Retail Banking – an Evolving Landscape

Ewen Fleming, Partner, Financial Services Advisory (Banking), Grant Thornton UK LLP

The environment within which retail banks now operate has changed significantly since the 2008 global financial crisis. Nevertheless, the transformation is far from complete as banks face a wide range of evolving challenges. Innovation and digital strategy must remain at the forefront of retail banks’ change agendas if they are to differentiate themselves and remain competitive.

Compared to other industries, the banking sector has been slow to marry evolving technologies to practically applicable innovation. Notwithstanding this, retail banks readily accept that technological progression equals improved operations, cost efficiencies and a route to competitive advantage. However a misconception within the industry persists – that innovation means technically-driven development. Banks need to focus on their customers by providing new digital services when demanded and also keep more traditional routes open where this is beneficial to both the customer and the bank.

Customer interaction

Ewen Fleming

Over the last decade, digital banking technologies have changed client interaction dramatically. People value the convenience of internet banking for simple transactions. However, certain services such as loan applications or mortgages require more significant interaction. Therefore the importance of branch evolution alongside digital innovation is a key path which retail banks must follow. Customers want and value choice, so banks should ensure communication channels align to customer preferences and expectation.

For example, no other financial product provides banks with the same level of customer interaction as current accounts and banks should not neglect the importance of the branch-based evolution as current accounts represent the most natural platform for cross-product sales growth.

Digital innovation

Advancements in technology and changing consumer behaviours, particularly with smartphone and tablet adoption across all age groups, present banks with the greatest opportunity to adapt their models to stand out from their competitors.

But while internet banking has been an undisputed success, the concept has so far been as a separate channel as opposed to an integrated and adaptable part of a customer’s chosen  journey.

Customers favour internet banking for simple transactions. However, encouraging customers to adjust entrenched habits requires both trust and innovatory incentives.

Consistency across platforms

While internet banking has firmly established itself as a medium of choice, mobile-based payments and application-based current account maintenance are yet to make a significant impression. However, the smartphone revolution is likely to change the face of banking significantly. As innovative solutions evolve, customers’ banking habits will change and historically ‘face to face’ transactions will increasingly move into the digital realm – purchasing goods, transferring funds, automating regular payments, etc.

As a result, accessibility  and a seamless, consistent user experience between devices and platforms will emerge as a key feature of future digital strategies and progressive organisations will continue to invest in mobile banking solutions, but must align them to existing digital platforms.

To survive and thrive in this new environment,  retail banks must retain a focus on ‘what matters most’. So despite the trend towards web-based banking services, banks should continue to invest in human interactions – giving the customers what they want in the manner in which they want it provided. Putting customers first and providing great service must be the drivers of innovation.

Ultimately, most customer journeys will start and end on the web. However, different customer groups will need assistance on that journey based on their – not the banks’-  perception of complexity or value. The challenge will be for the banks to build deeper knowledge of their customers and increasing the sophistication of segmentation to test and learn from their audience, as opposed a ‘big bang’ roll-out of changes which consumers might place little value, and confidence, in.