Non-traditional Players in the Retail Banking Market
Introduction
This report looks at the rise of non-traditional providers in the retail banking market and their impact on the competitive dynamics of the market. Moreover, it looks at the extent of development and penetration of non-traditional FSIs in each country, and provides best-practice case studies of some of the leading players, along with studies of other noteworthy players in the market.
Scope
*Measures the extent of development of non-traditional players in Australia, France, Germany, Italy, Japan, Spain, the UK, and US.
*Gives insight into the strengths and weaknesses of non-traditional financial services institutions.
*Provides case studies of Deutsche Postbank, La Banque Postale, UK Post Office, Auchan, Tesco, ICA Banken, Wal-Mart, Virgin Money, the AAA, and others.
Highlights
Each country differs in the level of development of non-traditional players. For example, French retailers have entered into financial services wholeheartedly, but its other providers have been more reticent. Meanwhile, the UK and Japan have a large number of different non-traditional FSIs.
Deutsche Postbank has become a dominant player in the German retail banking market; the largest bank in terms of customer numbers. Its ability to compete on price and its accessibility via a huge distribution network has enabled it to poach customers from its direct competitors.
Non-traditional players can have a number of distinct advantages over traditional FSIs. These include comparatively inexpensive distribution, brand leveraging, and the ability to provide better customer service. Such attributes have been crucial to the success and encroachment of non-traditional players on traditional providers in the market.
Reasons to Purchase
*Gives you a competitive edge by providing you with a number of case studies, including postal offices, retailers, automotive companies and others.
*Understand how the retail banking market is changing and where the threats and opportunities lie, both for non-traditional and traditional providers.
*Ascertain what the best business models and products are in order to plan your future business strategy.
CHAPTER 1 INTRODUCTION 9
What is this report about? 9
Scope of the report 9
Who is the target reader? 9
How to use this report 10
CHAPTER 2 NON-TRADITIONAL PLAYERS IN CONTEXT 11
Introduction 11
Non-traditional providers are now commonplace within the retail banking marketplace 11
Non-traditional providers from a range of sectors are present in retail banking markets around the globe 12
Many entered off the back of the direct banking revolution, although others have been around for much longer 13
The majority entered after the direct banking revolution 13
However, others have been in the market for many years 13
Each country's retail banking market is at a different point of development in terms of penetration by non-traditional providers 14
Australia is still new to non-traditional retail banking services 14
French retailers have entered into financial services wholeheartedly, but other providers have been more reticent 15
The German postal office is a highly developed FSI, but most retailers do not offer financial services 16
Non-traditional FSIs in Italy remain relatively undeveloped 18
Japan has a range of non-traditional providers from all types of backgrounds 19
Spanish non-traditional FSIs are gaining ground from a low base 20
The UK has a large number of different non-traditional FSIs 20
The US market is a mix of highly and barely developed non-traditional FSIs 21
Entry strategies have varied, although many have entered in partnership with traditional FSIs 22
Most have entered in partnership with a traditional FSI 22
Affinity marketing does not actually mean entry into the financial services industry 23
Co-branding is a popular method that can take advantage of both brands 23
White labeling leverages the non-traditional player's brand exclusively 24
Joint ventures offer each partner ownership 24
Yet, some have entered the market independently 24
Whether alone or in partnership, most opted for a simple product offering before launching complex products 25
Non-traditional players can have a number of distinct advantages over traditional FSIs 26
Some non-traditional FSIs can use comparatively inexpensive and effective distribution 26
Non-traditional FSIs can leverage their brand 27
Offering good customer service can be an effective acquisition tool 27
Yet there are weaknesses that they have not as of yet overcome 28
Many financial services products are complex to sell 28
The cost of development into a financial service provider can be high 29
In some markets, regulation still impedes non-traditional providers from penetrating the market 29
Conclusions 29
CHAPTER 3 CASE STUDIES OF NON-TRADITIONAL PLAYERS IN THE RETAIL BANKING MARKET 31
Introduction 31
Post offices are potentially the greatest threat to traditional FSIs 31
Deutsche Postbank AG: a leading example of the extent to which post offices could dominate 32
A brief background to Deutsche Postbank AG 32
Postbank is a full financial services provider for private clients 34
Postbank competes on price 35
Postbank is strong in distribution and product processing 36
With BHW, Postbank has to deliver its first major integration process 37
In fact, the BHW acquisition is opening various opportunities for Postbank... 37
... but the dominance of the Sparkassen Group remains unbroken 38
La Banque Postale: attempting diversification into new product areas 39
A brief background to La Banque Postale 39
La Banque Postale relies on its huge savings volume linked to the Livret A 41
La Banque Postale is now concentrating on building up its lending business 43
The immense savings side of La Banque Postale could support the development of its lending division 43
Becoming an effective mortgage lender will not be easy 44
The UK Post Office: the potential to have a radical impact on the UK banking market 45
A brief background to the UK Post Office 45
The Post Office has been involved in the financial services market for many years now 45
However, because of financial difficulties, the Post Office has more recently pushed further into the financial services market 46
The Post Office offers a diverse range of financial services products 48
The Post Office relies on a number of characteristics to sell financial services products 50
Moreover, the Post Office is now bringing innovation to its financial services products 53
