Economics of Retail Banking Note

Frances X. Frei; Dennis  Campbell

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Background Note | HBS Case Collection | April 2002 (Revised March 2006)

Economics of Retail Banking Note

by Frances X. Frei and Dennis Campbell

Abstract

Explains the financial operations of retail banking, highlighting profitability challenges facing the industry. For U.S. banks, it is quite common for more than half of the customer base to be unprofitable and to have relatively few customers make up the vast majority of profits. Attempts to explain how retail banks generate revenue and incur costs while serving their customer base.

Keywords: Customers; Economics; Cost; Banks and Banking; Profit; Revenue; Service Operations; Banking Industry; United States;

Format: Print

13 pages

Educators Purchase

Citation:

Frei, Frances X., and Dennis Campbell. "Economics of Retail Banking Note." Harvard Business School Background Note 602-153, April 2002. (Revised March 2006.)

About the Authors

Frances X. Frei

UPS Foundation Professor of Service Management

Technology and Operations Management

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View Publications »

Dennis Campbell

Dwight P. Robinson, Jr. Professor of Business Administration
Unit Head, Accounting and Management

Accounting and Management

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Dennis Campbell, Marshall Meyer, Bonnie Yining Cao and Dawn H. Lau

Keywords: Business or Company Management; Growth and Development Strategy; Manufacturing Industry; Retail Industry; Consumer Products Industry; China; United States;

Citation:
Campbell, Dennis, Marshall Meyer, Bonnie Yining Cao, and Dawn H. Lau. "GE Appliances: Implementing Haier’s Made-In-China Management System." Harvard Business School Case 119-099, April 2019. View Details

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Eastern Bank: Innovating Through Eastern Labs

Karen Mills, Dennis Campbell and Aaron Mukerjee

Eastern Bank is a 200-year-old New England mutual bank with a community focus. Eastern specializes in small business lending, having made strategic investments to become the top SBA lender in New England in the midst of the Great Recession, when other banks were pulling back. But with technology threatening to disrupt Eastern’s relationship banking model, CEO Bob Rivers is getting worried. Looking to spur innovation at the bank, he set up meetings at MIT to talk with “fintech” entrepreneurs. In a deliberate quest for innovation talent, Rivers finds his way to Dan O'Malley, co-founder of the payments division at Capital One and, most recently, CEO of a failed online bank. O'Malley agrees to join the bank as Chief Digital Officer, leading product development, customer support, and “Eastern Labs”—a new office enclosed by glass walls and located in the middle of Eastern's main lobby. Rivers provides Labs with $4 million annually—1% of gross revenues—to develop new banking technologies, and promises to help O’Malley spin out his own company if he develops product that can be monetized. O’Malley conducts tests in insurance cross-selling and small business lending, eventually launching a completely automated small business lending product. Rivers keeps the promise by helping O'Malley spin out a bank technology company called Numerated, and secures a 25% equity share for Eastern. But by the time of the spin out, Rivers is reassessing the success of the effort. Did Rivers have the right intrapreneurship model? Did he change the culture at Eastern? Did he make a mistake spinning off Numerated into a separate company? What lessons can he learn for “Labs 2.0”?

Keywords: Banks and Banking; Technological Innovation; Entrepreneurship; Management;

Citation:
Mills, Karen, Dennis Campbell, and Aaron Mukerjee. "Eastern Bank: Innovating Through Eastern Labs." Harvard Business School Case 318-068, October 2017. (Revised April 2019.) View Details

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Economics of Retail Banking Note

Abstract

Citation:

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