Becoming the Leader in Consumer Finance:

Bankinter Consumer Finance

Bankinter Consumer Finance

Business Case
2019

This Case Study was prepared by BANKINTER CONSUMER FINANCE. The Case is not intended to serve as a source of primary data. Some facts and
figures are presented only for the purpose of the case and need not reflect real facts.

Based on a previous case study prepared by CUNEF professors in cooperation with BANKINTER CONSUMER FINANCE, “CUNEF Business Case
Competition”, 2017.

Copyright © October 2020, Bankinter Consumer Finance.

Case Summary
As Bankinter Consumer Finance (BKCF) enters the last year of its growth plan to become a leader in
consumer finance in Spain, an advisory team is contacted to support BKCF in setting new strategic goals,
capturing the opportunities and tackling the threats of a market that is rapidly changing. In the recent
years BKCF has enjoyed a good streak of performance: it proved resilient during the last financial crisis and
has been growing ever since, tripling its size over the lastin 3 years and becoming a reference in the
industry. Yet, looking ahead, BKCF wonders how it can maintain the same pace of growth and further
strengthen its competitive position. It will not come easy in an industry that is reshaping in response to
several different forces, including internationalization, digitization, new products and channels, stricter
regulation and new competition. The challenge is then to develop a strategic plan for the next 3 years that
accounts for the changing nature of the consumer finance market and its ample threats and opportunities
ahead.

Index of Sections of the Case

1. The Case
2. Bankinter Consumer Finance
3. Where is Consumer Finance Heading? Trends, Threats and Opportunities
3.1. The Organic growth in Spain and Portugal
3.2. The Internationalization Option:
3.2.1. Europe
3.2.2. Latam
3.3. The Digitalization Challenge
3.4. The Product Offering Challenge
3.5. The Distribution Channels Challenge
4. Conclusion and Strategic Recommendation

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1. The Case

Alfonso Saez, CEO of Bankinter Consumer Finance (BKCF), and Gonzalo del Olmo, Head of the Marketing
and Business Analysis Division, are having a business lunch in Madrid city center. BKCF’s strategic plan for
the next three years, 2019 2020 – 20212, is on the menu. As the conversation turns to the main strategic
objectives and the key challenges ahead, Alfonso is unequivocal: “BKCF’s objective is to strengthen its
position and become a leader in the consumer credit market”. Indeed, over the last 187 years, BKCF has
become a reference in consumer finance in Spain. It has been resilient to worsening credit during the
recent financial crisis and then started to grow with new vigor. Nonetheless, both Alfonso and Gonzalo
realize there are big challenges ahead, including intensifying competition, new types of competitors,
changing consumer behavior, and political unrest in the EU and the US. They know that maintaining their
pace of growth is not going to be easy in this new environment and therefore is going to require taking
some tough decisions.

When Gonzalo returns to his office, he begins wondering if BKCF could not only match its recent
performance, but even surpass that performance in the future. Or, whether the new environment is going
to actually hurt performance, regardless of the strategy BKCF follows. He has plenty of work awaiting him,
but he can’t stop thinking about the future of BKCF and its ability to strengthen its position and become a
leader in consumer credit.

Alfonso bursts into Gonzalo’s office and sits down: “We need to put together our plan sooner than I
thought. There’s a board meeting next week so I need you to send me a draft by the end of the week.”

Gonzalo gets out his note pad and begins jotting down an outline of the plan. He can see many interesting
opportunities on the horizon, but he is unsure as to where to focus resources and where to try to develop
a competitive advantage in consumer finance. Many areas appear both attractive and threatening at the
same time, including international markets, new product and channels, and digitalization.

He knows preparing a thorough plan is going to be an intense challenge, but he is confident a good plan
could be developed and begins writing out key ideas that he would start researching the next morning.

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2. Bankinter Consumer Finance
Bankinter Consumer Finance (BKFC) is part of the Bankinter Group, a financial conglomerate with over 50
years of experience in the Spanish financial industry and a market capitalization in excess of €67 billion
(2019).

The parent company

Bankinter, formerly known Figure 1. The Bankinter Group

as Banco Intercontinental
Español, was founded in
June 1965 as a Spanish
industrial bank through a
joint venture between
Banco de Santander and
Bank of America. In 1972,
Bankinter fully separated
from its founders and
listed on the Madrid Stock
Exchange and its shares
were included in the IBEX
35 index. In 1990, it
changed its original name,
Banco Intercontinental
Español, to Bankinter. Source: Bankinter corporate website

The Bankinter Group specializes in providing innovative financial products and services through
multichannel distribution. Its main focus falls on private banking, enterprise banking and consumer credit.
The products and services that Bankinter offers span from corporate and real estate lending to personal
loans, from credit and debit cards to asset management and pension funds; from insurance to investment
banking. Remarkably, many of these products are provided through fully- or partially-owned specialized
independent companies, as it is the case for example for Bankinter Consumer Finance or Linea Directa for
insurance products (see Figure 1).

With over 5,400 employees, Bankinter operates through over 600 branches in Spain: 450 general ones, 49
for private banking, 22 for corporate customers and 73 for small businesses. Moreover, in 2016, it
acquired Barclays’ retail banking business in Portugal including 84 branches. Recently, in 2019, also
acquired EVO banco, a digital Spanish bank, as well as Avantcard, an Irish-based consumer finance
company.

Bankinter’s management view is that its mission is to create sustainable long-term value for shareholders,
customers, employees, and society in general. Its competitive advantage lies in its rigorous risk
management policy and its ability to effectively use and apply the growing magnitude of custormer data.
Indeed, thanks to its lower exposure to the real estate sector and its rigorous risk management policy,

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which resulted in a lower rate of non-performing loans than that of the sector, Bankinter was less affected
by the financial crisis than other Spanish banks. As a result, Bankinter experienced a continued growth in
credit volume and number of employees, contrary to the general trend.

Thanks to its broad range of diverse products and services, Bankinter has been able to attract a broad and
demanding corporate and retail customer base with a high economic capacity and high income. Another
fundamental pillar of its corporate strategy is, in fact, its focus on providing the highest customer
experience and best customer service. Indeed, reflecting its excellence in terms of brand management,
Bankinter has been selected since 2009 by Superbrands as one of the 25 Trademarks of Excellence on the
Spanish market, with special value given to the efforts made to position Bankinter as a different bank by
other than merely rational elements. Bankinter’s specialness in this respect builds on four main brand
values: agility, enthusiasm, integrity and originality. Indeed, Bankinter’s efforts are aimed at always being
more decisive, quicker and more efficient than other banks; relentlessly innovating with energy and spirit
of improvement. Moreover, Bankinter seeks to be unique and always propose something original, by
thinking and acting honestly, responsibly for the society and differently than competitors. Indeed,
Bankinter was the first bank to offer internet banking in Spain, as well as the first to introduce mobile
banking and the first to send text messages to confirm card payments.

Bankinter then takes special pride in its employees for their skills and the high quality service they
provide. In this respect, Bankinter recognizes that one of its core strengths is that it can rely on a young
team of professionals who are well-trained, flexible and capable of quickly adapting to technological and
market changes.

