Banking
Top 5 Banking Trends for 2017
Published by Gbaf News
Posted on January 14, 2017
15 min readLast updated: January 21, 2026
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Global Banking & Finance Review®
Company
Published by Gbaf News
Posted on January 14, 2017
15 min readLast updated: January 21, 2026
Add as preferred source on GoogleRupert Naylor – Senior Vice President, Europe – Applied Predictive Technologies (APT)
Rupert Naylor
2017 will mark a clear shift towards customer-centric banking. Banks are focused on improving existing customer relationships, breathing new life into branches, and pushing omnichannel strategies to the next level. Innovation and differentiation will be crucial for financial services organisations in the coming year, as evidenced by the top 5 trends in the industry:
User-friendly digital channels are now table stakes for banks, especially as millennials comprise a larger share of the overall banking market than ever. In 2017, leading banks will look to move to the next level: creating seamless experiences across all channels, for all customer segments, so that the appropriate levels and types of service can always be provided.
For example, banks need to understand the customer journey for each type of transaction and how it varies by customer segment. Are tech-savvy millennials still more likely to take out a loan if they can speak to a branch manager in person? Will more tenured customers stay with the bank even when they are steered away from a teller’s window and towards a digital kiosk? How will cross-sell be affected by shifting product offers to the mobile app as the primary communication channel? Answering these questions will be critical to shaping a seamless omnichannel strategy for banks.
Executives also need to understand how channel migration drives key metrics, including customer acquisition, retention, and overall relationship value. For instance, migrating customers to mobile banking could reduce costs from in-branch visits, but hurt the profitability of certain customer segments that value in-person interaction. Banks need to quickly identify these customers and understand which outreach tactics work best to limit possible attrition. The seemingly infinite combinations of product offerings, channels, frequencies, and outreach tactics provide an important opportunity for banks to test out different strategies so that they can hone in on the optimal communication strategy for each customer. Banks that can do this effectively will be the biggest winners in 2017 and beyond.
Most major banks in the UK are aggressively reducing their branch networks. RBS, for example, has closed 380 branches in the last two years, and Lloyds made waves by announcing plans to close 200 more locations by the end of 2017. Branches used to be ubiquitous by necessity, but with the shift to alternate channels, branch coverage needs are evolving.
Network consolidation has been a common industry theme for years now. Banks have already picked off the low-hanging fruit and closed their worst performers. Now, they must close branches with unprecedented precision. A recent survey showed that 52% of UK customers still use the branch once a month, a higher figure than was reported five years ago. With each closure, banks risk losing valuable customer relationships.
There are two key steps to take when closing branches. First, executives must choose branches that will have the highest percentage of transactions and new sales transferred to the surrounding network or digital channels. From our experience working with retail banks, we have found that sales transfers from closed branches typically range from 35% to 75%. Banks often focus primarily on attrition, but the level of new sales transfer is actually the biggest driver of success that executives need to understand before closing any branch.
Secondly, the bank must identify customer segments that are at the highest risk of attrition in the event of their branch closing. We have seen that 10 to 20 percent of customers are typically responsible for 80 to 90 percent of post-closure losses. We find that banks are not always aggressive enough in targeting customers with outreach when their branch closes, and focusing on this smaller set of high risk customers can make additional outreach more feasible and more effective.
Leading banks are quickly carving out a new role for the branch as a center for advice and relationship management. Many organisations are realising massive cost savings from closures and reinvesting this capital into the rest of the network to support this new direction. For example, TSB recently closed 25 branches and is pouring £250M into branch upgrades. These investments range from self-serve tablets and video conferencing capabilities to entire layout redesigns designed to facilitate high-value conversations.
Before making these significant investments, executives need to determine which new elements will strengthen relationships and facilitate incremental sales, and which are merely flashy. While self-service technology can free up staffing resources, banks must recognise that most customers expect a personalised experience when they enter the branch. It might not be cost-effective to replace tellers with self-serve kiosks at all branches; instead, there may be higher ROI from training existing staff to focus on cross-sell and investing in technology that facilitates those conversations. By testing different branch investments in a subset of the network, banks can make confident go-forward decisions on a branch-by-branch basis.
The marketplace for traditional banking products is increasingly crowded, and growing market share is more challenging than ever. In 2017, banks will focus on winning and expanding their client relationships through increasingly unique incentives and services.
