Infinity bank was one of the 10 largest banks in the UK with over 1800 retail branches. However, due to the change in the nature of the banking industry since the 1980’s Infinity bank had seen a consistent drop in its profitability. Deregulation of the industry had been one of the major changes that had taken place during this time which had increased the competition in the industry. Even though Infinity had followed other major banks in responding to this challenge by cutting costs, closing branches and making use of information technology, its results were far worse than others.
Since retail banking was a major source of their costs as well as revenue, they conducted a branch efficiency review which pointed out issues …show more content…
Can this data also give some insight into why current accounts are so unprofitable?
Even though averages can be misleading, they can provide some insight. To find some information why current accounts are so unprofitable I took averages of the costs and revenues for profitable and unprofitable customers. What is evident from this data is that because unprofitable customers keep a lower average balance in their accounts and are more expensive to serve, they tend to drive the revenues down. Also, if the sample is an indication of the real pattern amongst consumers then just 30% of the current account customers are somewhat profitable.
Profitable | Unprofitable | Average Service Cost - £51 | Average