This set of competences combined with an inclination to take action and to innovate in products, service
channels and processes, makes the Bankinter Group well equipped to face the challenges of the industry.
In their words:

“By being exceptional every day, we have got where we are now, and
will continue to be one step ahead of the rest in the future.”

Bankinter Consumer Finance (BKCF) background and strategy

The Bankinter Group entered the consumer finance market in 2001 by setting up a virtual joint venture
with Capital One called “Capital One de Bankinter”. Bankinter provided expertise with the customer base
while Capital One, being among the largest issuers of major brand credit cards worldwide, contributed its
knowledge of the product base. In 2007, Capital One exited the joint venture. As a result, a new company,
Bankinter Consumer Finance, was set up. The new BKCF is fully owned by the Bankinter Group. Over the
course of the 16 18 years since its creation, BKCF has established itself as a financial services specialist in
consumer credit solutions in Spain.

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The main mission of BKCF is to meet its customers’ financing requirements by providing them with flexible
means of payment for managing their day-to-day finances. BKCF attempts to accomplish this mission in
line with the Bankinter Group’s style and brand values: with innovation, in multi-channel mode, and
leveraging on its know-how, its flexibility and agility, its long-term commitment to provide excellent
customer service and its ability to work with partners.

In particular, BKCF is a data driven company whose corporate strategy is based on a few key principles
that span several different stages of the consumer finance value chain, which is summarized in Figure 2.
The first and most important is a scientific, net present value (NPV) driven decision-making approach.
Decisions are based on the expected profitability of each campaign/segment, by clustering customers and
modeling all NPV drivers. This way, BKCF’s information- based strategy maximizes returns along all the
value chain, form design and marketing to collection and litigation, through promotion and distribution,
credit scoring, compliance and customer management. This approach, which is supported by advanced
credit risk management and segmentation at all business stages (such as marketing, underwriting,
customer management, recoveries, etc.) allows BKCF to stands out from its less data-driven competitors
in managing data and profit from it. The same holds for the institutional strength that comes from being
fully integrated in a leading banking group, while some competitors are partly owned by financial
sponsors, whose objectives and visions may not always align with those of the company. Then, for what
concerns design and marketing, its multi-product offering and its excellence in customer management
allows BKCF to cross-sell different financial solutions to its customers and become their reference financial
services provider. Finally, for what concerns distribution, its multichannel strategy as well as outsourcing
customer acquisition to an external task force provides BKCF more flexibility to better manage the
corresponding costs, in a faster manner and with a lower economic impact.

Bankinter Consumer Finance (BKCF) organization

BKCF is organized in fiveour staff areas, twohree business areas and one two subsidiariesy (see Figure 2).
Offering is segmented across three main product lines: Credit Cards, Personal Loans, Point of Sale & Digital
Auto Loans.

Figure 2. BKCF’s Organization Chart

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 CLO

Source: BKCF

COO: leading IT, Legal and Operations departments, essential elements for the correct performance of the
company.

CIO: leading IT and innovation, key factors for development of the company.

CRO: Risk management is one of the main BKCF pillars. Risk and provisions models, credit policies and
collections and recoveries are leaded from this area. Managing resilience of P&L in the long term is the
principal goal of a CRO in a consumer finance business.

CM&AO: The second BKCF pillar is the business analyticsis team. Continuous optimization of marketing,
acquisition and CRM strategies as well as test & learn proposals come from this area.

CFO: Main figure in every firm could not be different in BKCF. Control, efficiency and corporate
development also depend on this department.

BankintercardCredit Cards: under the “bankintercard” business area BKCF offers several different cards to
its customers, some of them in partnership with major consumer brands, as listed below. Each card has its
own features and advantages, depending on the partner it is related to. In general, the cards allow
customers obtain cashback on their bills based on the usage of the card, or they grant points for discounts
in gas or flights. The cards that BKCF currently offers to its customers include:

 Bankintercard for the open market

 Linea Directa

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  Vodafone
 RCI (Renault, Dacia, Nissan)
 BP (British Petroleum)
 Groupon
 Air Europa
 Viajes Halcón
 Pullmantur
 Bankinter customer cards

This area also manages Point-of-Sale and Auto Loans. Mainly focused on offering loans to customers for
cars or expensive retail purchase at large retail shops or digital merchants and car dealers. BKCF entered
this market only in the last part of 2016. For the end 2019 BKCF has a €110M portfolio in auto loans and
more than €30M in PoS loans.

Personal Loans: under this business area BKCF serves the financial needs of a broad set of customers for
different consumption purposes. In 2019, BKCF booked more than €375M reaching more than €600M in
outstandings.

Point-of-Sale and Auto Loan: this business area is mainly focused on offering loans to customers for cars
or expensive retail purchase at large retail shops or digital merchants and car dealers. BKCF entered this
market only in the last part of 2016. In 2017 BKCF booked €50M in auto loans and almost €10M in PoS
loans.

Personal Loans: under this business area BKCF serves the financial needs of a broad set of customers for
different consumption purposes. In 2017, BKCF booked more than €340M. The average loan size was
approximately €11,000.

Point-of-Sale and Auto Loan: this business area is mainly focused on offering loans to customers for cars
or expensive retail purchase at large retail shops or digital merchants and car dealers. BKCF entered this
market only in the last part of 2016. In 2017 BKCF booked €50M in auto loans and almost €10M in PoS
loans.

Portugal subsidiary: in 2016 BKCF’s parent company Bankinter completed the acquisition of Barclays
Portugal. BKCF started its activity in 2017 through a subsidiary company which completed Bankinter
consumer business and also launched bankintercard in the Portuguese open market, booking with more
than €30M155 €million in personal loans, €57 million in credit cards and over 30 120 thousands new
clients, both loans and credit cards, in as in the end of 20179.

Avantcard Ireland: in 2019 Bankinter took over Avantcard Ireland Limited, one of the leading financial
entities in Ireland and the only one specialized in consumer credit. With this acquisition Bankinter took in
130,000 customers and 290 million euros in credit card debt and deferred payments, as well as 105

8
million euros in personal loans. Lately, Bankinter Consumer Finance has bought to Bankinter 100% of the
shareholding. Continuous growth carried Avantcard to finish 2019 with €159 millions in personal loans,
€307 millions in credit cards and 164 thousand clients.

Bankinter Consumer Finance (BKCF) growth 2001-20197

Form its inception in 2001 up until 2008, BKCF experienced continuous and sustained growth. However,
the worsening credit conditions leading up to and during the financial crisis led to a slow-down in the pace
of growth of the entire consumer finance sector in Spain and to an increase in the number of non-
performing loans (NPL). The financial crisis led in fact to both a reduction in the number of companies in
the consumer finance sector as well as to a shrinking of the volume of their assets. Despite the turmoil
and poor credit conditions, BKCF proved to be a resilient company during the period from 2008 to 2013,
reporting a loss only in 2010 (see figure 3). Consistently, while the company’s ratio of NPLs rose in the
initial years of the crisis, it has been steadily decreasing since 2010, falling below 10% as early as 2013.
The industry, in contrast, has experienced larger losses and a more significant and more persistent
increase in the ratio of NPLs over the same period.

Figure 3. BKCF Net Incomegrowth in € millions.

