1 In 10 Banks Will Disappear over the Next 5 Years, According to A.T. Kearney

New ten-year study from A.T. Kearney predicts that 1 in 10 banks will disappear over the next 5 years as revenue from traditional banking models stagnate whilst leaner, so-called neobanks increase their market reach

LONDON--()--A ten-year study from global management consultancy A.T. Kearney has found that the profit of European retail banks/divisions is at an all-time high, driven by a positive economic environment and lower risks (risk costs relative to total income at lowest level 5% compared to 12% in 2008).

Yet, the topline stagnates at (+ 1% in western Europe). A.T. Kearney’s ‘Retail Banking Radar 2019’ analyzes data from 92 banks across Europe and found that despite continued strong growth in volumes, income remains weak with a dramatic drop in income per client (-1.1% 2018 vs 2017; -11% 2018 vs 2008). Meanwhile, a quarter (24.6%) of bank branches across Europe has closed since 2008.

The study shows that the industry faces a critical transformation amidst rising consumer demand for digital banking and the growing possibilities of open banking, revealing four key areas:

  • Redefine target operating models, accelerate cost reduction and introduce new agile ways of working
  • Rebalance the organization both in terms of headcount and skills in the context of a changing branch paradigm
  • Prioritize customer experience as a way to retain and grow income
  • Embrace open banking, artificial intelligence and partnerships

Simon Kent, partner and global head of Financial Services at A.T. Kearney comments:

“Our ten-year study shows that whilst the industry is stronger, it is stagnating. Not all banks will survive the tide of change as customers increasingly favor digital banks and innovative products and services. Branch closures is a short-term fix to steady the books but it is not enough – traditional institutions need to consider strategic transformation to improve cost and top line and also offer more innovative products and services if they are not only to survive – but thrive – in the new retail banking landscape beyond 2019.”

The rise of “neobanks”
The rise of so-called “neobanks” in Europe offering solely digital products has led to customers increasingly heading to these new models in favor of traditional retail banks. The Radar showed that neobanks’ customer bases across Europe have grown by over 15 million since 2011, compared to a decrease in 2 million customers for retail banks. Up to 85 million Europeans will be customers of these banking models by 2023 according to the study – which equates to around 20% of the population over 14 years old.

Indeed, some ‘star’ neobanks such as the UK’s Revolut already have upwards of 4 million customers, and with several newcomers already hitting the market in 2019, these banks are catching up with traditional bank offerings. Others, such as Monzo, are planning expansions into other markets including the United States, showing the popularity of these models on a global scale. Ultimately, this has been one of the driving forces in the closure of bank branches across Europe.

The impact of Open Banking
Perhaps surprisingly, the Radar also showed that up to 50% of European customers are ready to share personal data with their banks. Under initiatives like the Second Payment Services Directive (PSD2), Open Banking has meant more information sharing between banks, third parties, and their customers – and it looks like consumer trust is growing to want this collaboration.

A trend revealed in the study is the transformation of traditional banks into lifestyle platforms, becoming a ‘one stop shop’ for customers’ daily needs – purchasing, travel, entertainment, utilities etc, even integrating social media into these solutions to provide a true lifestyle experience.

Daniela Chikova, partner at A.T. Kearney comments:

“The shift towards digital banking, only compounded by the introduction of Open Banking, has caused a transformation in how and where customers want to bank. They’re more open to sharing their data with third parties, have greater trust in banks’ ability to hold their data safely and, particularly amongst younger generations, don’t have a need for in-branch banking any more. Open Banking has been a key driver in banking innovation, and we expect this to continue into September as the new Regulatory Technical Standards come in.”


Notes to editors

About the Retail Banking Radar 2019

The Retail Banking Radar 2019 tracks 92 retail banks in 22 European markets, comprised of 50 banks in Western Europe and 42 banks in Eastern Europe. The data is taken from official bank records from January 2007-December 2018, including annual figures, forecasts and Q3 2018 results, and publicly available industry data.

About A.T. Kearney

A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. For more information, visit www.atkearney.com.


Pia Murray
020 7440 8670


Pia Murray
020 7440 8670