” segment. We concluded that a by upgrading the value of service
Value creation
customer-needs-driven approach should avoid the to banks ß Eventually collecting a greater
existing hard-sell practices. This remains true today. volume of financial flows and
assets
HSBC Premier is a good illustration of this model. It ß Differentiation with private

offers tailored advisory services to its most profitable banking customers as well as
clients, thanks to the creation of an offering with “non‑gold” mass affluent
Issues to cover clients
aimed specifically at high-value customers in its
ß Hiring or reskilling advisors,
mass affluent segment. These clients benefit from keeping costs in line with
dedicated specialist advisors and financial specialists expected added revenue
providing preferential offers.
Community Bank
Communities are increasingly recognised by marketing
specialists as essential in assessing buying behaviour.
Concept stores and websites (such as Second Life on Figure 2.17 Community Bank Model
the Internet) all try to leverage community affiliations,
and this model aims to achieve this objective in retail
banking (see Figure 2.17).
ß Specialised service provider to a
specific community (travellers,
La Caixa for migrants and HSBC for travellers are Value proposition military, migrants)
good illustrations of this model. Another is USAA to customers
ß Closest to your personal affinity,
for the US military. USAA is a community-centred recognised by “buzz” network
business model launched in Texas in 1922 by military
officers to mutually insure their automobiles. It grew
ß Niche positioning leveraged by
within the US, eventually extended its services to delegated marketing promotion
banking and investment products, and built its client Value creation
ß Main strength is the confidence
to banks
base among military families. By the end of 2006, relationship with the brand, and
the association had 5.9 million members and 21,800 with a strong belonging feeling
employees. Members held an average of five banking,
investment, or insurance products.
ß Compatibility with the brand,
e.g.: image, ethics, politics
USAA is the only fully integrated financial services ß Control of the customer-
Issues to cover
company at the national level in the United States. acquisition process versus the
It has grown revenues by 12% a year since 2000, and inability to reject a community
its CAGR figures for 2000-2006 are impressive: member
membership up 45%, products up 63%, productivity

up 69%, assets up 93%, and net worth up 90%. This Source: Capgemini analysis, 2008.
is clearly a success story.
Figure 2.18 Discount Bank Model Discount Bank

Many customers today are self-directed and view
banking services as ordinary commodities, many of
ß The most economic without which they purchase on their own. If they do not buy
Value proposition minimising security or quality the product themselves on the Internet, they at least
to customers
ß The lowest prices on the market compare prices there before buying the product. The
discount bank model shown in Figure 2.18 aims at
ß Marginal revenues without capturing these self-directed buyers with a profitable
additional fixed costs (provided low-price offering.
existing systems and back
Value creation offices may be shared)
to banks ß Acquisition or retention of self-
The HBOS multi-brand strategy, with its low-end
directed new customers who brand Halifax, is a good example. So is Boursorama
have little interest in advisory Banque, a subsidiary of Société Générale. Boursorama
or proximity services has developed a leading on-line broker position
in Europe, comprising 232,000 accounts under
ß Differentiate the market management and nearly 4.2 million orders executed
positioning under a new brand
(not to deteriorate the relationship
in 2006.
Issues to cover with current customers)
ß Sharing production means to Having bought a small network of branches in large
have a sustainable cost structure French cities from La Caixa’s French subsidiary,
Boursorama launched a single full-banking package
Source: Capgemini analysis, 2008. for Internet users with the lowest price on the market.
Boursorama’s Service Plus package includes a current
account with accruals (1.5%, versus 0% for traditional
banks), as well as free standard services for which
traditional banks charge. These include, among
Figure 2.19 Trust Operator Model
others, payments means, insurance, Internet access,
entry fee to mutual funds, credit cards, and premium
cards. The only customer requirement is to spend a
ß One-stop shopping for minimum amount each month. In 2006, Boursorama
customers, including all kinds
of personal or family services:
boasted an operating efficiency four times higher than
Value proposition domestic chores, bills traditional banks: 260 employees for 188,500 clients.
to customers management, employment
research, real estate, mobile
phones, journeys, sports and
“Larger offer”: Expanding the offering to include
other tickets . . . non-financial products and services
ß Capturing additional The Trust Operator

