The future of retail banking

Following the MoneyLIVE 2018 Summit, Jon Wilson takes a look at some the key themes influencing 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.

Posted about 5 years ago
About the author:
Jon Wilson

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