Global Bank Business Model Classification (1990-2021)

Abstract

This study focuses on the classification of bank business model (BBM). Employing the K-Means clustering method, we systematically classify banks into four BBMs, namely Universal, Trading, Retail, and Wholesale BBMs, for a global sample of 17,855 banks from 209 countries or regions over the period 1990 to 2021. We find that the Retail BBM dominates the global banking system, particularly prominent in North America, while the Universal BBM is more prevalent in Middle East & Africa and South America. Europe, in contrast, exhibits a diverse banking landscape with a more balanced distribution across four BBMs. BBMs serve as a crucial mechanism for banks' value creation through activities that enhance risk management capabilities and improve performance. This study contributes to the broader business model literature from the perspective of banking sector at the industry level in a global setting, and more specifically, contributes to the BBM literature by providing consistent BBM classification and laying the foundation for future research related to BBMs.

Keywords: Business Model, Banking, Bank Performance, Bank Risk-taking