Press Releases

Capco: Key Questions New Entrants to the Banking Sector Need to Answer if they are to Succeed

Contact
Robert Akam or Joe Eldridge 020 7400 4480 or email rakam@hanovercomms.com or jeldridge@hanovercomms.com
New entrants should approach the market in a structured fashion to maximise their likelihood of success

Capco, the global business and technology consultancy dedicated solely to the financial services industry, has assessed whether the billions being spent by new entrants can lead to sustained success in the UK financial services market. Capco’s Point of View, ‘New kids on the block...do new entrants have the X factor to succeed or will they simply fade away?’, outlines six questions companies need to answer to make sure they adopt the most effective market entry strategy.

Recent economic turbulence has disrupted markets. Governments and electorates have criticised traditional financial services providers and expect “a fresh approach” from the sector. In response, new players such as Metro Bank have entered the market alongside those who have traditionally operated outside the financial services sector, including Tesco with its financial services offering through Tesco Bank.

Yet the fact remains that the retail banking market is mature and crowded despite the criticisms levelled at it from some quarters. Even the more recent engines of growth, such as consumer credit, are at maturity.

New entrants are planning to spend billions entering the market. For instance Lord Levene’s new bank project in the UK is looking to raise £2-3 billion, Tesco has invested£1 billion buying out RBS from its joint venture and Metro Bank has raised an initial £75million.

Commenting on the recent developments, Capco Partner Mark Record said:

“The current financial climate has given new entrants a great opportunity to change the way banking is delivered in the UK. In order to break into the market in a significant way they need to quickly find the most effective means to deliver great customer service through their people and through new technologies. Customers armed with new technologies will drive some of this change but new entrants must be mindful that outstanding customer service is still delivered by a combination of well trained and knowledgeable staff, as well as technology. Those who create the right mix will be the winners.

“Analysing the market, Capco has prepared some of the key questions new entrants will need to address in order to succeed:

  1. Which markets are the most attractive to enter, in terms of geography, customer segments and products?
  2. Which is the most viable mode of market entry? Should prospective entrants look to buy an incumbent or one of the businesses that are currently being divested; attempt to partner with an existing player; simply search for an affinity relationship; or build an entire greenfield operation? In many cases their decision will be dependent on regulatory requirements but these questions nevertheless need to be addressed.
  3. What product(s) will they offer and how will they differentiate their offer from the competition? Will differentiation centre on price, customer service or exploiting a new technology development?
  4. Will they distribute remotely or via face-to-face channels?
  5. What will their operating model look like and where will their core competencies lie? Based on these characteristics, should they manufacture and distribute themselves and what should they look to outsource?
  6. Do they want to go it alone or look to partner? If partnership is an option, with whom should they partner from a product, manufacturing and technology perspective?

“Based on history, the prospects for new entrants may look daunting. However, recent mobile and online developments, together with changes in customer attitudes, may mean the time is finally right for newcomers to capture a significant share of the financial services market. As Bill Gates once remarked, the impact of new technology is always overrated in the short term and underrated in the longer term. The hype associated with the dotcom era may, finally, be substantiated.”

About Capco
Capco, a global business and technology consultancy dedicated solely to the financial services industry. Our professionals combine innovative thinking with our unrivalled first-hand industry knowledge to offer our clients consulting expertise, complex technology and package integration, and managed services to move their organisations forward.

Through our collaborative and efficient approach, we help our clients successfully increase revenue, manage risk and regulatory change, reduce costs and enhance control. We specialise in banking; capital markets; wealth and investment management; finance, risk & compliance; and technology. We serve our clients from offices in leading financial centres across North America and Europe. To learn more, visit our web site at capco.com and subscribe to Capco's newsroom RSS feed.