Danger that UK retail banks will fall behind rest of Europe in Euro stakes, says PriceWaterhouseCoopers

Citation

(2000), "Danger that UK retail banks will fall behind rest of Europe in Euro stakes, says PriceWaterhouseCoopers", European Business Review, Vol. 12 No. 5. https://doi.org/10.1108/ebr.2000.05412eab.003

Danger that UK retail banks will fall behind rest of Europe in Euro stakes, says PriceWaterhouseCoopers

Danger that UK retail banks will fall behind rest of Europe in Euro stakes, says PriceWaterhouseCoopers

Keywords Banks, United Kingdom, Europe

A major industry report published by PriceWaterhouseCoopers today reveals that European retail banks are acting cautiously with regards to the impact and opportunity represented by the introduction of the Euro. However UK banks sit on the edge of Euroland, as while they are leaders in terms of financial performance, they are not surprisingly behind in responding to EMU and the integration of European markets. PricewaterhouseCoopers conducted a survey which forms the basis of this new report at the end of 1999 among 44 retail banks across seven European countries to ascertain their preparedness for the next stage of the introduction of the Euro.

Despite the under-whelming take up of Euro-denominated products by bank customers across Europe, an accelerated demand for these products is expected in the half year prior to the introduction of notes and coins, so Euroland banks should be implementing their Euro strategies as early as today to meet this expected demand. While UK banks are not faced directly with the impact of the Euro in retail markets, today's report provides insights into the strategic and operational issues at the top of the agenda of their key competitors in continental Europe.

Angus Hislop, Head of UK Banking, PricewaterhouseCoopers said:

The Euro may not be a large scale driver in its own right but it is certainly catalysing rapid change in financial services and to stay on top of this fast evolving sector, Euroland banks need to act now and with agility in improving their operational effectiveness. UK banks now have a genuine opportunity to exploit innovation and current home-market profit advantages through a more aggressive approach to the Euroland environment. The status quo is not an option. The risk to UK banks seems to stem from a sense of complacency with the current success, whilst Continental rivals consolidate and encircle the UK market ready for the fall of the currency barrier.

Survey results indicated some marked differences between European banks' entry strategies abroad compared with competitors entering their home markets. Of those surveyed who were contemplating expansion abroad, 34 per cent thought it likely or very likely that "going-it-alone" would be successful.

When asked about foreign competitors "going-it-alone" in their home market, only 7 per cent thought it likely or very likely they would succeed. Of surveyed banks, 91 per cent consider their brand as an advantage or strong advantage against new competitors. Service, personal relationships with bank staff and geographical accessibility are also very important competitive advantages.

An overwhelming majority of European banks expect their customers to increasingly shop around for products. This will make it more difficult to realise their intentions of increasing penetration of the most desirable product sets – life assurance, pension, fund management and mortgages.

Angus Hislop concluded:

Brand has previously been considered to be a source of competitive advantage but it is not one that yet stretches far over products or geography. Banks are faced with increasingly disloyal customers so they will either have to work on the strength of their brand or start selling to people who are not their customers. Having both a product set and a brand that can sell across Europe, rather than in one country alone, is essential to success in the new Internet driven European retail banking industry. Today's banks are going to need to move much more aggressively to stay ahead in the game and that includes the UK retail banks.