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 Source: BKCF, not including Avantcard

The financial crisis also affected the size of BKCF’s loan portfolio. From its creation up to 2008, BKCF grew
the size of the outstanding loan balance at a rapid pace. However, due to the worsening of the overall
market conditions during the crisis, BKCF experienced a slight decline in the amount of credit outstanding.
This plateauing lasted roughly 4 years and in 2012, BKCF started growing again also in this respect.

While this growth was not very steep in the initial post-crisis years, BKCF has grown significantly since
2014, when it has put in place a business plan aimed at tripling the size of the company by 2017. Growth
in recent years (a six-fold outstandings increase in 2014-2019 period) has been favored by the improved
economic conditions and has not affected the riskiness of BKCF’s portfolio. Indeed NPL ratios over the
period have been consistently below the 19.2% high recorded in 2009-2010 and are on a downward trend,
declining by about almost a quarterhalf from 9.7% in 2014 to 7.25.3% in 20179.

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 Figure 4. BKCF Gross Loans Outstanding and NPLs ratios.

Source: BKCF, not including Avantcard

In the last existing disaggregated ASNEF report (September 2017), BKCF grew the size of its outstanding
pure consumer credit in Spain up to €1,261 million, making itbecame the fourth largest credit specialist in
the Spanish consumer finance market. Figure 5 reports the top 10 providers of consumer finance in Spain.
BKCF and its competitors are ranked in descending order based on the size of their outstanding loan
portfolios (in millions of euros).

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 Figure 5. Ranking ASNEF as September 2017 (€M)

Source: BKCF

As a resultAll these strengths have made, BKCF’s net incomeEBT for 20197 was reach €73125.39 million
(Table 1), an increase of 34.0% since 2016. This result is mainly driven by a continued growth in net
interest income which has reached €176281.35 million in 20179.

Table 1. BKCF’s Income Statement 20197

20197
(€M)
Net interest margin 281176.35

Net fees and other charges (114.8)

Gross income 161.5269,7

Impairments & cost recoveries (8430.78)

Risked adjusted margin 18430.89

HR costs (103.97)

General costs (465.63)

Net IncomeEarnings before taxes 73.3125.9

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 Source: BKCF, excluding Avantcard

3. Where is Consumer Finance Heading? Trends, Threats and Opportunities

Industry experts surveyed by Roland Berger and Eurofinas on their forecast up to 2018 almost
unanimously (98%) express confidence in the consumer finance market’s continued growth. A majority of
these experts foresee record double-digit growth rates, with auto lending set to register the most
dynamic growth in outstanding balance terms and other personal lending set to register the best
performance in gross lending.

Yet, the way ahead towards a full recovery of the consumer finance market is not free of challenges. In
light of this, the remainder of this section describes more in detail five major challenges, and the resulting
threats and opportunities for BKCF.

3.1 The Organic growth in Spain, and Portugal and Ireland

Spain and Portugal are recently leading the growing in the European consumer credit market. The two
markets have exhibited similar growth rate patterns over the past decade. Since 2015, both countries
have enjoyed double digit growth rates in the outstanding loan amounts, with the Portuguese market
growing at a slightly faster pace than the Spanish market over the past years (Figure 6). Also recovering
the Irish market, which suffered a deeper shrinking during the crisis period.

Figure 6. Consumer credit market growth YoY (€%)

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 Source: Eurostat

BKCF was able to advance the relaunching of the business after financial crisis, now the environment is
completely different as that in 2014. Competitors are much more aggressive in Iberian markets and it
seems to become into a lower marginss scenario. In spite of this BKCF could still have opportunities of
finding profitable business lines in both markets. In Spain especially focused on its acquisition strengths
(mainly looking up for new partnerships), the development and optimization of prime implemented
business lines and advancing in digitalization. In Portugal developing the range of product offer
( nowadays mostly composed by Bankinter cards and personal loans and bankintercard for the open
market) with the goal of gaining market share (Figure 7). Ireland is focused in acquiring BKCF´s way of
managing the consumer business, trying to gain partnerships and reviewing new opportunities both in
products and marketing strategies.

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 Figure 7. BKCF´s specialist market share in pure consumer credit (personal loans, revolving and
consumptions goods for Spain June 18 and personal loans, rollovers and revolving for Portugal
SeptDecember 198)

Source: ASNEF, ANFAC, ECB and BKCF

BKFC’s key strategic options

In the southern part of the Eurozone, both the Spanish and the Portuguese consumer credit markets are
enjoying sizable growth rates of their consumer credit markets as seeing. This growth is striking given the
fact that the Spanish consumer credit market, with close to €76 billion in loans outstanding in 2017, is five
times the size of the Portuguese market (about €14 billion).

Looking ahead, a recent survey of top managers in consumer finance by Roland Berger and Eurofinas
reports that nearly all respondents agreed that Southern Europe is the region with the highest growth
expectations going forward, followed by Central and Eastern Europe (see Figure 8). The forecast indicates
lower growth prospects for revolving credit and higher growth prospects for auto loans in Southern
Europe. Thus, both the Spanish and the Portuguesethree BKCF´s consumer finance markets share similar
prospects and seem to be in an exciting position with a strong potential for future growth.

Figure 8. New Business Volumes Expectations by Region

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 This figure presents survey results about which regions of Europe will experience the highest
growth in new consumer finance business volumes. Each color indicates the expected growth rate
in each region (e.g. green stands for an expected growth higher than 10% etc.). The percentages
in each rectangle denote the percent of respondents who forecast each growth rate, in each
region.

Source: Roland Berger and Eurofinas

If BKCF decides to reinforce its current market position, strengthen its competitive advantage and grow
organically in Iberia, where in terms of business should BKCF concentrate its efforts?

3.2 The Internationalization Option

As seeing in Figure 8, a majority of industry top executives anticipates a consolidation in their domestic
consumer finance market. Thus, there may be good opportunities for national champions to expand
internationally.

3.2.1 Europe

Within Europe, the largest consumer finance markets are the United Kingdom, Germany and France ( see
Table A1 in the appendix). Despite the similarities in market conditions among European countries, there
are vast differences among households and their propensities to borrow across EU states.

European countries diverge in their households’ overall indebtedness, their ability to repay debt and their
recourse to consumer finance (see Table A2 in the appendix). For example, looking at the gross debt-to-
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income ratio, in countries like Denmark and the Netherlands, households borrow twice as much as they
earn, whereas in countries like France, Italy, and Poland, household borrow less than their income, on
average.

Since 2015, the European consumer credit market has undergone a visible recovery. The observed growth
in outstanding balances in the major European markets was supported by a brisk increase in new personal
loans.

However, different countries exhibited a large heterogeneity in the growth rates of their respective
consumer credit markets. New loan production is growing up sharply in most countries, while other
countries, such as Greece and the Netherlands, are experiencing a decline in new lending (Figure 9). Even
further, the different segments of the EU consumer credit market are undergoing contrasting
developments. For example, revolving credit in the Eurozone exhibited a downturn, while auto financing
experienced a boom.

