Posted: 04 May 2022 5 min. read

Do asset light operating models get better results?

On the previous blog, we discussed some characteristics of asset light operating models adopted by new challengers within the financial services space. Key differences are summarised below.

These differences in operating model choices, although not the sole reason, are helping challengers achieve better results. We analysed a group of incumbents and challengers and compared 4 key metrics (Figure 1). Overall, challengers are more efficient, more valuable, and more desirable for both customers and talent.

Asset light operating models have clear efficiency advantages

The lighter operating model suggests that challengers are able to attract and serve customers at a lower cost point. There are some key aspects of the operating model of challengers that enable such advantages:


High level of automation across the customer journey supported by scalable technology solutions enables growth at lower marginal cost (i.e. the cost to onboard and serve a new customer is much lower for a challenger than for a classic incumbent). As an example (see Figure 2), a European digital bank requires 4x fewer staff to serve a similar number of customers of a large Australian bank. It also has technology expenditure per customer c.13x lower than that of the Australian retail bank.


In addition to having a more scalable model, challengers also have made choices to reduce fixed costs, including lower staff and premise costs. Challengers tend to employ professionals with greater variable compensation and have a smaller physical real estate footprint (i.e. no branches and less central real estate). These differences means the European digital bank (see Figure 2) is able to spend c. 15x less on occupancy costs than the Australian retail bank. In addition, these advantages help the European digital bank achieve efficiency 5x greater than the Australian retail, driven by higher staff, premisses and technology efficiencies.

Performance of incumbents in APAC vs. challengers

To test these advantages further, we mapped three key metrics across a range of incumbents in the region and compared them with leading global challengers. Overall, challengers outpaced incumbents on the following key metrics:

  • Total customers per employee (see Figure 3): Leading global challengers have a greater number of customers per employee suggesting advantages in increased automation and technology scalability.
  • NPS (see Figure 4): Similarly, leading global challengers have higher net promoter scores demonstrating  greater customer loyalty and satisfaction.
  • Market value to total assets (see Figure 5): Finally, leading global challengers have higher market value to total assets implying that greater scalability, coupled with better customer loyalty and satisfaction, have led to higher valuations for challengers in general.

Conclusion and what’s next

Although, it may be unfair to compare narrowly focused product challengers to multi-product retail incumbents, we believe the advantages are clear. Asset light operating models get better results and have greater efficiency advantages. Challengers are building operating models that focus on lighter assets that drive a greater source of competitive advantage. We believe this is part of the reason that challengers have higher market valuations.

Our next blog will explore how players in the region are reacting and adapting their operating model to the current market and competitive conditions.


More about the authors

Matt Bailey

Matt Bailey

Partner, Financial Services Transformation & Operations

Matt is passionate about creating positive changes for his clients. He is a globally recognised Partner with over 25 years of experience in the Financial Services sector in Australia and across Asia, Europe and the Americas. As a subject matter expert in Financial Services and Fintech, he specialises in large scale transformations focused on cost reduction, technoogy build and responding to regulatory requirements. He has led Bank and Insurer target operating model designs, build implementations and regulatory responses for clients globally.

Andre Santos

Andre Santos

Director, Financial Services Transformation & Operations

Andre has over 12 years’ experience in Financial Services consulting and industry, leading strategy and transformation projects. Covering a range of areas, including building (new) business capabilities and operating models, conducting strategy reviews, supporting delivery of regulatory projects and cost rationalisation programs. Most recently, Andre has been advising insurance and banking clients on new ways of working and digital operating models as well as supporting clients design and run efficiency improvement programs.

Phil Windus

Phil Windus

Partner, Financial Advisory

Phil is a member of the global Deloitte Occupier Advisory panel overseeing the Asia Pacific region. He has negotiated over 250,000 square metres of lease transactions around Australia, created accommodation strategies for clients with single or multiple locations, overseen relocation projects, delivered property due diligence reports for clients interested in takeover assessments, and undertaken feasibility studies for public and private occupiers.