Retail Banking
Transformation
The industry is transforming towards to a digital financial ecosystem, driving the corporare banking sector to where the primary channel is mobile, paper products are transformed to digital products on digital platforms, artificial intelligence is used to complement human interactions and finance is embedded seamlessly into everyday life. According to the seventh annual global banking survey conducted by The Economist Intelligence Unit in March, 45% of respondents said their strategic response to the COVID crisis was to build a “true digital ecosystem [1] .”
Mobile-first Engagement
Attracting the digital consumer
Customer expectations are being set by Bigtech. Mobile is the engagement tool of choice. COIVD-19 has accelerated this.
Retail banks must deliver experiences with an eye to mobile first. They need to understand the customer journey, exploit deep insights and develop a user experience across the customer lifecycle. This does not mean that branch cannot play a role, indeed it may evolve into a wealth management/advice centre with bookings managed through the mobile app. Retail banks also need to ensure that the human element is properly integrated into the customer journey rather than being an afterthought or point of last resort.
Delivering end-to-end digital experiences will require the integration of networking, cloud, digital workplace, AI & analytics and security.
Digital Platforms
Simpler to buy and serve
Digital banking & payments have become the norm for consumers. Nearly three-fourths of consumers prefer to make and receive payments via digital methods, including direct deposit and digital payments from P2P applications or mobile wallets. 65% of consumers believe digital payments are the most secure as opposed to other forms of payments, including money order, cash or cheque [1].
Many banks have made progress on digitising their own products, payments, and service but still lag BigTech, FinTechs and neobanks.
Digital Platforms are the core technology that will allow banks to compete long-term leveraging cloud, AI & analytics and security.
Intelligent Operations
Resilient and automated
Rising interest rates are improving the Net Interest Margin (NIM) in Retail banking but competition from digital born neobanks will maintain pressure on profitability. Resilience is now also key.
Retail banks will focus on automation to complement a shift to higher-value human work as a necessity to reduce cost-to-serve and increase resilience. Banks with EU operations will need to consider the planned DORA operational resilience regulation expected to be implemented by 2024 [1]. This covers ICT risk management and resilience testing.
Digitisation, robotic process automation and artificial intelligence will work alongside a secure digital workplace supporting hybrid working.
Open Finance Ecosystems
Frictionless & convenient
The EU & UK EU regulators mandated that banks open APIs to third parties. Other countries are adopting similar practices.
Open Banking is a reality and moving towards maturity in some markets. The New Payments Architecture (NPA) being implemented in the UK by 2024 is a step towards Open Banking 3.0 [1] .
Open Finance ecosystems will ultimately provide consumers with integrated financial experiences, estimated to be a $7 trillion market [2]. BigTech companies are using embedded finance, via payments, as an “on-ramp” to financial services.
One-to-many API connectivity with market players, is key. Drives cloud, data analytics and security.