The future of retail banking

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The future of retail banking

Retail banking is undergoing its first significant period of change for decades, thanks to advances in technology changing consumer behaviour in almost every sector. Beginning in communications, tech has since made shopping, travel and many other lifestyle activities faster, more convenient and user-friendlier. Online banking set the ball rolling in the retail banking sector, which led to apps and the introduction of AI on the customer service side, but there is much more on its way.

As this is both a significant and exciting time for many of our clients and candidates in retail banking, I was thrilled to attend November’s MoneyLIVE Summit 2018, the leading retail banking conference in Europe, and came back armed with some great insights from both the speakers and the MoneyLIVE survey of over 600 senior figures from national and multinational businesses in the banking sector. Here are some of the key takeaways on the future of retail banking:

Open banking

Open banking legally allows third parties to access customer account information and make payments on the customer’s behalf. This is a game changer for retail banks, who have previously held these cards close to their chests, minimising the impact of competitors. Driven by consumer demand for the convenience of a single portal to manage their finances, open banking means banks will need to innovate and develop API’s to allow access – and potentially lose customers to Fintech companies and other competitor platforms that may be offering a better customer experience.

MoneyLIVE survey stats:

81% believe today’s banking customer is driven less by trust in large institutions and more by convenience and quality of experience

It’s expected that 37% of customers will use non-traditional financial services firms within two years, rising to 53% in five years and 70% in 10 years

Nearly two-thirds of consumers perceive little or no differentiation of products and services among the big banks, but they enthusiastically embrace the self-serve tools and transparent and simple offers promoted by new digital entrants

One in three digitally-active consumers around the world already uses FinTech services

90% of bankers are worried that an estimated 24% of revenue is at risk to standalone FinTech companies

Digital transformation

Digital transformation has been underway for some time in retail banking to satisfy customer demand, with web-chats, mobile banking apps and Robotic Process Automation (RPA), which automates low level processes freeing up employees to deal with higher level tasks, leading the way. Contrary to initial fears for jobs, banking is using RPA and AI to assist, rather than replace, the human workforce.

Front-end attractions to customers are easy to copy, so banks have no excuse to lag behind, but internal processes are much harder to change and it’s here where retail banks have legacy issues that the real change must happen. While it is expected that RPA will also be rolled out in customer on-boarding and credit decisions for faster processes at the customer end, banks have another legacy issue in that digitising process does not digitise its historical data, which has been filed and secured in many formats.

MoneyLIVE survey stats:

65% believe the gap in the quality of digital experience between traditional banks and newer Fintechs has narrowed over the last two years

54% expect the investment focus to be on improving internal process efficiency

81% agree that return on investment in RPA is significantly faster than for other technologies

A combination of open APIs, AI and connected devices could reduce the time to reach a credit decision by 66%

An estimated 80% of data held by banking organisations is unstructured, with customer data locked in PDFs, emails and other documents

Artificial Intelligence

While chatbots and RPA have been adopted, most banks are still in their AI infancy, with the majority of professionals in the sector envisaging a number of barriers to overcome before AI can thrive in their organisation. The skills gap is the first of these, with traditional banks competing with Fintech and challenger banks for the same data scientists, compliance professionals, data engineers and machine-learning experts. Legacy issues, regulations, liability issues and the reluctance of senior management are also seen as obstructions.

With the potential for AI to transform customer service; produce a personalised customer experience; harness more data; and create new revenue streams, it’s imperative that retail banks keep pace with challengers and find ways to overcome the obstacles.

MoneyLIVE survey stats:

Chatbots have been embraced: 60% are using them in customer service

39% are already using AI to deliver robo-advice to customers and a further 22% have a pilot underway.

However, only 7% view their current AI offering as highly sophisticated

75% believe banks will struggle to recruit the necessary expertise to compete

69% say poor data management is a barrier to the uptake of AI within their organisation

Voice activated technology

Most people can only type fewer than 40 words per minute, but can speak at 125-175 words per minute. This has seen the advent of voice-activated technology, such as Siri, Alexa, and connected cars and apps, as primarily informational, but increasingly transactional resources. Widely seen as the next major consumer channel, while it has not yet been embraced for financial transactions due to security and privacy concerns, it won’t be long.