Figure 9. European countries consumer markets volume, trend and potential (as situation vs historical
maximum peak)

Source: WEO FMI 2018

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BKFC’s key strategic options

Regarding the internationalization challenge, should BKCF continue growing internationally in Europe?
Which kind of countries should be the first to address?, big ones or smaller with a less competitive
environment?

If BKCF decides to grow internationally it has to weigh different execution options: should it expand
organically or through a joint venture or an acquisition?

3.2.21 Latam

BKCF may have some strategic reasons why considering Latam as a possible target: Cultural and linguistic
affinity to its known countries, markets sizes (Table 2) and growth perspectives, larger margins expected
than Europeans ones and less both strong specialist competitors (Figure 10) and regulative environment
(see table in appendix A3).

Table 2. Main consumer credit markets size (June 17)

Consumer credit market Comparative

Country (€ billions) vs Spain
Mexico 43.126 0,63x
Brazil 196.364 2,85x
Colombia 32.460 0,47x
Peru 15.643 0,23x
Chile 22.504 0,33x
Bolivia 1.887 0,03x
Uruguay 4.950 0,07x

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 Source: BKCF

Figure 10. Principal competitors by market share at end 2016

Source: BKCF

BKFC’s key strategic options

It would not be a riskless decision for BKCF. Political instability in the area, as well as high volatility in
exchange rates could be seen as an excesive threat. There is also an additional not negligible difficulty for
BKCF, it would be its first experience in managing a subsidiary with a huge time difference. Would you
recommend BKCF to expand in Latam? If so, which country and why?

After deciding the target country to enter the region, stablishing the business also would face others
challenges depending on the approaching way. Should BKCF enter this new market organically or through
a joint venture or an acquisition?

3.3 The Digitalization Challenge

It is commonly believed that as technology changes how people live and work, consumer finance firms
need to invest more than ever in digital transformation in order to stay competitive.

Digitalization is having a deep economic, behavioral and societal impact as it becomes absorbed in the
broader economy. An array of low-cost technologies allows people to engage with each other and with

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businesses in new ways, which leads to a need for an ongoing adaptation of technologies to behavioral
changes. As a result, digitization expands the possibilities for business reinvention, at a faster pace and at
a dramatically reduced cost.

For example, the adoption of smartphones and the rich services delivered via “the cloud” have eroded the
distinction between people and their devices at work, at home, and on the go. As people adopt these
services, the data about their usage and intent further refines the service and the capabilities of the
device. As a result, companies can let more services shift from internal processes to customer self-service,
thus lowering total costs and increasing customer satisfaction.

Similarly, advances in algorithms, abundant data, and unlimited computing power have changed our
understanding of what can be automated and how. Learning algorithms will automate some activities
with radical improvements in precision, quality, and cost. Equally important, digitization is ushering in the
kind of plug-and-play standards of interconnecting services that has become standard practice within and
between software companies. These “open APIs” can be a means to redeploy and recombine capabilities
for flexibility and speed, or to source third-party capabilities without creating future “legacy systems”. As
a result, many of the techniques that were previously restricted to tech juggernauts such as Facebook,
Microsoft or Google – for cost or skill reasons – are now widely available for financial services incumbents.

For several years after the crisis, the agenda of consumer finance providers was dominated by
restructuring and regulatory reform. However, in recent years, consumer finance providers have
increasingly focused on digital change: embracing mobile channels, redesigning customer experiences,
partnering with innovators, using cloud computing, exploring new datasets and analytic tools and
digitalizing inefficient processes. Indeed, more than 90% of consumer finance top-executives responding
to the Roland Berger and Eurofinas survey consider digitalization to be the most important current trend
in the market, as today’s value chain won’t be tomorrow’s. In particular, approximately 60% of survey
respondents anticipate they will have most of their contracts fully digitalized by 2018, up from 25% in
2014.

Digitalization represents a huge transformational challenge. Although digitalizing existing core businesses
to radically reduce operating costs seems necessary to maintain current market share, profits and
valuations. Digitalizing to merely increase efficiency is insufficient for shareholder value creation. Two
main approaches to digitalization are emerging to defend existing business and to build new competitive
advantages. The first approach involves recurring to “deep digitalization” to radically reduce costs and
defend profits. In this respect, digital technologies are not applied for modest efficiency gains but as a
means to transform the operating model and to fend off margin erosion from efficient competitors. The
second approach consists in developing new sustainable competitive advantages within ecosystems that
are being reshaped by digital forces. In this respect, consumer finance providers need to make clear
strategic choices about where and how they can compete in the evolving ecosystem by positioning
themselves in the market as either demand aggregators (customer platform), platform providers (data
and infrastructure) or component suppliers (financial services and products).

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A new ecosystem driven by digital forces

The rise of digitalization is changing the way customers access financial products and services. While
existing companies are trying to adapt their systems to the digital revolution, the status quo of the
financial services industry has been challenged by the emergence of technology-focused start-ups that
innovate the products and services currently provided by the traditional financial services industry. The
rise of digital finance allows consumers to connect to information anywhere and at any time and digital
services can address customers’ needs in a more flexible way than the traditional players.

With FinTechs gaining significant momentum in the financial industry and their market share growing
twofold on an annual basis, close to 95% of the respondents to a 2016 survey of financial services
companies by PwC believe that part of their business is at risk of being lost to FinTech companies 1. In
particular, respondents from the banking and payments industries believe they could lose up to 28% of
their market share to FinTechs by 2020. Survey respondents identified 4 key threats related to the rise of
FinTechs: pressure on profit margins, loss of market share, privacy, and loss of customers (see Figure A1 in
the appendix). Nevertheless, some industry experts also believe that regulation and the intensive capital
requirements in the financial services industry represent hefty barriers to entry for FinTechs and would
limit the potential negative impact of these start-ups for existing companies.

While FinTechs threaten the status quo of the financial services industry as a whole, their rise presents
certain opportunities for incumbent companies. One of the biggest advantages of FinTechs, as identified
by survey respondents, is the potential for partnerships with FinTech companies, which would increase
the efficiency and reduce the costs of business for incumbent firms. A potential partnership with a FinTech
company could also result in product differentiation, which in turn would lead to customer retention and
revenue increases (see Figure A2 in the appendix).

BKFC’s key strategic options

Regarding the digitalization challenge, BKCF’s key strategic decision is whether to keep its value chain as it
is, holding tight on its current competitive advantages, or to develop or acquire the technology to
digitalize one or more stages of its value chain.

If BKCF decides to keep its existing value chain as is, it would have to focus on maintaining and advancing
its competitive advantages. On the contrary, if instead of focusing on its core strengths BKCF decides to
digitalize its business model, BKCF will have to identify the stages of the value chain in which to embrace
digitalization.

For example, as digitalization is innovating the traditional processes and systems of financial companies,
the loan underwriting process has largely benefited from the ability to read and analyze large amounts of
data brought about by digitalization. In particular, as discussed in an Oliver Wyman 2016 report,
digitalization allows for an automated and structured capture of customer data, filtering only the relevant
customer data from the bank’s point of view. Moreover, digitalization has reduced the time it takes to
1
Respondents are 544 top-tier managers of the world’s top financial institutions from 46 different countries.
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perform initial screens and assign credit scores to customers. For the customers who are approved for
credit, digital advances translate into sophisticated models which identify the optimal underwriting
approaches, taking into account customer information as well as regulation and other external factors, in
a reliable and rapid manner. Overall, modern machine learning techniques increase the statistical power
of scoring models, such as risk or fraud scoring models, among others, which could translate into
substantial savings for financial institutions2. Even further, the right choice of data sources and analytical
tools to employ empowers decision makers to ask the specific questions about the future of the business
and its strategic options.

