Bank Business Models: A Cluster Analysis Approach

This study demonstrates the efficacy of cluster analysis in identifying bank business models by utilizing variables that serve as proxies for value creation processes within banks. By bridging the gap between the general discourse on business models and the specific considerations of bank business models, this research innovatively links the value proposition to systematically derived proxies for value creation. Applying this methodology to a sample of 63 major banks from Europe and the U.S., our analysis successfully categorizes four out of five banks into accurate business model classifications. Specifically, the approach exhibits a remarkable accuracy rate, correctly identifying all investment banks, 89% of universal banks, and 44% of retail banks. The capability to accurately discern bank business models is crucial for the preliminary steps of implementing model-specific regulatory requirements and evaluating the sustainability of business models. Moreover, this quantitative, objective method offers a more efficient alternative for regulators compared to the traditional, labor-intensive process of gathering qualitative business model data from annual reports.