However, while there have been successes, there is a way to go before the Post Office exerts a significant command on the UK banking market 53
Japan Post Office: sink or swim for the world's largest deposit taker? 54
A brief background to Japan Post 54
Japan Post is a huge provider of retail financial services 54
In a radical move, Japan Post is to undergo privatization 55
But will it be successful? 56
Retailers are fast expanding their provision of financial services 57
Auchan: continued improvement via low pricing and pervasive distribution 58
A brief background to Auchan 58
Auchan is one of the largest retailers in the financial services arena in Europe 59
Banque Accord is the group's financial services subsiduary 60
Auchan has a strong product portfolio 60
Auchan follows a strategy of mass market distribution and low pricing 63
Future direction: continued expansion 64
Tesco Personal Finance: utilizing an aggressive approach to continue expansion 64
A brief background to Tesco 64
Tesco Personal Finance has used partnerships to enter the market 67
One of TPF's main strategies is to build up customer loyalty by linking up some of its products to Tesco's Clubcard loyalty scheme 68
In addition, a number of other strategies have contributed to its success 69
Future direction: more of the same but with greater reach 74
ICA Banken: succeeding by going down the independent route 74
A brief background to ICA 74
ICA Banken established itself independently, without a partnership with a traditional FSI 76
A card loyalty scheme is the cornerstone of its strategy 77
However, ICA Banken also relies on its cost effective distribution outlets 78
Future direction: continued expansion of services and location 79
Wal-Mart: a potential giant on the horizon? 80
A brief background to Wal-Mart 80
At present, Wal-Mart offers a limited number of financial services... 81
...but it plans to open Wal-Mart Bank 82
At present it is unsure whether Wal-Mart will receive a banking license 84
However, if given the go-ahead on a banking license, Wal-Mart could have a large impact on the banking industry 85
Other providers besides Wal-Mart would also change the banking market in the US 86
Automotive companies are gradually becoming more involved 87
BWM Financial Services: using its strong brand to acquire and retain customers 88
A brief background to BMW Financial Services 88
BMW Financial Services product and service range differs widely from market to market 90
BMW Financial Services is attempting to intensify the relationship between BMW and its customers 92
But BMW Financial Services differs somewhat from other non-traditional providers in that its main aim is to assist the core business of selling cars 93
The American Automobile Association: benefiting from its sheer size and customers' trust 93
A brief background to AAA 93
The AAA Financial Services Department was created in 1982 94
Its available product range differs from club to club 94
AAAs success can partly be attributed to its desire to add value to members 95
It also benefits from its non-profit status and customers´goodwill towards the organization 96
Yet AAAs main focus is not on financial services 96
Others have also made a mark 97
Virgin Money: leveraging its group's brand successfully 97
A brief background to Virgin 97
Virgin Money is the group's personal finance provider 98
Virgin Money has used its group's brand to become well-recognized and respected in the financial services marketplace 99
It has also followed the group's main values to build up a successful business 99
Future direction: continued international growth 101
Conclusions 101
CHAPTER 4 THE FUTURE ROLE OF NON-TRADTIONAL RETAIL BANKING PLAYERS 102
Non-traditional players are gaining in importance 102
Those non-traditional providers that have penetrated their retail banking markets share common success factors 102
Moreover, it is such factors that traditional FSIs will have to face in years to come 104
However, there is a long way to go 105
Indeed, there remain many businesses that have yet to get involved in the retail banking industry 105
Yet, ultimately, non-traditional providers will become part and parcel of the financial services landscape 106
CHAPTER 5 APPENDIX 108
Supplementary data 109
Data table relating to the UK Post Office profile 109
Data tables relating to the Tesco Personal Finance profile 110
Definitions 111
Balances outstanding 111
CAGR 111
Captive finance house 111
FSI 111
Gross advances 111
Motor finance 111
Non-traditional FSI 111
Research methodology 112
Relevant readings 112
Datamonitor's custom research capabilities 113
Retail Banking Team contact details 114
How to contact experts in your industry 115
List of Tables
Table 1: Key figures for Postbank, 2000-2006 34
Table 2: Key figures for La Banque Postale, 2004-2005 42
Table 3: Total assets and operating income of the major banks in Sweden and ICA Banken, 2004 76
Table 4: Key markets for BMW Financial Services, 2006 (1 of 2) 90
Table 5: Key markets for BMW Financial Services, 2006 (2 of 2)) 91
Table 6: Large UK banks by the number of UK branches, 2004 109
Table 7: Tesco Personal Finance financials, 2001-2005 110
Table 8: Advertising spend on financial services by a number of traditional and non-traditional FSIs, 2005 110
List of Figures
Figure 1: Many different types of non-traditional players are now involved in the retail banking market, but their extent of penetration in the market differs across countries, 2006 12
Figure 2: Postbank offers an extensive range of products and services, 2006 35
Figure 3: La Banque Postale's products and services, 2006 41
Figure 4: The Post Office is now pushing its financial services, as well as other retail services, July 2006 48
Figure 5: The number of Post Office branches dwarfs all of the largest banks in the UK, 2004 52
Figure 6: Tesco Personal Finance has generated profits since 2001, 2001-2005 67
Figure 7: Part of Tesco Personal Finance's success is due to its competitive pricing, which helps to place its products consistently in the Best Buy tables, July 2006 71
Figure 8: Tesco Personal Finance is one of the largest non-traditional financial services providers in terms of advertising spend in the UK, 2005 72
Figure 9: Tesco Personal Finance has gone for a more ``fun`` approach to its online platform, July 2006 74
Figure 10: ICA offers four different type of loyalty cards, three of which have debit and or credit functions, July 2006 78
Figure 11: BMW Financial Services has 26 subsidiaries worldwide, 2006 89
Figure 12: AAA Financial Services´ products and services, 2006 95
Figure 13: Datamonitor's core consulting capabilities 114