business flow The larger offer model depends on a bank having a
Value creation ß Increasing cross-selling
very high degree of client trust and satisfaction, which
to banks opportunities
many typical universal banks enjoy today. The model
ß Optimising the return on
assets (physical network) shown in Figure 2.19 assumes the earned trust can
be leveraged to extend the bank’s offering into other,
ß Securing multi-service non-financial services products offered to its clients.
competences, avoiding blurring
the image of the bank
Issues to cover Many banks have run experimental trials of this
ß Choosing quality partners or
acquisition targets, fine-tuning model, including the sale of entertainment tickets
the pricing policy on La Caixa’s ATMs. But Deutsche Bank’s Q110
concept is probably the most ambitious. It relies on
Source: Capgemini analysis, 2008. trendy shops with all the sophistication of a concept
store, offering financial services alongside premium With 164 million users and 450,000 e-sellers in 2007,
food products. It gives very detailed care to the client PayPal has not only achieved substantial success to
experience, even including fancy boxes for financial date, but also has substantial development potential in
services packages. Deutsche Bank Q110 branches banking license authorisation and diversification.
have generated 50% more account openings than the
bank’s other branches.
Figure 2.20 Open Source Bank Model
“Indirect business” (B to B to C)
This model did not evolve from any traditional retail
banking distribution model, but a growing number
of retailers and websites have started extending ß Easy access and time saving
their offering to include financial services products of highly automated operations
Value proposition
provided to them by retail banks. Retail banks could to customers
through the Internet,
complementing other on-line
use this business line as a way to build economies of
services
scale in their systems and back offices. Banks would
have to agree up front to position themselves as pure
producers who would not participate in the end-client
ß Best price and turn-key access to
relationships commanded by the distributors. fully operational, professionally
Value proposition
supported, legally and
to distributor
Open Source Bank prudentially secure financial
products
Business on the Internet has given rise to pure players
who have developed unique know-how in making
money in the virtual world. By providing them
ß Additional business volume
with products, retail banks could form a mutually bringing economies of scale and
Value creation
beneficial partnership (see Figure 2.20). Zopa (UK), potential opportunities for cross-
to banks
an Internet marketplace linking private lenders and selling in partnership with the
distributor
borrowers, is an example. Another is PayPal (US), the
famous payments services leader on the Internet.
PayPal was created in 1998 and bought by eBay in ß Risk management
2002. It is the leader of on-line payment solutions, ß Avoiding the transfer of know-
how to the distributor
and offers services in seven currencies in 55 Issues to cover ß Choice between branded and
countries. To on-line buyers, it offers security and white-labelled offering
confidentiality inexpensively, plus free person- ß Low customer intimacy
to-person money transfer. To on-line sellers (e- threatening loyalty and retention
merchants), it offers a simple solution with a good
service level, no debt-collection risks, and a positive
effect on website image, which has been successfully
competing with banks’ “distant selling contract”, at
least for small or starting sites.
PayPal’s efficient cost model features an automated

system that guarantees a very low cost/income ratio
(30%) compared to banks. Thanks to eBay and the
“buzz” effect, it has limited client acquisition costs.
A special team works full-time to minimise the fraud
rate, which in 2006 stood at 0.29% (vs. 1.5% for cards
on the Internet).
Figure 2.21 General Broker Model General Broker