Then, BKCF would have to measure the possible different execution options: should BKCF develop or
acquire the new digital technology or should it consider a takeover of a digital competitor or a digital
services provider?

In this respect, a recent survey by PwC provides some indication on the financial services industry
responses to the opportunities and threats of digitalization. There is significant heterogeneity in the way
that existing financial service providers deal with new digital entrants. In particular, in response to the
changing nature of the industry, close to a third of incumbent companies are forming partnerships with
FinTechs (see Figure A3 in the appendix). Another 9% of incumbents acquire FinTechs, while 11% of
existing companies develop their own FinTech subsidiaries. Yet as many as 25% of survey respondents
choose not to deal with FinTechs at all.

Yet, a common concern both FinTech companies and incumbent firms face is uncertainty surrounding the
regulatory regime with regards to the former. The survey reveals that companies are concerned mostly
with the ambiguity surrounding potential regulatory hurdles (see Figure A4 in the appendix). For example,
there seems to be confusion as to what rules apply to FinTechs and which regulatory agencies govern
compliance with these rules. While incumbents express interest in forming partnerships with FinTechs,
the ambiguity surrounding the regulatory environment could make such integration less attractive.

3.4 The Product Offering Challenge

The consumer finance industry provides a vast range of products to meet its customers’ needs, such as
credit cards, auto loans, personal loans, and student loans, to name a few. Some products are more
demanded than others. Taking a look at the proportion of new consumer credit in 20195 by type of
product provided (for European consumer credit providers represented through Eurofinas), revolving
credit (i.e. mostly cards) represents slightly more thanalmost a third quarter of the total new financing in
the year, while personal loans contributed just under a quarteraround 20% (see Figure A5 in the
appendix). The largest category of consumer loans is related to vehicle financing, in which new and used
car loans sum to slightly more than 4025% of all new loans.

2
For example, in the report, Oliver Wyman discusses the case of a Turkish bank which experienced a 50% net profit
uplift by applying advanced analytics in the bank’s risk scoring methodology.
22
Top executives in consumer finance who participated in the Roland Berger and Eurofinas survey expect
growth in all product lines in excess of 5% annually. Yet, a slight decrease in margins is expected for auto
loans and personal loans, whereas those on Point-of-Sale financing are expected to increase moderately.

Credit Cards

According to a 2016 report by the European Banking Authority, consumer card transactions account for
the most relevant share of payment instruments in the EU, but their weight in total value is relatively
small.

The Spanish credit card market exhibits similar patterns.

The number of payment cards in circulation in Spain has increased 50% overalmost doubled over the past
the past 195 years, from 45.8 million cards in 2000 to 6986.9 4 million in 20159. The types of cards in use
has also changed significantly over time. While in 2000 debit cards were close to twice more prevalent
than credit cards, in 2005 debit cards represented only a half of the credit cards on the market. Iin
particular2019, of the 69.986.4 million cards in 2015, 44.38 million were credit cards and 25.148.4 were
debit cards. On average, each Spaniard in 20159 hads 12.51 cards.

The total number of card transactions has close to tripled over the past decadeshown a fivefold increase
in this century (Carbó Valverde and Rodríguez FernándezECB, 20169). In 2002, Spaniards carried out 991.5
million transactions with a card, amounting to €46,829 million. In 20195, there were 52,683584 million
card transactions in Spain, for the equivalent of €112210,330 600 million.

Personal Loans

According to data published by ASNEFdata provided by ASNEF, 2015personal loans continue with its
growing trend in Spain. was characterized by an uptake in new consumer loans for the first time since
2010. In particular, outstanding balances grew +18,1% YOY in 2019. But there are some doubts new
consumer loans in Spain amounted to slightly more than €15 billion in 2015, up by €1 billion relative to
2014about future demand as . The majority of these new consumer loans drawdowns, just close to 68%,
came from new credit card issues while 26% were due to new consumer creditwent slightly down (-0,6%
YOY). This trend is also reflected on the outstanding balances, which have experienced in 2015 a
comeback to approximately the same levels of 2010.

Auto Loans & Point-of-Sale

These products perform in parallel to the economic perspective and goods consumption trend.
Automotive industry is living a quick transformation process towards electrifying. This may affect auto
sales ( near 80% are financed) -lending in Spain increased in gross lending terms in 2016with a contained
demand, while customers may be waiting for more clarity about diesel regulation or public incentives. The
increase was mainly due to the introduction of the Spanish Government’s Plan Pive in 2015, which
incentivizes consumers to exchange their old cars for new ones. This plan came to an end in July 2016 and
is expected to be the final edition of the Plan Pive program, which was undertaken to bolster Spain’s
automotive industry.

23
BKFC’s key strategic options

BKCF’s different product lines: credit cards, personal loans, point-of-sale, and auto loans, have very
different risk-return characteristics. Thus, more sustained growth in one business area versus another may
substantially affect the overall profitability and the risk of the firm’s credit portfolio. Figure 11 shows how
BKCF’s different business areas compare in terms of risk and returns, looking ahead, as well as their
current relative weight in BKCF’s product offering.

Figure 11. Product Risk/Return Trade-off

Source: BKCF

In terms of the product offering challenge, BKCF’s key strategic decision is whether to stay focused on the
current product lines, in order to reinforce its current market shares and strengthen its competitive
advantage, toor to rebalance it product mix. or thinking of launching other new products such as
mortgages or insurances.

For example, point-of-sale and auto loans are currently undersized in BKCF’s portfolio compared to credit
cards and personal loans. Therefore, BKCF may decide to rebalance its product mix by expanding its auto
loans and point of sale product lines. In this respect, BKCF’s strategy could be to expand these lines of
business on the open market or by leveraging on possible synergies with existing partners (i.e. Vodafone,
Linea Directa, BP, RCI Banque, Air Europa, Groupon, Viajes Halcón, etc.).

24
3.5 The Distribution Channel Challenge
Consumer finance products are being distributed to customers mainly through four different channels:
Online (Internet and Apps), by telephone, through brokers or aggregators, or in branches and point-of-
sale. Different channels have different costs. Online and telephone contacts are the cheapest forms of
contacting customers, then brokers and aggregators. Point-of-sale and branches are the most expensive.

The shape of both demand and supply are shifting across the industry creating new ways to serve
changing customer needs and expectations. In a recent study of the Spanish financial sector, KPMG
surveyed 20 top managers of major financial institutions in Spain. When asked about the major changes in
the demand for financial products and services, two-thirds of the respondents considered multichannel
distribution- or the ability to interact with the bank through various platforms- to be the major driver of
demand changes in the upcoming years (see Figure A6 in the appendix). The second and third major
drivers of demand changes in the future years include the provision of financial advice and the
personalization and quality of the customer service provided by the financial institutions 3.

