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By the end of this decade a raft of new legislation and developments in technology will have brought about a revolution in retail banking that will see only the companies who invest in building the best relationship with their customers emerge as winners.
Following years of high profile failures and growing consumer mistrust in the traditional retail banking sector, new legislation is now coming to the fore which is intended to improve transparency and flexibility and ultimately rebuild the reputation of a damaged sector.
The introduction of Payment Services Directive 2 (PSD2) by January 2018 and last week’s report (Aug 9) from the Competition and Markets Authority show there is a gathering head of steam around this which banks ignore at their peril.
Coming at a time when there are huge leaps in technology, a consequence of this new legislation is that it opens the way for new entrants to gain a foothold in what has always been a closed market.
Increased ability to compare products and greater ease to switch to a better deal combined with the ability to manage a range of financial products through one simple point of contact, potentially an app, will mean retail banks will need to be more agile and more competitive.
Taking the example from other markets in which competition is fierce and customers have the flexibility to choose their provider, such as retail or telecoms, it is likely that customer experience will become the most significant battleground.
As competition becomes fiercer with challenger banks and new entrants to the market able to capitalise on and adopt new technology more easily and quickly than those tied into legacy systems and processes, ensuring the best possible customer experience will be the way to ensure customer loyalty.
The aim of the new legislation is to give consumers more control and greater power over their finances. Coming at a time when technology can make that happen, it is the customer who will decide the ultimate winners and losers in the new retail banking space. Focussing on your customer experience, investing in IT and building new skills and capabilities, then become the keys to survival in what will be a more congested and competitive marketplace.
Are you ready?
Over the next five years, developments in regulation and digital technology will reshape customers’ experiences with retail banking providers. As a result, existing banks will need to transform their digital capabilities. Those that do not will be relegated to acting merely as wholesale providers, competing solely on price.
It’s time for digital transformation…