The Future of Banking will be Personalized and Open

By Elias Ghanem, Global Head of Capgemini Research Institute for Financial Services, Capgemini

In the year 2024, persistent challenges notwithstanding, there is an optimistic outlook for a continued decline in inflation. Should this trend be effectively managed, it is anticipated that the banking industry may witness a transition to lower interest rates, paving the way for a potentially smoother trajectory. However, until such positive developments materialize, financial institutions find themselves compelled to showcase resilience and concentrate on both retaining and growing deposits within an intensely competitive environment. The lending landscape remains intricate, marked by elevated borrowing costs, and expected decreases in credit quality and collateral values. The paramount importance of fortifying operational resilience is underscored, ensuring that customers experience secure and uninterrupted services, thereby bolstering their confidence and loyalty.

When we account for the forthcoming operational challenges, banks need to recognize the importance of identifying and investing in the acquisition, service, and retention of their most lucrative customer base. In my opinion, we will see retail banks center their attention towards personalized offerings for the affluent user segment. With nearly USD 27 trillion in wealth, and recognizing the vast potential within this demographic, the affluent segment comprises of individuals with investable assets between USD 250,000 to USD 1 million.

To attract affluent customers, retail banks are providing exclusive benefits and personalized experiences. For instance, Standard Chartered Bank launched the Wealth $aver account in Singapore[1] offering higher interest rates based on total assets under management. Similarly, Citi introduced relationship tiers with increased benefits[2], and Société Générale launched SG, the Group’s new French retail bank with focus on affluents[3]. J.P. Morgan upgraded First Republic Bank branches to appeal to high-wealth customers[4], Standard Chartered plans additional outlets for the affluent in Hong Kong[5], and Wells Fargo launched LifeSync[6], a digital platform for prosperous clients.

This trend indicates a convergence in deposit banking, lending solutions, and wealth management to meet the diverse needs of affluent customers. The move toward early engagement and tailored premium services recognizes the potential for these customers to amass greater wealth over time. Through better rates, waived fees, personalized services, and value-added offerings like financial planning, retail banks aim to build a lasting relationship with their affluent customers. The integration of banking and wealth management services creates opportunities for banks to cross-sell across the customer lifecycle, allowing them to capitalize on synergies as affluent customers expand their wealth. As banks focus on securing long-term loyalty, the affluent segment becomes a crucial driver for future financial growth.

Delivering services to customers, particularly the affluent class, necessitates a robust data and digital infrastructure to explore new avenues for creating and communicating value to clients. The global rise of open banking is transforming data from a proprietary asset to a shared, open resource, driven by regulatory initiatives and increased consumer awareness. In the European Union, robust frameworks and policies paved the way for open banking, with global adoption following suit in regions like Saudi Arabia, Australia, Brazil, and the United States, which is now introducing regulations to fuel broader adoption.

Examples include Mastercard’s European open banking capabilities[7], ING’s collaboration with Salt Edge[8] for open banking use cases, and Experian’s partnership with Zopa Bank[9] to enhance credit card decisions. BNY Mellon’s Bankify, developed with Trustly[10], allows firms to receive customer payments from bank accounts.

The impact of open banking is two-fold: customers gain control over data, access a wider range of services, and benefit from increased competition; alternatively, banks unlock transformative opportunities and may forge innovative partnerships to develop distinct branded products. As open banking evolves, more regulatory frameworks are expected. Recently, the European Union’s Financial Data Access framework enables retail banks to become lifestyle partners deeply embedded in non-financial customer journeys. The journey towards open data continues, promising increased collaboration, competition, and enhanced customer experiences in the financial services sector.

These trends underscore a broader industry shift from traditional banking models to more customer-centric, adaptive strategies. As the financial landscape undergoes significant transformations, leveraging the groundwork laid by the open banking initiative becomes pivotal for banks. With open finance looming on the horizon, institutions need to build upon the principles and frameworks established in open banking. This transition underscores the necessity for banks to not only adapt to current innovations but also proactively position themselves to embrace the broader spectrum of opportunities that open finance offers.

In conclusion, the fusion of catering to affluent customers and adopting open banking heralds a dynamic and inventive future for the banking industry. Through a proactive approach to comprehend and address customer needs throughout various life stages via personalized services and harnessing the potential of open data, banks are well-positioned to navigate the intricacies of the ever-changing financial terrain. This strategic alignment ensures not only sustained growth but also resilience in the face of continual challenges the financial ecosystem might face going forward.

[1] Hubbis, “Standard Chartered Singapore launches first-of-its-kind affluent deposit account;” September 30, 2022.

[2] Finextra, “Citi introduces ‘relationship tiers’ for retail customers;” August 24, 2023.

[3] Societe Generale, “Societe generale group announces the creation of its new French retail banking: SG;” January 2, 2023.

[4] Investment News, “New Citigroup unit to sell products through independent advisers to wealthy investors;” March 2, 2022.

[5] South China Morning Post, “Standard Chartered to open 3 centres for wealthy customers in Hong Kong, tapping growing opportunities from Greater Bay Area, Southeast Asia;” August 1, 2023.

[6] Wells Fargo, “Wells Fargo Introduces LifeSync^®, A Digital Platform to Help Clients More Easily Plan and Track Their Money;” February 22, 2023.

[7] PYMNTS, “Mastercard Expands Open Banking Capabilities With Algoan Partnership;” June 6, 2023.

[8] Salt Edge, “ING and Salt Edge join forces for widening open banking use cases;” March 29, 2023.

[9] The Paypers, “Experian announces partnership with Zopa Bank;” February 7, 2023.

[10] BNY Mellon, “BNY Mellon Launches Bankify;” September 7, 2023.