Then, in response to the changing demand for financial products and services, financial institutions are
adopting new channels through which to capture new customers and meet their existing customers’
needs. In particular, Two thirds of the KPMG survey respondents agree that the main lever to capture new
customers is technology, followed by the quality of financial advise (see Figure A7 in the appendix).

The online channel is the best suited to match the changing customer needs, as it combines digitalization
and multichannel distribution. Indeed, the growing importance of the online channel to reach customers
is evident from the respondents’ estimates of the main platforms through which customers communicate
with their financial institutions. According to the survey results, the main platforms through which
customers engage with their finance providers is either through mobile applications or through the web.
The role of the physical branches has largely diminished over time with less than 40% of customers using
the office locations frequently, while call centers have become nearly obsolete (see Figure A8 in the
appendix).

Data form Deloitte reinforce the KPMG survey results about the importance of the online channel as a
means to reach customers. According to Deloitte’s market analysis, in 2016, 86% of bank customers
connected with their financial institutions using the web at least once a week (see Figure A9 in the
appendix). While 14% of customers visited their bank’s website less than once a month, 56% of customers
accessed their bank online more than 10 times a month.

Yet, while banks are increasingly distributing their products and services through the online channel, the
importance of this new means of doing business depends on the banks’ size (see Figure A10 in the
appendix). In 2014, all banks had close to 10% of their transactions carried out online, and the remaining
90% done through traditional channels. In 2016, all banks experienced an increase in the volume of online
transactions. However, the extent to which banks have adopted the online channel differs by bank size.
For instance, large banks more than doubled their use of the online distribution channel and in 2016, 25%
3
KPMG, Transformación del sector financiero en España (2016)
25
of all transactions were carried out online, compared to 10% in 2014. In comparison, small banks also
increased their use of the online channel but at a more modest pace- from 11.2% in 2014 to 17% in 2016.

Deloitte’s market analysis further breaks down the use of the different distribution channels by customer
age to capture differences in trends by age groups (see Figures A11 through A14 in the appendix). Their
findings indicate that 55% of customers under the age of 25 access their bank online daily, compared to
37.5% of customers under the age of 35 and 32.4% of customers under the age of 45. Only 10% of
customers who are 45 and older access their financial institution via the web on a daily basis.

BKFC’s key strategic options

Regarding the distribution channel challenge, BKCF’s key strategic decision is whether to preserve its
competitive advantage in multichannel distribution, or to rebalance its distribution strategy to capture
new customers and to keep up with the changing preferences of its customer base.

BKCF’s estimated cost of marketing to existing customers varies considerably by product and by
distribution channel (see Table 3). Of all distribution channels, the cost of outbound marketing is cheapest
for credit card products, and slightly more expensive for personal loans and auto loans.

Table 3. Distribution Costs to Existing Customers of Different Products

Credit Cards Personal Point of Sale
Loans & Auto Loans
Outbound Telemarketing (OBTM) €150/c €200/c €200/c
Online (Internet and Apps) €170/c €0/c €0/c
Branches/ Stands €180/c €0/c €1200/c
Source: BKCF

So far, BKCF’s customer preferences seem to be more geared towards telephone interactions as
compared to other channels. Indeed, using customer service as a proxy of inbound contacts, telephone is
the preferred option by BKCF customers to request assistance (see Figure A15 in the appendix). Only a few
use internet, apps or emails for this purpose. Thus, going forward, BKCF can choose to maintain the
existing distribution channels at their status quo, or it can invest in increasing the importance of the online
distribution channels, in expectation of possible changes in customer preferences in the future.
Yet, along with retaining existing customers, BKCF should be concerned with attracting new customers.
Future customers won’t adopt current products and will likely not acquire them through established
distribution models.

Indeed, consumer finance top-executives responding to the Roland Berger and Eurofinas survey expect
more use of online contact and e-commerce. In particular, if in 2014 close to 40% of survey participants
believed that new customers would come entirely from off-line channels, by 2016 only 11% of
respondents expected new customers to come entirely offline. In turn, the number of respondents who
indicated that new customers would be gained through an online channel, be it via the web or phone
applications, nearly doubled from 2014 to 2016 (see Figure A16 in the appendix).

26
The expected uptake in the use of the online distribution channel and mobile applications is also evident
in PwC’s 2016 Global FinTech Survey. The survey shows that the traditional financial industry players are
increasingly undertaking a mobile approach by designing their own products and services to enhance
customer engagement via the mobile channel. In particular, more than half (52%) of the survey
participants offer a mobile application to their customers, while another 18% are in the process of
developing one (see Figure A17 in the appendix).

Investment in the mobile distribution channel is consistent with the expected growth in customers using
mobile applications in the near future. The survey results show, in fact, that even if the majority of
respondents indicate that less than 40% of their customers currently use mobile applications, over the
next five years this proportion is bound to increase dramatically (see Figure A18 in the appendix). Indeed,
61% of the survey participants believe that by then more than 60% of their customers will be using mobile
applications at least once a month to access financial services.

This global trend to changing the landscape of the financial services industry also in Spain. In particular,
out of three categories for payment: online purchases, online person-to-person transfers, and payments
through mobile applications, online purchases are expected to experience the most rapid growth (see
Figure A19 in the appendix). Online purchases grew from €33.6 billion in 2014 to €38.2 billion in 2015 and
are projected to increase to as much as €68.3 billion by 2020. According to the forecasts, the person-to-
person online transfers and mobile payments are bound to experience a more modest increase in the
Spanish market. Nevertheless, it is possible that the increase in these types of payment channels,
especially the mobile applications channel, would provoke an unforeseen change in the structure of these
transactions, and the consumer finance market in general.

Signs of such a change are evident in the 2020 forecast for the use of FinTechs in Spain (see Figure A20 in
the appendix). As can be seen from the figure, in 2016 there were 15.8 million users of online banking and
30 million active online users who could potentially use FinTech services. By 2020, the number of online
banking users is projected to grow to 23.5 million and the FinTech users to 32 million.

From the actual users of FinTechs in Spain, 7.8 million are currently using FinTechs for person-to-person
transfers and 770,000 users are making payments with mobile applications (see Figure A21 in the
appendix). By 2020, the forecast has person-to-person transfers growing by close to 1 million users, to 8.7
million people. In addition, the number of customers who use mobile applications in Spain is projected to
grow more than threefold, to 3.23 million in 2020.

27
4. Conclusions and Strategic Recommendation
Alfonso and Gonzalo realize that BKCF cannot do everything, as businesses do not have unlimited
resources. They realize they are going to need to prioritize their options, choose the opportunities that
make the most sense given their situation and the changing environment. They are going to want to
leverage their strengths and reduce the threats. Although BKCF has had success since the business was
launched in 2001, they realize maintaining the same level of success over the next few years is not going
to be easy.