Financial services organisations can pull numerous levers to increase the size, depth, and retention of customer relationships, including staff training, monetary incentives, and premium services. As customers have become more accustomed to standard cash offers, banks are also becoming more creative in how they attract and retain customers. For example, First Direct provides premium customers with a UK-based call center available 24/7, and they even offer £100 to customers that leave the bank to demonstrate confidence in their services. Other organisations are similarly trying to attract and retain customers by increasing account owner freedom and choice. Virgin Money, for instance, allows savings account holders to choose between monthly or annual interest depending on their expected withdrawal schedule, while Nationwide Building Society provides savings customers with access to a 25% Government Bonus when purchasing their first home. Each of these strategies require significant investment – it is crucial for banks to test different variations of these strategies on a small scale to understand which investments truly drive incremental increases in relationship size and retention.
Wealth management groups have traditionally focused on relationships and personal attention, and therefore have not always been on the cutting edge of new technology. However, the emergence of new Fintech disruptors and increasing reliance on mobile channels is driving industry-wide innovation. For example, MoneyFarm recently launched the UK’s first wealth management app. The easily accessible investment platform is entirely fee and commission free for the first £10,000 invested, opening up wealth management services to a broader audience than ever before. The key for established players is to find the right balance of maintaining their competitive advantage with strong personal relationships while still realising the benefits provided by automated digital tools.
UBS recently launched SmartWealth, a “robo-advisor” platform that provides automated advice to investors based on goals, means, and risk tolerance. This product lowers the UBS wealth management threshold from a minimum of £2 million to just £15,000. While these types of offerings may not be large revenue generators immediately, they can establish early relationships with younger customers that can grow into higher value relationships over time.
Private banking groups are following the lead of retail banks and increasingly relying on targeted omnichannel communication. Growing adoption of mobile and online channels by premiere clients is enabling advanced wealth management groups to send the right messages to the right individuals at the right times. Emirates NBD, for example, is investing USD136 million in a new private banking digitisation initiative meant to drive mobile engagement and strengthen customer relationships. At the same time, executives must consider the risk of ‘communication fatigue,’ the tipping point in which too much outreach causes customers to tune out. By testing different types and frequencies of communication, sophisticated organisations can hone in on optimal touchpoints for each client.
Author Bio
Rupert Naylor – Senior Vice President, Europe
Applied Predictive Technologies (APT) – A Mastercard Company
Rupert Naylor, Senior Vice President, is in charge of the European operations of APT.
Prior to joining APT, Mr. Naylor spent many years at Bain & Company, working in London, Mumbai, Paris and San Francisco. In his early career, he spent several years in Japan working in banking for Merrill Lynch and in telecoms. Mr. Naylor started his career in the UK Government, including a posting at the Embassy in Tokyo.
Mr. Naylor was educated at Oxford and is a Sloan Fellow from London Business School.
Rupert Naylor – Senior Vice President, Europe – Applied Predictive Technologies (APT)
Rupert Naylor
2017 will mark a clear shift towards customer-centric banking. Banks are focused on improving existing customer relationships, breathing new life into branches, and pushing omnichannel strategies to the next level. Innovation and differentiation will be crucial for financial services organisations in the coming year, as evidenced by the top 5 trends in the industry:
User-friendly digital channels are now table stakes for banks, especially as millennials comprise a larger share of the overall banking market than ever. In 2017, leading banks will look to move to the next level: creating seamless experiences across all channels, for all customer segments, so that the appropriate levels and types of service can always be provided.
For example, banks need to understand the customer journey for each type of transaction and how it varies by customer segment. Are tech-savvy millennials still more likely to take out a loan if they can speak to a branch manager in person? Will more tenured customers stay with the bank even when they are steered away from a teller’s window and towards a digital kiosk? How will cross-sell be affected by shifting product offers to the mobile app as the primary communication channel? Answering these questions will be critical to shaping a seamless omnichannel strategy for banks.
Executives also need to understand how channel migration drives key metrics, including customer acquisition, retention, and overall relationship value. For instance, migrating customers to mobile banking could reduce costs from in-branch visits, but hurt the profitability of certain customer segments that value in-person interaction. Banks need to quickly identify these customers and understand which outreach tactics work best to limit possible attrition. The seemingly infinite combinations of product offerings, channels, frequencies, and outreach tactics provide an important opportunity for banks to test out different strategies so that they can hone in on the optimal communication strategy for each customer. Banks that can do this effectively will be the biggest winners in 2017 and beyond.
Most major banks in the UK are aggressively reducing their branch networks. RBS, for example, has closed 380 branches in the last two years, and Lloyds made waves by announcing plans to close 200 more locations by the end of 2017. Branches used to be ubiquitous by necessity, but with the shift to alternate channels, branch coverage needs are evolving.
Network consolidation has been a common industry theme for years now. Banks have already picked off the low-hanging fruit and closed their worst performers. Now, they must close branches with unprecedented precision. A recent survey showed that 52% of UK customers still use the branch once a month, a higher figure than was reported five years ago. With each closure, banks risk losing valuable customer relationships.
