The pandemic has accelerated numerous digital trends and revealed new ways of managing personal finances and businesses. For many banks, these changes will become a turning point. Maintaining their competitive advantage in the market will depend on the correctness of the chosen priorities. According to experts, the future of retail banks will be determined by the creation of quality customer experience, the central role of innovation in the development of products, the creation of ecosystems with partners to accelerate the implementation of new solutions and increase business flexibility, as well as efficient data protection. Let’s focus on these trends to see if your bank meets these growing expectations.
1) Non-traditional competitors and neobanks
New economic realities have created ideal conditions for “neobanks” to enter the market of banking services. These are fintech companies that provide classic banking services exclusively in digital format. Such companies are not burdened by outdated offline approaches and traditional, familiar banking technologies. They are more flexible and mobile in response to customer needs. One of the impeachable examples can be considered PayPugs services. They are becoming leaders in providing a personalised approach to serving those customers for whom a modern digital experience is crucial.
The second group of non-standard competitors became social platforms. Prominent examples are WeChat in Asia, online retailers (Alibaba), and microfinance organisations (Paytm). With their help, you can transfer funds via smartphone without the fees associated with bank accounts. If such alternative providers are more efficient in meeting the needs of customers, they will be able to bypass traditional banks in the future.
2) Personalised customer experience
Most bank customers changed their habits during the COVID-19 pandemic: they began to visit stores less often and switched to contactless payment for goods and online shopping. Meanwhile, 82% of consumers believe they will use digital wallets or cards in the future. Therefore, those banks that can provide an impeccable personalised customer experience based on data and analytics will be most in demand. At the heart of such an experience should be ease of use of online banking products, confidence in the security of transactions and personal data, as well as trust in the brand. Value for money will become one of the crucial factors for customers when purchasing banking products.
3) Data protection regulation
The growth of online transactions has led to an increase in cyberattacks. As a result, a new trend has appeared all over the world – the intervention of the regulator in the market to strengthen cybersecurity, data protection, and support of the most vulnerable category of customers. In particular, we expect that the regulator will require banks to introduce open banking for accessing account information and payment functionality. This means a new challenge for banks — maintaining a balance between confidentiality and introducing new forms of open banking. In addition, it may lead to increased costs and negatively affect their revenue growth.
4) Investments in modern technologies
Banks must invest in modern technology to compete in a world where smart devices and platforms can provide banking services. This will not only allow to stay on the market but also help to reduce costs significantly, optimise business processes and increase efficiency. The world’s leading banks are already using such automated solutions as RPA, robotic process automation, and chatbots. To reach the desired digital level sooner, many banks will have to partner with leading innovative companies, creating “open” banking. This will lead to the creation of new business models and ecosystems.
5) Built-in bank as a new model
Experts concluded that three models of retail banking will dominate the market in the future: universal banks, transaction-oriented banks, and so-called “built-in” banks. The first model will be preserved in many respects due to working with premium clients who demand high-quality individual service. Transaction-oriented banks are primarily payment service providers with large customer bases. “Built-in banks” are a kind of intermediaries: they support the digital ecosystems offered by large technology corporations, such as Microsoft, and gain more information about the habits and needs of their customers.
In any case, for banks to be successful, the customer must now be at the centre of their attention. The tasks facing classical institutions are so complex that it will be challenging to face them without integration with IT. Banks will be forced to compete in a fundamentally new way for market leadership, attracting and retaining customers.