Are Europe's Banks Ready For a Global Pricing Strategy?
According to a newly published report from EFMA, ING and Cap Gemini Ernst & Young, conducted in 11 countries over 9 months, the price of core banking services varies by 30% or more, even in economically similar neighboring countries.
29 March 2004
AMSTERDAM -- The inaugural World Retail Banking Report 2004 reveals the results of a nine-month study across 11 western countries, which for the first time compares the prices charged by retail banks for basic banking products such as current accounts, cash usage and management fees.
The report, conducted by Cap Gemini Ernst & Young in cooperation with the European Financial Management & Marketing Association (EFMA), and ING, takes a customer point of view in mapping the pricing schemes used by 73 selected banks in Europe and North America.
The objective of the report is to set a benchmark for pricing models used by banks today to serve as a reference to measure the changes expected to impact the industry over the next few years.
It was found that most institutions in a given country apply some combination of four basic pricing models: account-based, transaction-based, package-based, and indirect revenue-based. The local pricing models have developed over a considerable number of years. The research highlighted that two key factors were responsible:
- The delicate balance that the banks have found between the regulator’s effort to ensure a stable system, the work of consumer groups for lower and fairer fees and the political pressure from many governments, and
- The determination of the banks to direct consumer behaviour towards more cost effective channels and products.
“This is the first picture of the way things look today,” said Bertrand Lavayssiare, Head of Global Financial Services for Cap Gemini Ernst & Young. “Considering the market forces and regulatory changes now in motion, with the increasing globalisation of banking ownership, and with the universal offering demanded by customers, we will be looking at quite a different market in a few years time.”
“The scene is set for change,” said Patrick Desmar’s, Executive Director of EFMA.
“It is only a matter of time before our member institutions come to grips with
the issues of a global and integrated pricing strategy.”
Methodology
The World Retail Banking survey compares country-by-country the standard prices for core banking products and services to consumers. The research was conducted over eight months by 11 different in-country teams across 73 banks.in Belgium, Canada, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, the United Kingdom and the United States of Americas.
The pricing index is based on day-to-day banking needs of customers: account
management, means of payment, cash utilization and exceptions handling. For each
bank in a given country, standard unitary prices were collected for these products
and services as broadly advertised in readily available media. The teams then
established a “dashboard” for each country mapping out the domestic banking environment.
Each team then analysed the pricing schemes presented by major banking institutions
to compile a common pricing index.
The final stage of research was focused interviews with banking experts and economists
that both validated the findings and contributed commentary for the market conditions.
About Cap Gemini Ernst & Young
Cap Gemini Ernst & Young is one of the world’s largest providers of Consulting,
Technology and Outsourcing services. The company helps businesses implement growth
strategies and leverage technology. The organisation employs approximately 48,000
people worldwide (55,000 including Transiciel) and reported 2003 global revenues
of 5.754 billion euros.
With approximately 4,000 specialists worldwide, Cap Gemini Ernst &
Young has established a leadership position in financial services, counting among
its clients 35 of the world’s largest financial institutions. More information
about individual service lines, offices and research is available at www.cgey.com
About ING
ING is a global financial institution of Dutch origin offering banking, insurance and asset management to over 60 million private, corporate and institutional clients in over 50 countries. With a workforce of about 115,000 people, ING comprises a broad spectrum of prominent companies that increasingly serve their clients under the ING brand. For more information on ING’s products and services, please visit www.ing.com.
About EFMA
The European Financial Management & Marketing Association is a not-for-profit association with a membership uniquely composed of banking and financial service organisations in Europe. EFMA seeks to promote innovation in the banking and financial communities by fostering debate and discussion in a setting removed from the pressures of commercial competition. Through a robust array of information services as well as through meetings and conferences EFMA facilitates dialogue among its members, creating a forum for the recognition and study of best practice. For more information, please visit www.efma.com.