As the technology is relatively new, there needs to be a number of improvements, encompassing biometrics to ensure security, and at the bank end, information will need to be structured internally so that it can be accessed correctly by the technology. But the time is now for banks to explore this technology.

MoneyLIVE survey stats:

84% agree voice activated tech will be huge

50% will wait and see, rather than pioneer or test the tech in a banking environment

90% of consumers are aware of voice-enabled products and devices and 72% have used a voice assistant

Within 5 years, 54% of customer service enquiries will be via voice channels

70% think that the ease of use will mean the take up will be more cross-generational

I’d love to hear what you think is the next big thing, and how your organisation is getting ready to embrace the future of retail banking. Do the themes above chime with your experience going into 2019?

If you’d like to understand more about how we’re helping retail banks on their journeys, please reach out to me.

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"2025 and Beyond" Question and Answer session

26 Feb, 2024

Our webinar 2025 and Beyond: Why Your Hiring, Learning, and Culture Need to Evolve brought together thought leaders Enrique Rubio (Hacking HR), Lisa Skinner Källström (Teamtailor), and Hydrogen Group’s Dean Jennings and Michelle Miller. The conversation explored strategies used to tackle the challenges of the future workforce, shift organisational cultures towards lasting partnerships, and ensure teams are equipped for the age of artificial intelligence. _ The Q&A box was brimming! Our webinar offered participants the chance to consult our HR experts on addressing shifts in the people and culture realm as we approach 2024 and beyond. Interesting questions were raised, and we compiled them all to seek and reached out to our experts to get some definitive answers. For a recap on the webinar, check out our blog Navigating the Future: Insights from our Webinar "2025 and Beyond" So, here we are. Your questions - answered! - How can companies make people feel more secure in their jobs? Is it just a matter of increasing communication? Lisa suggested a shift towards a more sustainable approach. 'In recent years, we have seen many companies experience massive growth, and the need to get great talent onboard - hence offering extremely generous compensation packages. Unfortunately, many have now faced layoffs, and while the compensation and benefit strategies are not the sole reasons, I would like to propose a more sustainable approach for the future. [Increase benefits as the company grows, and as business results allow, we can increase pension levels or similar benefits – and discuss it internally! Open dialogue about results, investment choices, and their rationale fosters a sense of involvement among team members and signals the company's commitment to a sustainable direction.]' Dean echoed concerns about job security in today's volatile economy and advises, 'In today's uncertain economic climate, job security is a concern. However, by becoming indispensable and embracing tools like AI, individuals can enhance their value to employers, securing their positions for the future. Apart from using Chat GPT, what other tasks can be automated with AI? Lisa commented, ‘We’ve mentioned a few examples already, but I would look at all the systems your company allows you to use and question your suppliers on what features are or will be based on AI. For example, many applicant tracking systems allow the opportunity for AI to summarise CVs for an easy overview, generate interview questions and suggest more personalised replies to rejected candidates based on their CVs. Also, the opportunity for AI to transcribe an interview is an amazing tool which allows the interviewer to solely focus on listening and talking to a candidate as opposed to taking notes. As always, AI in these types of systems is not designed to make the decisions for a recruiter or business - but serve as an assistant to save time and work more efficiently.’ Dean added, ‘There are far too many to list. The AI directory https://aitoolsdirectory.com/ does a really good job of showcasing what does what and where you can find it.’ What is the impact of AI on employee engagement and how can HR teams use AI to promote engagement? Also, what precautions should professionals take when using AI? Dean offered his perspective by stating that ‘engagement and AI may seem contradictory, but there's a clear benefit when HR uses AI to streamline admin tasks, freeing up time for vital human interaction. Tools like Koios, for instance, offer Acoustic AI, helping HR understand team and individual personalities better, for more tailored approaches. Professionals must approach AI implementation carefully, ensuring ethical use to maintain trust and transparency in the workplace.’ How can we make sure our services stay personalised while using AI? Dean responded, ‘By leveraging AI to handle time-consuming tasks. The best thing about AI is that you get to choose what it does and what it doesn’t. If you feel strongly about human interaction to enable personalisation, you don’t have to let go of that – just embrace AI to make those interactions better. Get it to strip data in the background for you, or to type up your notes and actions as you have the conversations. The possibilities are endless, and they can be tailored to your needs.’ Within your businesses, have you experienced any resistance to the adoption of AI? How have you handled these objections? Dean responded, ‘A lot of the resistance I have seen has either been a fear of trying or a fear of being caught. There seems to be a negative connotation with AI, that if you get it to do something for you, are you cheating? The answer is a resounding no, you are working with the tools available to make yourself more productive for your organisation. Robot proof recruiter, if you haven’t read it, you should. Especially if you are a recruiter or if recruitment is part of your job role. I’ll spare you the details, but it is an amazing read that showcases the fact you can never take the people part out of recruitment - you’ll always be able to provide a better level of service than a robot (at least for now) and you need to focus on the parts of the process where human interaction is at its most vital and automate/utilise AI to get back time in your day to improve that social element of the process.’ Do you feel Employee Resource Groups will be on the rise with the future generation of workers? Dean replied, ‘A truly hybrid workplace cannot function effectively without the right technology in place. That doesn’t even need to be AI. For employees to feel a sense of belonging in a workplace, there should be a seamless experience that goes beyond just having teams up on 1 laptop in a room full of 30 people. Again, this will only advance with time ... my eutopia is to have my whole team (who are based in the UK + Thailand) sat around a virtual desk, on a beach with an interactive whiteboard we can utilise in real time via virtual and augmented reality. You may laugh now, but in the next couple of years, VR and AR tech will be the staple of hybrid working and teams coming together around the globe. This doesn’t take away from the in-person experience and nor do I think it should. It should be a tool that compliments real-time working solutions.’ How can we support older generation employees in the changing landscape? Dean offered his perspective, ‘AI is truly remarkable. It embodies the futuristic vision many of us had as children—computers and programs taking on tasks for us. For those uneasy about it, I believe it's a matter of not fully comprehending it or lacking the skills to use it effectively. AI has quietly become a part of the workplace, and many are still navigating its intricacies. The focus should be on empowering employees to leverage AI to enhance productivity and value to the organisation. Those who resist or fail to adapt won't be replaced by AI but by individuals who embrace change and view AI as a tool for greater contribution.’ How can we safeguard against the risk of AI stifling creativity in the workplace? Lisa said, ‘I would say the opposite, if we use AI for the more regular and routine tasks then we will have more time to use to be creative! For example, instead of spending hours on creating a presentation for an important project - let AI do this creating for you and spend the time on how you want to engage with your audience instead. Using ChatGPT to find easy tasks that I would previously have spent a lot of time on has been a big change in how I work and allows me find space in the day.’ Is there a regional divide across different parts of the world? Are Europeans more prone to appreciate safety/job security than Americans? Lisa commented, ‘My thoughts are that globally we have been through a lot in recent years, covid affected everyone regardless of location. After that, we had war in Europe for the first time in many years which had major effects on the economy, which I believe has made people appreciate job safety even more and value this in choosing their next employer. However, in some parts of Europe employees are still very protected by labour laws etc so I believe it is different from America where it is more common to have short notice period and less resistance from employers to terminate an employment.’ Expanding on the key themes discussed in our webinar, we're thrilled to introduce our Thrive Guide – a practical roadmap for building a thriving workplace. Within the Thrive Guide, discover actionable strategies to enhance employee engagement, foster diversity and inclusion, and implement flexible working models. Discover practical solutions to enhance workplace productivity and satisfaction. As our expert Dean Jennings emphasises, 'adapting to evolving workplace dynamics requires strategic initiatives.' This sentiment is echoed by other industry leaders in our webinar. In the Thrive Guide, these insights converge to offer practical solutions, providing a roadmap for organisations navigating change. Revolutionise your workplace. Download the Thrive Guide now!