Retailers have always been dangerous challengers
to specialised product or service distributors to
individuals, and they have developed unique retail
ß The best products on the market, marketing expertise (see Figure 2.21). Many of
Value proposition and independent advisory them have already extended their operations to
to customers services to help determine which some financial services, such as cards or consumer
best fits with client’s needs
credit. They can, moreover, claim the advantage of
independence, whether in the selected best-of-breed
products they propose, in the advisory part of the sales
ß Best price/quality ratio and turn- process, or even in the comparison engines they post
Value proposition
key access to fully operational, on the Internet. Once again, retail banks could profit
professionally supported, legally
to distributor
and prudentially secure financial
from this business as financial product suppliers.
products
Examples include the Independent Financial Advisers
(US and UK), on-line comparison engines such as
ß Additional business volume Meilleurtaux.com (France) and Bankrate.com (US),
Value creation
bringing economies of scale and MLP (Germany), Seven Bank (Japan), and Virgin
potential opportunities for cross-
to banks
selling in partnership with the
Money (UK).
distributor
Virgin Money is a brand-centred group launched
in 1995 (first known as Virgin Direct). It takes
ß Risk management, avoiding the
advantage of the Virgin brand strength and
transfer of know-how to the values: quality, innovation, “fun”, competitiveness,
distributor and customer rights. The bank uses a very non-
Issues to cover ß Choice between branded and conventional message to differentiate itself from
white-labelled offerings competitors, create buzz, and appeal to young
ß Threatens customer loyalty and
people. Through government lobbying, Virgin
retention
Money positions itself as a protector of consumers’
rights, and offers very innovative products, including
Source: Capgemini analysis, 2008. special insurance for cancer and pets. Virgin Money
has achieved recognised international success, with
2 million clients, 2,445 employees, and offices in
Australia, South Africa, the UK, and the US.
Virgin Money uses a retailer’s business model and

offers a large product range, including credit cards,
personal lending, insurance products, and pensions. It
focuses on marketing, selling, and distribution more
than on financial conception or processes, contracting
through partnerships with MBNA Europe for credit
cards and personal loans, and with Scottish Widows
for cancer coverage. In the UK, Virgin Money has
recently offered to buy Northern Rock (a savings and
mortgage bank), which should remind retail banks
that partners can always transform into competitors.
Bankers’ views on
new distribution models
The bankers’ answers reflected the widespread
opinion that three of these models are most likely
to be taken up in the marketplace: Trust Operator,
Discount Bank, and General Broker (see Figure
2.22). Many banks even admit to having their
own projects based on the first two models, Trust
Operator and Discount Bank, which many felt
are natural paths banks are inclined to follow and
are perceived as not too difficult to implement.
Conversely, the General Broker model is the one
banks are the least comfortable with, perceiving
its claim at independence from production as more
typical of a non-bank’s positioning.
When we asked bank executives about the change

each model would bring to the retail banking
business, they selected the Discount Bank model
as number one, combined with the General Broker
and the Open Source Bank models, indicating that
their worst concerns about future competition were
focused on a price war and a struggle for clients’
trust and relationship.
Figure 2.22 Executive Views on the New Models
Most frequently selected distribution models Most frequently selected distribution models
that are most likely to appear before 2010 that would change the retail banking industry
Trust Operator Discount Bank

