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The fourth dimension

Building customer-centric business models in retail banking

A new competitive landscape is challenging traditional paths to growth.

Since the recent financial crisis, pressure on capital and liquidity has led banks and building societies to restrict their lending and to focus on gathering deposits. A more forceful regulatory agenda has also curtailed sources of non-interest income can caused operating costs to escalate. As a result, traditional paths to growth have become more challenging.

Capital-adequacy ratios are now much improved. Yet lending and profitability is likely to remain tough. Senior executives interviewed for this report expect balance-sheet constraints to influence their competitive strategies well into the future.

As banks try to increase their income and profitability, they face some difficult choices. With some restrictive lending and higher operating costs, some customers have become expensive to serve and less profitable. The long-term sustainability of the current modus operandi, where a major bank serves 10-15 million customers – of which a proportion is profitable – is now in question.

The fourth dimension
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