The Challenge

Your challenge is to prepare a strategic recommendation for BKCF. In particular, your need to prepare a
convincing report (.ppt) for Alfonso Saez in which you carefully explain the strategy you recommend,
prioritizing the challenges that BKCF is facing and weighing the pros and cons of the strategic options
available.
Imagine that you are a consultant and after analyzing BKCF you are going to make a recommendation to
the BKCF Board about its strategy for the next 5 years: What strategies do you recommend BKCF to follow
in the next few years to maintain its growth?

o Analyze the environment

o Build a CANVAS
o Define the strategic objectives and how you are going to achieve them

o Do you see any “blue ocean” in the future strategy of BKCF?

o
Your recommendation should answer the following questions:
What strategies do you recommend BKCF to follow in the next few years to maintain its
growth?
How to to organize (new organizational chart) BKCF Holding after the purchase of
PortugalIreland, since it is mixed in the current organizational chart (functional),
support, country and business lines.
Do you see any “blue ocean” in the future strategy of BKCF?
One of the slides should contain the CANVAS:

28
KEY PARTNERS KEY ACTIVITIES VALUE CUSTOMER MARKET
PROPOSITION RELATIONSHIPS SEGMENTS

KEY RESOURCES CHANNELS

COST STRUCTURE REVENUE STREAMS

29
References

ASNEF (2017) Datos Estadísticos Memoria 2016/2017 e informes trimestrales

Carbó Valverde and Rodríguez Fernández (2016) Digitalización y preferencias por los medios de pago en
España, Funcas

Deloitte (2016) Market Monitor

ECRI (2016) Statistical Package - Lending to Households and Non-Financial Corporations

Eurofinas (2016) Consumer Credit Bulletin, Summer

European Banking Authority (20186) Consumer Trends Report

European Central Bank (20186) Households Finance and Consumption Survey

KPMG (2016) Transformación del Sector Financiero en España

Oliver Wyman (2016) Risk Digital and Consumer Finance

Oliver Wyman (2017) State of Financial Services

PwC (2016) Global FinTech Report

Roland Berger and Eurofinas (2016) Survey on the Future of European Consumer Finance

Eurofinas Biannual Survey (2019)

30
Appendix

Figure A1. Top Threats Related to the Rise of FinTechs

This figure shows the four main threats related to the rise of FinTechs, based on the percentage of survey
respondents who consider them a major threat, in 2016.

Source: PwC

Figure A2. Top Opportunities Related to the Rise of FinTechs

This figure shows the four main opportunities related to the rise of FinTechs, based on the percentage of
survey respondents who consider them as an advantage, in 2016.

Source:PwC
31
Figure A3. Dealing with FinTechs
This figure shows the varying strategies consumer finance companies undertake to deal with FinTechs,
along with the corresponding percentage of survey respondents who undertake each action, in 2016.

Source: PwC

Figure A4. Challenges of the Interaction between FinTechs and Incumbents

This figure displays the percent of survey respondents who identify each given option as a challenge: for
incumbent firms when integrating FinTechs into their business (gray) and for FinTechs when integrating
into traditional firms (purple), in 2016.

32
Source: PwC

Figure A5. New Consumer cCredit granted in the EU: Breakdown by Loan Type
This figure displays the percentage of new consumer loans in the European Union by type of product
offered, in 20152019.

33
Source: Eurofinas

Figure A6. Main Projected Changes in Consumer Demand in the Near Future
This figure present survey respondents’ forecasts about the main expected changes in consumer demand
in the near future, as of 2016.

34
Source: KPMG

Figure A7. Main Projected Channels to Capture New Customers

This figure present survey respondents’ forecasts as to the main expected channels to capture new
customers in the near future, as of 2016

Source: KPMG

Figure A8. Customers’ Projected Preferred Channels of Contact with the Bank
This figure presents the forecasted percentage of survey respondents’ customers who would use each of
the 4 channels to contact the bank (mobile app, web, branch, or phone) in the future, as of 2016.
35
Source: KPMG

Figure A9. Monthly Frequency of Online Channel Use and Average Age of Weekly Online Channel Users
This figure provides information on the use of the online channel in the consumer finance market in 2016.
The left-hand panel shows the percentage of survey respondents’ customers who use the online channel
anywhere from never to more than 10 times a month. The right-hand panel shows the age and relative
percentage of respondent’s customers who use the online channel on a weekly basis.

Source: Deloitte

Figure A10. Comparison of Volume of Transactions by Channel Type

36
This figure compares the percentage transactions carried out online versus traditional channels between
2014 and 2016, split by bank size.

Source: Deloitte

Figure A11. Daily Frequency of Online Channel Use

This figure shows the percentage of survey respondents’ customers who use the online channel of
contacting their bank on a daily basis, split by age group, as of 2016.

Source: Deloitte

37
Figure A12. Frequency of Physical Branch Use
This figure shows the frequency (daily, weekly or monthly) and the percentage of survey respondents’
customers who visit the physical branch to contact their bank, split by age group, as of 2016.

Source: Deloitte

Figure A13. Frequency of Online Banking Use

This figure shows the frequency (daily, weekly or monthly) and the percentage of survey respondents’
customers who use online banking to contact their bank, split by age group, as of 2016.

Source: Deloitte

38
Figure A14. Frequency of ATM Use
This figure shows the frequency (daily, weekly or monthly) and the percentage of survey respondents’
customers who use the bank’s ATM, split by age group, as of 2016.

Source: Deloitte

Figure A15. Customer Service Channels

This figure depicts the different distribution channels through which BKCF reaches its customers.

Source: BKCF

39
Figure A16. Online Versus Offline Customer First Contact
This figure presents survey respondents’ expectations about the role of online contact to sign a consumer
loan contract, in 2014 and in 2016. Each color shows the possible predictions: more than 30% of 1 st
contact achieved online (gray), up to 30% of first contact online (purple), and 100% offline from 1 st contact
to contract (green). The percentages in each rectangle denote the percent of respondents who forecast
each option.

Source: Roland Berger and Eurofinas

Figure A17. Mobile Apps

This figure shows the percentage of survey respondents who offer their customers with a mobile
application.

40
Source: PwC

Figure A18. Current and Target Usage of Mobile Application

This figure shows survey respondents’ use of mobile application. On the left-hand side, participating
companies indicate the percentage of their customers who are currently using the firm’s mobile app at
least once a month, as of 2016. On the right-hand side, respondents indicate the target percentage of
customers they would like to use the mobile app within the next 5 years.

Source: PwC

Figure A19. Value of Fintech Payment Transactions by Distribution Channel in Spain (2014 – 2020)
This figure presents the actual and estimated values (in millions of euros) of Fintech payment transactions
by distribution channel in Spain, between 2014 and 2020.

Source: Carbó Valverde and Rodríguez Fernández (2016)

41
Figure A20. Potential Use of Fintech Services by Distribution Channel in Spain (2014 – 2020)
This figure presents the actual and estimated use (in millions of users) of Fintech services by type of user
in Spain, between 2014 and 2020.