Discount Bank Open Source
General Broker General Broker
1 1
2 2
3 3
Source: Capgemini World Retail Banking Report 2008 survey on growth levers.
Conclusion
In a very risky and changing market, banks need stabilisers to be sure they can continue to meet their
performance targets. Retail banking will remain a major stabiliser, although banks need to find a profitable
organic growth path that leads beyond the one they are following now.
Within ten years, most retail banks operating in high-income markets (and some operating in high-growth
markets) will have reached a common standard of excellence corresponding to the results achieved by the best
performers of today: combining fast time to market with innovative products and local client intimacy, full
multi-channel integration and optimisation, increasing sales productivity through dynamic branch management,
and leveraging a multi-brand portfolio to fine-tune high-growth value propositions for each market segment.
Trapped between demanding shareholders and tough competition in slow-growing markets, banks will have
to invent their own future model to differentiate themselves from traditional solutions. Each of the models
discussed above has the potential to bring some added value to traditional retail banks in their search for
growth in high-income markets. The best performers will combine several of them—and perhaps add still
others—to compete effectively in tomorrow’s retail banking market (see Figure 2.23).
This combination of several models is necessary to track all micro-segments of customers and adapt
diversified value propositions to their specific needs or expectations. It will prove very complex to implement.
The challenge will be to allocate resources in a way that supports the specific features of each model while
avoiding a duplication of systems and organisations. All traditional enablers of operational performance
will have to be fine-tuned and re-combined to fit this new context of diversified business models, without
sacrificing operational and economic performance.
This new perspective does not mean that operational issues will be completely different in the future. But they
will certainly have to take into account the new strategic environment, answering some exceptionally difficult
questions: How can a bank use a portfolio of brands to organise the diverse value propositions it brings to
market? How should channels be integrated to support each value proposition? To what extent will it be possible
to share channels between different brands? What of the branding of the branches? Which parts of the IT
platform can be shared between brands, and which is essential to differentiate value propositions? How can a
shared back office deliver differentiated service levels to different segments?
Banks seeking to operate successfully in high-income markets, as they surely must, will need to find good
answers to all of these questions—and more—to survive and prosper in the years ahead.
Figure 2.23 Creating an Integrated Model for a High-Income Market
Today Tomorrow
New Banking Model

Trust nd
Operato
r ra
lt i-b e l
Mu ha
nn
Con l t i- c ion
t
Ba n ine nt a l Mu g r at
Disco e
k u int
Ba nk nt
Specialised
G e ne branches
ra
Brok l uni
ty
er
mm
Co k e
n t ti m
Ba Fas rket
a
Open to m
Ba nk Fi n Sa
Source Ad a n c i a ma le s
vi s
or l na
ge
m en
t

appendix 53
Appendix
Methodology
METHODOLOGY All comparisons between our 2005, 2006, 2007, and

