The Future of Retail Banking

Retail banking is the delivery of services to individuals instead of businesses. Services provided include savings & transactional accounts, mortgages, personal loans, debit cards, and credit cards.

Traditional banks are facing stiff competition from new competitors who are providing a positive customer experience by way of new products and channels.

However, experts believe, traditional banks have a role to play, a historical notion of a trustworthy organization as a source of fund and as a medium for transactions would stay.

The environment in which the banks would function will change in terms of customer expectations, stringent regulations, technology, and competition among others.

Banks must decide on the strategy to be implemented to manage the change – be a leader or a follower. However, banks cannot maintain the same business model.

The market leaders by 2020 would be those who are innovative and restructure their operations in line with the future requirements. In the future, banks must be quick and transparent, probe various options in a challenging scenario.

Many banks have launched new products, delivery mediums, and analytics to stay competitive. Banks have traditionally been slow to change while the transformation process is about executing and amalgamating the existing technology and information.

The speed of change is increasing at a fast pace and banks that cannot cope up will be out of business.

The Transformation Process

Robust forces are changing the retail banking sector. Growth is slow, costs are high, and Return on Equity (ROEs) is low. Strict regulations are affecting business operations and economics.

Technology is providing the sector an opportunity to facilitate a positive customer experience and enhance the efficiency of the business operations.

Financial startups with a customer-focused approach are competing with the traditional banks. Customers are seeking greater service. The brand value of banks has depleted.

Under these circumstances, according to a survey, “70% of international banking professionals are of the view that it is vital to have an opinion of the banking sector in 2020. Just over half (54%) believe that large banks will be the winners in 2020. The other half (46%) see smaller banks capturing a share through increasing differentiation”.

Current Challenges

Banking experts believe clinching new accounts is a critical challenge. Banks are constantly looking for growth, and establishing a relationship with a new client is the first indicator of an excellent retail banker.

In fact, banks emphasize niche customer results. Therefore, improving customer service is the most important investment preference for banks across the globe.

The requirement to comply with modifying regulations is the most important challenge for banks in the US and Europe. Banks are finding it difficult to integrate regulatory compliance with the business operations.

In emerging economies, recruiting top-notch talent, while retaining existing accounts against the backdrop of stiff competition is also proving to be a challenge. R&D, innovation, and new product development are the most important preferences in the emerging markets.

The factors that would influence outcomes for banks in 2020 are:

• Establish a customer-oriented business model.


• Maximize distribution.


• Streamline business operations.


• Collect accurate information.


• Facilitate innovation.


• Effectively manage risk, regulations and capital.

Banks across the globe have not been able to meet these requirements due to financial, human resources, technology, and organizational reasons. Banks must overcome these bottlenecks to stay ahead of the competition.

Impact of Macro Trends

The macro trends with the greatest impact are as follows:

• The growth of state-controlled capitalism – regulation revamping the sector and guiding the business models.


• Technology would transform the business landscape – improved service and decreased cost.


• Demographics – evolving needs and opportunities for growth.


• An increase in customer expectations and the requirement to enhance the brand equity.

The Future Trends

The future trends governing the banking sector would be as follows:

• The banking landscape would move from being global to regional. National and regional organizations would play a critical role.


• Governments would monitor through regulations.


• Restriction of entry into local markets.


• Regulated banking assets would be lesser than at present.


• The growth of the banking industry would be more in correlation to the GDP.


• Institutions that would be lending would follow stringent governing procedures.


• Distinct banks would be a direct bank. Branch operations would witness a radical change.


• Competitive outcomes would not be based on branch networks, but based on licenses, technology, and promotional budgets.


• The significance of the smart device would become more prominent.


• Biometrics would play a key role in the transaction authorization.


• Knowledge sharing of best practices would happen through new players in the market, third-party relationships instead of global banking organizations.


• Banks would be customer focused and not on products/channels.


• Brand equity would be enhanced.


• Cyber security would be paramount.

Banks must be in a position to anticipate the future challenges and revamp their strategy to out beat the competition.

Banks must take tough decisions regarding the customers to be offered a service. They would have to reconstruct their organizations with emphasis on customer retention and cost reduction.

Banks would have to be swift, innovative and flexible in order to implement efficiently. They must have the ability to collect, consolidate and study various sources of data.

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Source by Ralph waldo

The Future of Retail Banking