The market and regulatory landscape in which retail and commercial banks operate continues to present a number of strategic opportunities and threats.
Post financial crisis, large banks had to address material legacy issues, clean up their balance sheets and bear the costs of new regulation, including significantly tighter prudential regulation through capital adequacy rules, while facing the pressures of a “lower for longer” interest rate environment. These issues continue to be relevant, but the focus has now shifted toward adapting to the new world of “open banking” and big (or at least bigger) data, and investing heavily in technology to respond to nimbler, innovative models adopted by challenger banks and fintech players.
Those banks adopting “challenger” models face important strategic choices of their own, principally:
- “Where to play” against larger institutions to generate attractive returns
- “How to win” with compelling propositions, often tech-enabled
- “How to configure” their business model, including routes to market
In addition, banks of all sizes face the challenge of changing consumer behavior, driven by a combination of significant and increasing customer preferences for digital means of managing their finances and ongoing low engagement of most customers combined with a loss of trust in major brands.
L.E.K. has helped financial institutions of all sizes navigate this environment and achieve tangible results in terms of growth and shareholder returns.
How we help
Our clients in the banking sector include financial institutions large and small, brokers and other intermediaries for banking products, and providers of critical services to banks, including services such as staffing, regulatory compliance and technology solutions.
Our banking team offers an in-depth understanding of the key challenges and factors that drive value in banking to:
- Provide certainty about their participation strategies: Clients turn to us to navigate uncertainty and for a bespoke assessment of where they should play ― geographically, in a value chain, across customer segments or across product categories.
The questions we answer are often unique for our clients and their circumstances and include everything from “What are the most attractive and sustainable market niches in SME lending?,” “Should we further develop our direct proposition for mortgages?” and “How can we differentiate our current account proposition?” through to “What will be the real impact of fintech models trying to disrupt our business model, and how should we respond?”
- Help them win: Clients appreciate our distinctive and value-driven analytical approach that complements our deep sector knowledge. We bring these to bear in helping our clients win and grow in their respective markets through optimizing their routes to market, helping them improve their pricing or customer origination or retention capabilities, creating or enhancing their product propositions, and improving their competitive positioning to gain share.
Investors, in particular, look to us to help identify the growth levers and uncover the potential that lies within banking businesses in which they seek to invest, and help realize the potential in their portfolio companies.
- Bring their strategies to life: Clients look to L.E.K. to help provide pragmatic support in aligning their business and people toward a common goal. Our work in this space involves definition and implementation of target operating models, guidance on the role of technology within banking businesses, development and alignment of incentive mechanisms for front-line staff, and unlocking of opportunities for performance improvement as business models evolve.
Examples of our work
Examples of financial services consulting engagements include:
- Assisted a listed specialist bank in the assessment of strategic options and product portfolio decisions, including the clear identification of sustainable market niches with attractive dynamics of size and competitive intensity; also supported the bank in bridging capability gaps to address the highest-priority opportunities.
- Helped a major high street bank in the strategic planning process for one of its divisions, including articulation of the division’s strategic positioning, identification of key target customer segments and definition of an outline product proposition.
- Supported a successful capital raising for a digital-only “neobank” and helped articulate the equity story for prospective investors.
- Helped a service provider to the banking industry identify new attractive growth opportunities to offset pressures in its current business areas.
- Assisted a major high street bank in a series of regulatory investigations by the OFT, CC, CMA and others into competition in retail and SME banking, developing detailed regulatory submissions to support the bank’s position based on a combination of rigorous econometric and customer behavioral analysis with commercial insight derived from many years of strategy experience in the space.
- Designed and launched a stand-alone online bank for a well-known high street bank.
- Undertook an in-depth cost and efficiency review of the marketing department of a major high street bank, enabling substantial efficiency improvements through removal of duplication and reshaping of marketing-campaign activity based on a bespoke fully loaded ROI methodology codeveloped with the bank.
- Developed a branch staff incentive scheme for a major high street bank, based on econometric analysis of customer satisfaction drivers. The incentive scheme enabled branch staff to focus on clear, practical actions rather than the indirect customer satisfaction score itself.