For this fifth annual edition of the World Retail 2008 editions were made on the basis of three factors:
Banking Report, we have continued to refine the ß A flat exchange rate: To compare price evolution
methodology used in previous reports and expanded from 2007 to 2008 in euros, without those
its coverage to two new countries: Denmark and figures being skewed by exchange rate effects, we
Singapore. We have discontinued the South Africa recalculated last year’s prices for surveyed countries
analysis, because we found it does not effectively that use a currency other than euros based on 13
represent the African zone. September 2007 exchange rates.
ß A same-country scope: To maintain continuity,
Each of 26 country teams contributed to its national countries we added over the years (Denmark,
dashboard (www.wrbr2008.com) and the pricing Singapore, Croatia, India, Japan, Romania,
analysis, and conducted spotlight interviews. The Ireland), as well as Italy and South Africa, have
dashboards on the website provide overviews of the been excluded from the parts of this year’s analysis
national banking industry for each country surveyed. comparing 2005, 2006, 2007, and 2008 data.
In every country studied, a national team identified
the major macroeconomic indicators and described ß One frequency pattern: The price focus of the
the retail banking environment, the type and size of comparisons was ensured by recalculating last year’s
players, the products sold, and the main trends in that price indexes based on this year’s frequencies of use
country’s retail banking industry. (eliminating effects from change of patterns).
The dashboards map these insights in a detailed and As a result, the recalculated price indexes are not
consistent format (see Figure A.1). This work also equal to the ones published in previous years’ reports.
helped us determine which banks to include in the For instance, the 2007 local profile price index is €71,
pricing index. Figure A.2 provides a complete list of compared to €77 published in the 2007 analysis.
the banks surveyed.
We have also refined some definitions to maintain
The main principles of our pricing index our product list in spite of changes in the underlying
methodology remain the same as for last year. The actual products sold by each bank. Some of these
pricing analysis provides both local and global views changes are only marketing window-dressing, but
based on prices and frequency of use. We calculated others are more substantial. For instance, in Portugal,
prices on the basis of usage patterns for three kinds of France, Australia, and Poland, prices for external and
user: less active, active, and very active. internal wire transfers differ if ordered at a branch
or through the Internet. The proportion of transfers
done through both channels was estimated to get
To determine those three groups, we split the total
a weighted average for the unit price. To remain
customer community into three. The 20% with the
consistent, we recalculated last year’s prices based
lowest consumption are less active users, the 20%
on these refinements and assumptions on last year’s
consuming the most are very active users, and the
proportion of on-line transfers.
remaining 60% are the active users. Figure A.3 shows
how local profiles vary by usage pattern. In countries
where consumer behaviour is tracked, bankers were
able to provide this data or refine previous patterns;
in other countries, local frequencies were estimated by
our local retail banking experts.
appendix 55
Figure A.1 Sample Dashboard - Croatia
Source: Croatian National Bank (HNB), Croatian Banking Association (HUB), Croatian Chamber of Economy (HGK), 2007.
Figure A.2 Pricing Index Survey Sample: 194 Retail Banks in 26 Countries
Europe Eurozone Europe Non-eurozone
Czech
Austria Belgium France Republic Croatia Denmark
Share of deposits 83% Share of deposits 67% Share of deposits 88% Share of deposits 79% Share of deposits 82% Share of deposits 75%
BA-CA Fortis Bank Banques Populaires CSOB Zagrebačka Banka Danske Bank
Erste Bank Dexia BNP Paribas CS Privredna Banka Jyske Bank
BAWAG P.S.K. ING Bank Caisse d’Épargne KB Zagreb Nordea Bank
Sparkassen sector KBC CCF HSBC GE Money Bank Raiffeisenbank Sydbank
Raiffeisenbanken CIC HVB Erste Bank
sector Crédit Agricole SG-Splitska Banka
Volksbanken sector LCL OTP Banka
Crédit Mutuel Hypo Alpe Adria Bank
Société Générale
La Banque Postale
Norway Poland Romania
Germany Ireland Italy Share of deposits 61% Share of deposits 90% Share of deposits 79%
Share of deposits 67% Share of deposits 100% Share of deposits 64% DnB PKO BP Bancpost
Fokus PEKAO CEC
Deutsche Bank AIB UniCredit
Nordea BPH Alpha Bank
Commerzbank Bank of Ireland Intesa Sanpaolo
Sparebank 1 CitiBank Banca Transilvania
HVB Permanent TSB MPS Midt-Norge BRE ING Bank Romania
Saving Banks National Irish Bank BNL Sparebank 1 ING Raiffeisen Bank
Mutual Banks Ulster Bank Capitalia Nord-Norge Kredyt Bank BRD Groupe SG
Postbank UBI Sparebank 1 BZ WBK Banca Comerciala
Dresdner Bank SR-banka Romana
BGZ
Millenium Erste Bank
The Unicredit Tiriac Bank
Netherlands Portugal Spain Raiffeisen
Share of deposits 85% Share of deposits 91% Share of deposits 92%
ABN AMRO CGD BBVA Slovakia Sweden Switzerland

ING Bank BCP Caixa Galida
Postbank BES La Caixa Share of deposits 86% Share of deposits 78% Share of deposits 88%
Rabobank Totta Cajamadrid
SNS Bank BPI Banesto Unicredit Bank Svenska UBS
Fortis Bank MG Grupo Banco Popular Slovenska Sporitelna Handelsbanken CS
Grupo Cajas Rurales Tatra Banka Swedbank Cantonal Banks
Caixa Cataluña Vseobecna Uverova Nordea Cooperative Banks
Banco Sabadell Banka SEB Other Banks
Bancaja Ceskoslovenska Danske Bank Regional Banks
Obchodni Banka SkandiaBanken
CAM
Dexia
ING Direct
Bankinter
IberCaja
Unicaja United Kingdom
Open Bank
Santander Share of deposits 83%
Uno-e
HSBC
RBS
Asia-Pacific Barclays
HBOS
Lloyds TSB
Australia China India
Share of deposits 70% Share of deposits 72% Share of deposits 44%
CBA ABC Standard Chartered

