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The UK retail banking sector is developing quickly. In fact, banking is one of the fastest changing industries in the world at present with some experts predicting dramatic changes ahead if major banks don’t revise their business model. A perfect storm of change is taking place:
Anyone who studied Michael Porter’s Five Force Analysis at business school can see that retail banks are in a jam. Porter’s model described the various ways that competition can enter a market or become more intense. The number of competitors and technological change mean that change is coming from all directions for most banks.
Yet there are some interesting foreign entrants to the UK market. The US banking giant Goldman Sachs announced in 2017 that they are entering the UK retail banking market in the middle of this year. Goldman Sachs is taking an interesting approach. They are focusing only on the savings and loans business. They will provide a digital-only service to keep costs low, and they will position their rates at the top of the market.
Goldman Sachs expects to be able to build a considerable business by offering better rates and they know that they will get considerable media attention because of their own brand and US heritage.
The leading UK-based retail banks are facing competition from all sides. They have their long established reputation and tradition and they still have millions of customers – many of whom are quite happy staying where they are. But they need to invest in the customer experience and developing digital services if they want to be able to match the services being launched by challengers and digital startups. The customer experience is going to be a key factor in the next decade for this industry. What changes do you think retail banks need to make to be more customer-centric? Leave a comment below, or get in touch on LinkedIn and let me know.
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