What are the upcoming technology trends in retail?
The rate of change in customer experience expectation appears to accelerate every year. A decade ago most customer service managers were overseeing a...
Think of any industry and then think for a moment about how digital transformation is changing the marketplace. It’s easy to see that digital platforms, apps, and social networks are reforming almost every industry you choose to name. For some industries, like the media and news gathering, the change seems so profound that nobody yet understands how it may profitably function in future.
But retail banking is where almost everyone can see some of the most dramatic changes, not least because almost all of us interact with our own bank regularly. It is impossible to avoid seeing how our own banks are changing, and how new competitors are regularly launching and attempting to redefine what we think of as a retail banking service.
The challengers are all around. Clearbank is a new electronic banking service designed by the people behind payments giant Worldpay. They just received a banking license and will be launching soon. Atom Bank offers a full retail banking experience just using an app as the customer interface and for those who want the full branch experience, Metro Bank has been rewriting the rules of high street banking for the past few years.
All these new rivals have one thing in common. They are shifting their focus to the customer. They are new banking services with customer-centricity baked in right from the start. They don’t have the legacy of vast branch networks or ancient computer systems and therefore every service can be designed around what a customer expects in 2017.
This is a major challenge for the existing retail banks. They cannot immediately rise to the challenge because they have rules, processes, and procedures built up over decades. They have a history in the industry and this cannot change overnight.
But although the new “Fintech” challengers are customer-centric and offer better services that are usually cheaper than traditional banks, many customers still want access to branches. Customers are exploring the newer options, but are not flooding to fintech alternatives yet.
New research from Salesforce explored why this is happening in the UK and USA. The existing banks have their history, their brand and reputation. Customers still want to feel that they can trust their bank and many are not inclined to put their faith in an app when it comes to financial transactions, such as investments or a loan.
The banks also have millions of customers. Many have never changed their current account provider for years or decades, so there is a strong inertia that keeps people attached to the financial brands they know and feel comfortable with.
But some retail bankers and financial analysts predict that disaster may be inevitable in some key areas – usually the most profitable services. Just over a year ago, McKinsey said that services like loans and credit cards would reduce by around 60% in traditional banks inside the next decade. That’s almost two thirds of their most profitable services migrating to apps and challenger banks as the services are being designed to be customer-centric.
Retail banking is just one example of an industry where customer experience and customer expectations are redefining the industry. It may not be happening overnight, but a 60% shift in business inside a decade would be seismic, considering that brands like Barclays have been around for over 300 years.
What do you think about the Fintech challenge faced by traditional retail banks? Leave a comment below, or get in touch on LinkedIn, and let me know.