WBC BC Bank North America
NAB BOC Punjab National Bank
St George CCB Bank of Baroda
ANZ ICBC HDFC Bank Ltd. Canada USA
CMB ICICI Bank Ltd.
Share of deposits 85% Share of deposits 33%
Minsheg State Bank of India
Shanghai Pudorg Citibank N.A. BMO ABN AMRO
Development Bank Canara Bank CIBC Bank of America-Fleet
Bank of India Desjardins Boston
RBC Citigroup
Scotia J.P. Morgan Chase
Japan Singapore
TD Sun Trust
Share of deposits 62% Share of deposits 63% U.S. Bancorp
Wachovia
Bank of Tokyo- DBS Bank Wells Fargo
Mitsubishi UFJ, Ltd United Overseas Bank HSBC
Mizuho Bank, Ltd. Overseas Chinese
Sumitomo Mitsui Banking Corporation
Banking Corp. KBC Source: Capgemini analysis, 2008.
Resona Bank, Ltd.
Bank of
Yokohama, Ltd.
The Sumitomo Trust
and Banking Co.,
appendix 57
Figure A.3 Pricing Index Survey Sample: 194 Retail Banks in 26 Countries
Canada Norway
Less Active Active Very Active Less Active Active Very Active
Account Management For one year
On-line Banking # of connections 0 12 24 0 23 59
Payments
Internal Wire Transfer # of transfers 6 12 48 2 8 20
External Wire Transfer # of transfers 0 0.5 2 10 50 90

About Us
ING THE EUROPEAN FINANCIAL MANAGEMENT

ING is a global financial services company & MARKETING ASSOCIATION
of Dutch origin with 150 years of experience, Efma is the leading association of banks, insurance
providing a wide array of banking, insurance and companies and financial institutions throughout
asset management services in over 50 countries. Europe. Efma promotes innovation in retail finance
Our 120,000 employees work daily to satisfy a by fostering debate and discussion among peers
broad customer base of individuals, families, small supported by a robust array of information services
businesses, large corporations, institutions and and numerous opportunities for direct encounters.
governments. Based on market capitalisation, Efma was formed 35 years ago and gathers today
ING is one of the 15 largest financial institutions more than 2,200 different brands in financial services
worldwide and in the top 10 in Europe. worldwide, including 80% of the largest European
banking groups.
ING is a major financial services company in the
Benelux home market. ING services its retail clients Visit www.efma.com
in theses markets with a wide range of retail banking,
insurance and asset management products. In our CAPGEMINI
wholesale banking activities we operate worldwide, Capgemini, one of the world’s foremost providers
but with a primary focus on the Benelux countries. of consulting, technology and outsourcing services,
In the United States, ING is a top 10 provider enables its clients to transform and perform through
of retirement services based on sales assets under technologies. Capgemini provides its clients with
management. In Canada, we are the top property and insights and capabilities that boost their freedom
casualty insurer based on direct written premium. to achieve superior results through a unique way of
ING is a leading direct bank with 15 millions working—the Collaborative Business Experience—
customers in nine countries. In the growth markets of and through a global delivery model called
Asia, Central Europe and Latin America, we provide Rightshore®, which aims to offer the right resources
life insurance. We are also a large asset manager with in the right location at competitive cost. Present
assets under management of more than €650 billion. in 35 countries, Capgemini reported 2006 global
ING Real Estate is the largest property company in revenues of €7.7 billion and employs over 83,000
the world based on its business portfolio. people worldwide.
Visit www.ing.com With a network of 15,000 professionals serving over