Source: Carbó Valverde and Rodríguez Fernández (2016)

Figure A21. Users of Fintech Services by Distribution Channel in Spain (2014 – 2020)

Source: Carbó Valverde and Rodríguez Fernández

42
43
Table A1. This table provides data on the consumer credit markets of Europe (€billions, as August 2018)

Consumer credit Market historical Market historical

Country ∆ vs MAX ∆ vs MIN ∆ 3 years ∆ YoY
market MAX MIN

EUROZONE 677,9 677,9 442,0 0,00% -34,8% 16,6% 5,4%

UNITED KINGDOM 240,5 240,5 0,0 0,00% -100,0% 21,1% 5,6%
GERMANY 194,3 202,2 165,5 4,05% -14,8% 10,3% 1,9%
FRANCE 168,9 169,3 121,0 0,21% -28,4% 13,1% 7,7%
ITALY 100,2 100,2 29,7 0,07% -70,4% 42,8% 8,0%
SPAIN 85,7 106,5 52,0 24,27% -39,3% 45,3% 13,4%
POLAND 34,6 34,6 0,0 0,00% -100,0% 20,0% 2,8%
GREECE 20,8 36,3 9,9 74,12% -52,6% -18,7% -12,4%
AUSTRIA 18,7 30,1 18,6 60,73% -0,6% -8,8% -2,6%
DENMARK 17,2 19,5 0,0 13,33% -100,0% -5,2% 1,4%
NETHERLANDS 16,9 29,2 16,8 73,05% -0,8% -20,4% -4,4%
FINLAND 15,8 15,8 6,5 0,00% -58,7% 12,6% 4,6%
PORTUGAL 14,9 15,8 7,9 6,51% -47,2% 30,5% 10,9%
IRELAND 13,3 29,2 10,3 120,41% -22,6% 14,8% 2,2%
ROMANIA 12,3 16,3 0,0 32,21% -100,0% 7,8% 6,4%
BELGIUM 11,0 11,0 7,8 0,04% -28,8% 32,4% 22,5%
CZECH REP. 9,1 9,1 0,7 0,00% -92,6% 16,5% 6,1%
CROATIA 6,8 6,8 0,0 0,00% -100,0% 14,9% 9,3%
HUNGARY 6,8 11,0 0,0 63,00% -100,0% -15,1% -1,4%
SLOVAKIA 6,6 6,6 1,0 0,00% -85,2% 44,1% 12,6%
BULGARIA 4,6 4,6 0,0 0,00% -100,0% 20,9% 15,4%
LUXEMBOURG 3,5 3,5 1,2 0,00% -66,7% 39,4% 16,8%
SLOVENIA 2,6 2,9 1,5 12,57% -42,8% 26,3% 11,4%
CIPRUS 2,3 4,8 2,3 106,94% 0,0% -18,6% -8,6%
ESTONIA 0,8 0,9 0,6 6,61% -28,1% 28,5% 6,9%
LITHUANIA 0,7 1,3 0,2 90,51% -76,9% 2,5% -4,2%
LATVIA 0,5 0,9 0,4 81,45% -14,6% 12,5% 0,2%
MALTA 0,4 0,4 0,2 13,20% -48,0% -9,8% 5,9%
Source: ECB
Table A2. This table provides data on the financial conditions of European households, collected by the European Central Bank in a survey of more
than 80,000 households in 20 EU member states.
Debt Burden Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(median, indebted households) area
Debt to asset ratio (%) 25.7 18.7 30 15.3 38.5 17.4 22.6 20.4 18.4 22.9 28.2 22.2 20.2 9.1 49 20.1 6.8 37.8 8.6 12.6 35.3
Debt to income ratio (%) 71.8 79.8 38.1 38.3 102.1 53.3 141.8 68 69.6 251 42.8 114.1 60.3 55.3 177.1 32.7 15.2 198.5 24.9 42 76.7
Debt service to income ratio (%) 11 11.3 5.9 7.9 12.9 8.9 18.6 16.6 9.3 30.4 9.1 14.8 12 9.8 11.3 2.1 8.8 15.1 9.1 9 10.8
Consumption and Saving Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(% of households) area
Ability to get financial assistance
52.3 65.5 58.5 22.6 36.4 40.5 54.5 39.3 22.7 69.4 40.8 60.3 60 52.3 45.7 70.4 39.4 29.6 55.8
from friends and family
Credit Constraints Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(% of households) area
Applied for credit in the last 3
18.6 16.8 23.7 18.8 28.1 2.5 18.4 26.7 8 17.8 16.2 32.6 10.6 16.1 9.2 5.6 12 14.4 13.9 18.4 29
years
Refused or reduced credit 13.3 10.1 10 10.2 16.6 72 22.4 11.2 19.9 24.3 15.7 30.8 7.7 24.1 18.7 15.9 13.3 30.9 28.2 5.9
Not applying for credit due to
6.4 2.7 5.2 5.5 12.4 4.2 9.2 8.8 7.5 8.1 6.2 5.5 2.3 3.3 2.9 6 5.7 8.5 6.8 5.3
perceived credit constraint
Credit constrained (all
8 3.9 6.5 6.8 14.7 5 11.5 10.3 9.9 9.1 9.9 7.6 3.4 4.5 3.5 6.9 7.1 11.7 10 6.3
households)
Credit constrained (middle net
6.6 1.9 6.1 4.4 11.3 3.9 10.4 7.9 6.8 7.6 7.6 8 0.3 3.1 2.1 6.3 3.6 14.3 9.2 3.8
wealth quintile)
Debt Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(% of households) area
Has non-mortgage debt (all
28.2 25.2 32.8 25.1 41.4 17.1 27.4 33.6 13.9 37 23 33.9 25.5 27.6 37.9 20.6 28.4 22.6 34.8 25.3 43.9
households)
Has non-mortgage debt (middle
26 26.3 33.4 18.8 41.2 14 25.3 33 13.9 32.4 19.5 31.7 23.7 27.6 32.9 14.5 27.6 20.6 34 23.8 44
net wealth quintile)
Debt Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(conditional medians, € th.) area
Outstanding balance of non-
5 6.7 3.5 0.7 3.9 3 6 5.7 5 10 1 10.1 1.6 3 15.1 2.9 1 3.1 2.5 1.6 8.2
mortgage debt (all households)
Outstanding balance of non-
mortgage debt (middle net 5.2 7 3 0.5 3.6 3.7 4.5 5.7 5 3.1 0.6 9.8 1.6 1.8 15.4 2.8 1.1 2.5 2.9 1.5 8.1
wealth quintile)
Structure of Debt Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(% of total liabilities) area
Non-mortgage debt 14.3 8.9 12.1 5.3 5.8 20.6 10.7 17.5 18 14.7 17.9 8.9 21.9 17.3 17.6 13.3 11.3 6.9 34.1 17.6 23.9
Credit card debt 1.3 0.7 1.8 1.1 1.1 7.1 0.9 0.5 1.1 2 1.5 0.4 2.6 4.1 1.9 1.8 1.7 0.7 4.4 2 1
Personal loans 13 8.3 10.3 4.2 4.8 13.6 9.7 17 16.9 12.7 16.4 8.6 19.3 13.2 15.6 11.4 9.6 6.2 29.6 15.7 22
Payments for debt per month Euro
BE DE EE IE GR ES FR IT CY LV LU HU MT NL AT PL PT SI SK FI
(conditional medians, €) area
Non-mortgage debt (flow) 216.3 280 150 68.2 219 200 233.6 280 200 400 56 448 81.5 229.2 229.9 121 88.1 172.8 185.2 100 207

Source: ECB

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Table A3. APR limitations in the region

Source: BKCF

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