2024 Study on Retail Banking Investments: Business Models (Simon-Kucher)

Summary

• Retail investor participation grew considerably across Europe during the pandemic, but not all providers benefited equally.§1
• In Germany, only 23% of new investment accounts opened between July 2020 and June 2021 were opened with traditional banks, according to a 2021 Whitebox study.§1
• 68% of Trade Republic users are under 35, compared with 10% to 20% typically for large traditional banks.§2
• More than 70% of customers prefer an all-inclusive fee model to a transaction-based or pay-per-use model.§3
• In an average pre-Covid year such as 2019, 50% to 60% of customer accounts generate no transaction.§4
• Retrocessions represent 30% to 50% of the investment services revenues of traditional banks and online brokers.§4
• Zero cost is no longer a sufficient differentiator for neobrokers, who need to differentiate through their offering.§7

Key insights

1. Online providers have grown quickly in users while traditional providers benefited much less from the growth trend.§1
2. Neobrokers attract the strategically important segment of young clients, while traditional banks' retail investor clients have aged.§2
3. Complex pricing models are one of the main reasons retail customers do not invest with their main bank.§2
4. Customers expect simple, predictable fees and an intuitive digital interface with very few clicks.§3
5. After the initial euphoria, user activity stabilised and transaction revenues fell.§4
6. Many institutions have decided to evolve their revenue model to do without retrocessions, which are considered too risky.§4
7. Traditional banks should raise investment penetration among current-account customers and revise their obsolete pricing model.§5
8. Online brokers should consider promoting recurring fees, such as a differentiated subscription model, to reduce dependence on market activity.§6