900 clients worldwide, Capgemini Financial Services
moves businesses forward with leading solutions for
banking, insurance and capital markets. We provide
deep industry experience, enhanced service offerings
and advanced next generation global delivery to
help clients achieve tangible results that impact
performance and capture competitive advantage.
Visit www.capgemini.com/banking
Capgemini would like to particularly thank the following banks interviewed
for this report:
ABN AMRO National Irish Bank

Banca Popolare di Milano Nordea
Banca Popolare di Sondrio Popular
Bank of America Rabobank
BBVA Raiffeisenbank Austria D.D
BNP Paribas Raiffeisenlandesbank Oberösterreich
Bundesverband der Resona Bank Ltd
Deutschen Volksbanken und Sabadell
Raiffeisenbanken Santander
Crédit Agricole SEB
Canara Bank Societe Generale Splitska Banka
Dexia State Bank of Hyderabad
Erste Sumitomo Mitsui Banking Corporation
Fortis Sumitomo Trust and Bank
Getin Bank Swedbank
HSBC TD Bank
ING The Bank of Tokyo - Mitsubishi UFJ, Ltd
ING Vysya Ubi Banca
Karnataka Bank Unicredit
KBC Unicredit Tiriac
Komerční Banka Yokahoma Bank
Lloyds TSB Zagrebačka Banka D.D.
Mizuho Bank
We also thank the following people for collaborating to produce this report:
The Development Team for analysing, writing, and compiling the findings
of the report: Olivier Ducass, Jacques Richer, Hiroko Portal-Nakamura,
Clémence Bechu and Laura Sellam. World Retail Banking Report Executive
Steering Committee for providing their insights, industry expertise,
and overall guidance: Patrick Desmarès, Bertrand Lavayssière, Marion
Lecorbeiller, and Felix Potvliege. Sid Seamans for editing the report. All
our Local Survey Contributors.
Visit For more information, please contact:
Capgemini – banking@capgemini.com
ING – nanne.bos@ing.com
www.wrbr08.com
EFMA – patrick@efma.com
www.capgemini.com/wrbr08
For press inquiries, please contact:
marion.lecorbeiller@capgemini.com
nanne.bos@ing.com

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2008

27 Organic Growth in Domestic Markets

Bertrand Lavayssière Patrick Desmarès Felix Potvliege

METHODOLOGY We collected most of the data for this 2008 edition

Europe Eurozone Ireland 5

TOTAL countries/banks 26/194

Debit card stop payment

Source: Capgemini analysis, 2008.

NEW COUNTRIES IN OUR 2008 REPORT GENERAL PRICING ANALYSES

Denmark Local Profile

Singapore’s prices are comparable to Australia’s,

Figure 1.3 Average Local Profile Price for 2008 (€)

Source: Capgemini analysis, 2008.

Source: Capgemini analysis, 2008.

Price Analysis Based on this product categorisation, we analysed

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%

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.

Cost Based on GDP/Capita

Figure 1.6 Percentage Cost of Banking, by GDP per Capita

REGIONAL PRICING ANALYSES As illustrated in Figure 1.7, overall prices remained

Figure 1.7 Evolution of Local Profile Prices, 2007–2008 (%)

Source: Capgemini analysis, 2008.

North America North America registered the biggest price increase.

Edition of World Retail Banking Report Country (2008)

Source: Capgemini analysis, 2008.

Cash Utilisation Payments

Source: Capgemini analysis, 2008.

80% 43% 44% 49% 47% 44%

Edition of World Retail Banking Report Country (2008)

Source: Capgemini analysis, 2008.

Cheque (price per cheque)

Standing order (fixed

Debit card stop payment

Document search (desk)

External wire transfer

Internal wire transfer

Source: Capgemini analysis, 2008.

Edition of World Retail Banking Report Country (2008)

Source: Capgemini analysis, 2008.

Source: Capgemini analysis, 2008.

Source: Capgemini analysis, 2008.

Edition of World Retail Banking Report Country (2008)

Source: Capgemini analysis, 2008.