There are two key steps to take when closing branches. First, executives must choose branches that will have the highest percentage of transactions and new sales transferred to the surrounding network or digital channels. From our experience working with retail banks, we have found that sales transfers from closed branches typically range from 35% to 75%. Banks often focus primarily on attrition, but the level of new sales transfer is actually the biggest driver of success that executives need to understand before closing any branch.
Secondly, the bank must identify customer segments that are at the highest risk of attrition in the event of their branch closing. We have seen that 10 to 20 percent of customers are typically responsible for 80 to 90 percent of post-closure losses. We find that banks are not always aggressive enough in targeting customers with outreach when their branch closes, and focusing on this smaller set of high risk customers can make additional outreach more feasible and more effective.
Leading banks are quickly carving out a new role for the branch as a center for advice and relationship management. Many organisations are realising massive cost savings from closures and reinvesting this capital into the rest of the network to support this new direction. For example, TSB recently closed 25 branches and is pouring £250M into branch upgrades. These investments range from self-serve tablets and video conferencing capabilities to entire layout redesigns designed to facilitate high-value conversations.
Before making these significant investments, executives need to determine which new elements will strengthen relationships and facilitate incremental sales, and which are merely flashy. While self-service technology can free up staffing resources, banks must recognise that most customers expect a personalised experience when they enter the branch. It might not be cost-effective to replace tellers with self-serve kiosks at all branches; instead, there may be higher ROI from training existing staff to focus on cross-sell and investing in technology that facilitates those conversations. By testing different branch investments in a subset of the network, banks can make confident go-forward decisions on a branch-by-branch basis.
The marketplace for traditional banking products is increasingly crowded, and growing market share is more challenging than ever. In 2017, banks will focus on winning and expanding their client relationships through increasingly unique incentives and services.
Financial services organisations can pull numerous levers to increase the size, depth, and retention of customer relationships, including staff training, monetary incentives, and premium services. As customers have become more accustomed to standard cash offers, banks are also becoming more creative in how they attract and retain customers. For example, First Direct provides premium customers with a UK-based call center available 24/7, and they even offer £100 to customers that leave the bank to demonstrate confidence in their services. Other organisations are similarly trying to attract and retain customers by increasing account owner freedom and choice. Virgin Money, for instance, allows savings account holders to choose between monthly or annual interest depending on their expected withdrawal schedule, while Nationwide Building Society provides savings customers with access to a 25% Government Bonus when purchasing their first home. Each of these strategies require significant investment – it is crucial for banks to test different variations of these strategies on a small scale to understand which investments truly drive incremental increases in relationship size and retention.
Wealth management groups have traditionally focused on relationships and personal attention, and therefore have not always been on the cutting edge of new technology. However, the emergence of new Fintech disruptors and increasing reliance on mobile channels is driving industry-wide innovation. For example, MoneyFarm recently launched the UK’s first wealth management app. The easily accessible investment platform is entirely fee and commission free for the first £10,000 invested, opening up wealth management services to a broader audience than ever before. The key for established players is to find the right balance of maintaining their competitive advantage with strong personal relationships while still realising the benefits provided by automated digital tools.
UBS recently launched SmartWealth, a “robo-advisor” platform that provides automated advice to investors based on goals, means, and risk tolerance. This product lowers the UBS wealth management threshold from a minimum of £2 million to just £15,000. While these types of offerings may not be large revenue generators immediately, they can establish early relationships with younger customers that can grow into higher value relationships over time.
Private banking groups are following the lead of retail banks and increasingly relying on targeted omnichannel communication. Growing adoption of mobile and online channels by premiere clients is enabling advanced wealth management groups to send the right messages to the right individuals at the right times. Emirates NBD, for example, is investing USD136 million in a new private banking digitisation initiative meant to drive mobile engagement and strengthen customer relationships. At the same time, executives must consider the risk of ‘communication fatigue,’ the tipping point in which too much outreach causes customers to tune out. By testing different types and frequencies of communication, sophisticated organisations can hone in on optimal touchpoints for each client.
Author Bio
Rupert Naylor – Senior Vice President, Europe
Applied Predictive Technologies (APT) – A Mastercard Company
Rupert Naylor, Senior Vice President, is in charge of the European operations of APT.
Prior to joining APT, Mr. Naylor spent many years at Bain & Company, working in London, Mumbai, Paris and San Francisco. In his early career, he spent several years in Japan working in banking for Merrill Lynch and in telecoms. Mr. Naylor started his career in the UK Government, including a posting at the Embassy in Tokyo.
Mr. Naylor was educated at Oxford and is a Sloan Fellow from London Business School.
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