What Determines the Winners Among Europe’s Retail Banks? How CRM Can Provide the Silver Bullet for the Future

Abstract

This joint KPMG Consulting/Goldman Sachs research project is intended as a “thought starter” on the future of retail banking in Europe. Our aim is to illuminate the key characteristics of leaders and laggards in the pan- European retail banking arena and to influence the debate on the critical role that technology now plays. Our key findigs are as follows. Over the next five years, we believe that European retail banks will experience a new trigger to M&A activity, based on the ability of a few banks to export their skill in exploiting the domestic customer base through Customer Relationship Management (CRM). The reduced opportunity for domestic consolidation and margin pressure in the core business will focus retail banks on extracting greater value from the existing customer base. Those with effective CRM will emerge as winners. European regulation will prove a significant obstacle to organic expansion across borders in Europe, at least until 2005. Cross-border mergers and acquisitions mightl thus prove the most effective way of expanding beyond the home market. While still a voyage of exploration and discovery, CRM will be one of the critical differentiating factors between retail banks. This does not only apply to the domestic market, where the winners will see revenue growth outpace both asset growth and the growth of the competition, but also across Europe. The ability to upgrade a partners’ technology and cross selling skills, will be a determining factor in whether a retail bank can make a continent-wide impression.