Operational Excellence in Retail Banking

Raising Performance in Turbulent Times

By Christophe DuthoitMichael GrebeJonathan Hayes, and Rob Sims

The retail-banking industry is facing significant change on many fronts. The continued tightening of regulations has brought measures aimed at better consumer protection and more rigorous capital and liquidity management, raising new hurdles for banks; customer expectations are higher than ever; and ongoing technological innovation is creating its own challenges and opportunities.

Such changes have not only shifted the competitive positions of many institutions but also contributed to a level of cost pressure that retail banks have rarely felt before. The majority of banks struggle to achieve a return on equity (ROE) that exceeds the roughly 12 percent cost of equity for the sector. This reality, in turn, increases the importance of achieving operational excellence. True operational excellence enables retail banks to expand margins both by reducing costs and by raising revenues through improving sales effectiveness and the customer experience (in terms of speed and overall quality).

In this report on The Boston Consulting Group’s second annual study of operational excellence in global retail banking—our Retail-Banking Process and Productivity Benchmarking (RBPPB) survey—we will address the following questions:

  • Which key trends can be observed?
  • What are the critical domains of operational excellence, and how well are banks performing in them?
  • How should retail banks’ senior-management teams, particularly chief operating officers (COOs), prepare for the future?

A high level of operational excellence is a critical element of success in retail banking today, with best-practice institutions likely able to achieve and sustain an ROE higher than 20 percent. Such banks are positioned to continuously overcome cost pressures and improve their overall performance, despite volatile market conditions.


The authors would like to thank Sven Schubert for his work on the RBPPB study.