2019 and Beyond – Thoughts on Retail Banking Trends

4 January 2019

Basingstoke, UK

Paul Race

Glory

2019_and_beyond_header_C04_02_1860x896_desktop

Like any company providing services to the financial sector we take an active interest in research reports that forecast the way the industry is likely to evolve. The speed of change in the industry, in an environment that encourages both competition and cooperation between the banks and non-traditional financial service providers, means that all such forecasts involve an element of uncertainty.  

This blurring of boundaries has caused banks to re-assess the way they interact with technology companies and fintechs and the way they deliver services across multiple channels, including the physical branch.  The way in which the branch is being reinvented as part of an integrated approach to service provision is of particular interest to Glory.

We live in a digital world and this provides traditional service providers with challenges and opportunities. Rather than simply regarding large technology companies and fintechs as low-cost competitors seeking to expand into what was previously their domain, innovative financial institutions recognise they can learn and adapt the way they service a tech-savvy customer base. 

Drivers for change include open banking and APIs.  Openness of information may provide the threat of disintermediation, but it also enables cooperation and collaborative behaviour.  Data and its distribution are key to a rapidly changing environment.  As banks move away from costly siloed systems, use of the cloud delivers lower costs and more efficient data distribution.

How great is the potential for cooperation?  According to IDC, by 2021, 75 percent of Global 200 banks will have established open banking APIs with their key business partners, but revenue earned from third parties will be less than 10 percent of total annual revenues.

Other factors influencing an evolving business model will be the need to reduce costs, increased automation opportunities (particularly within the branch) and the need for more personalised services focused on individual customer needs.  Data is key to delivering the services customers require at the right time.

Artificial Intelligence, too, is central to enhancing service delivery. Cap Gemini has estimated that AI adoption can result in a 20 percent saving in operating expenses by 2030.

Meanwhile, as banks respond to changing customer expectations in a mobile environment, is voice the next channel?  The adoption of voice assistants could open the way for increased customer engagement but could also have implications for the number of branch visits.

Whilst acknowledging the development of digital only banks and the associated low cost of deposit funding, for many the physical branch remains a core element of customer service delivery in an omni channel environment.  The challenge is to provide the right type of branch in the right location.  A recent Deloitte report notes the continuing importance of the branch 'in attracting and retaining customers'.  It concludes that 'branches will continue to deliver value, especially with greater digital enablement'.

Payments provided the 'way in' to banking for large technology companies like Amazon and Google, who are now able to deliver a wider range of services.  Innovation in the area of payments will continue, with analysts believing such trends will occur in conjunction with 'the Internet of things, POS, mobile wallets, crypto currencies and blockchain'.

So where next for retail banking?  Some analysts believe it will become an 'invisible' service though it remains to be seen what the implications of this will be for the bank brand.

One thing for certain is that in a customer-centric environment banks will need to respond quickly to change.  The competitive battle for marketshare will be fought on the battleground of differentiated customer experience rather than product offering. Ensuring appropriate levels of investment in technology that delivers a personalised service and the achievement of the right balance between automation and staff intervention will be key to success.

Contact Us

Never miss the latest blog

Subscribe