The Future of Retail Banking
Imagine for a moment, just for a moment, that you have a time machine and can leap forward ten years and see how the world will look. Then, imagine armed with that information, you are sat in an expansive boardroom somewhere in the world and the Chairman of the Bank you are visiting asks you ‘What is the Future of Retail Banking?’, How would you answer?
Sadly, I do not have a time machine and the future, well, we all know from past experience, that this is impossible to predict (especially in Banking), yet I was asked this question last week and I thought you may be interested to read my point of view. Granted, this is skewed to the region in which I operate, but here are the big trends to look out for in the coming years.
Here are my top nine trends to watch:
Convenience is the name of the game. All of us own smart phones and this channel will be used more and more to offer better, simpler, more convenient services to customers. We will see banks spending time, money and effort simplifying their services, we will also see them have to fight on many fronts to win an retain customers, especially in retail banking, where the seemingly unstoppable march of the telecommunication network providers and device manufacturers will see those banks who do not embrace technology fail. Customers will want to transact with their bank in the way they want to which will mean, for the majority, that will be via their handheld device, tablet or video ATM. Customers will be able to connect directly to an expert and resolve their question at their convenience, 24/7. We will see the rise of the specialist service provider with smaller, more niche players entering the market. All of this meaning greater convenience and better service for the customer.
It’s already happening in so many markets, but the need to carry cash will diminish. Already, we are seeing services like Apple Pay and MPesa replacing the need for cash. This trend will increase, and with this will come the demise of the in-branch teller. There may still be a need for bulk cash transactions to take place in some markets, but overall, I see the end of money as we know it.
Small is beautiful
Branches will get smaller and be replaced by service hubs and lounges in more convenient locations. The old fashioned large branch will exist only in big cities, where demand dictates it. We will see banks operating a ‘hub an spoke’ model, with smaller ‘Express’ branches or ‘Lounges’ servicing a larger head office or hub branch.
Getting personal is the only way
As banks gather more and more data on their customers behaviour and habits, we will see them offering their services in a more personal way - regardless of a customers net worth. I believe that macro segmentation will be a thing of the past. Banks will understand customers personal needs much better, based on the facts they have about them, not based on categorisation, pigeon-holing or guess work - and armed with this, they will offer services or packages of products which are relevant to customers personally.
The rise of the middle classes
In many of the territories in which I operate, I am already seeing the poor becoming richer. Freer trade links, the power of technology to connect small businesses with the global market is empowering transformation. Improvements in the rule of law, the rooting out of corrupt practices combined with the hunger to grow that characterise Asian and African markets will see significant growth here. This will be married to improvements in the services middle classes need. Once again, technology, convenience and education will play an important role in winning and retaining customers. We will see banks taking an active role in the communities they serve, removing the image of the lofty corporation that does not understand the day-to-day challenges of ‘real people’, and replacing this with empathy, a real understanding of problems and a pro-active approach to finding solutions.
The rich get richer
As the middle classes become more wealthy, we will also see the rich getting richer, with an increase in the number of what we might call Premium, or Private Banking clients demanding more from their bank than they currently do. This means that the banks who have a physical presence will have to start to think like exclusive hoteliers and I will not be surprised to see some banks partnering with brands such as Four Seasons (the hotelier), to provide high end experiences that go beyond banking and into the provision of managed lifestyle services. Where profits generated from high-net-worth customers are reinvested in providing elegance and excellence on a highly personal level to clientele. Banks will provide exclusive spaces for their customers to meet, socialise and network with other like minded individuals however, do not be mistaken, the wealthy also will require the very best in technology to serve their needs.
Listening and hearing
Meaningful and personal relationships between service providers and their customers will become more and more crucial. Banks will be forced to listen to customers and provide better, more customer centric solutions and services. How will they listen more? Face to face meetings will still be a vital source of information, however we will see more and more organisations looking to data mining, crowd sourcing and other social channels, understanding the complexities of customer behaviour and extrapolating trends from this to help them fine-tune their product offer and improve their customer facing service.
More than a bank
Banks of the future will not look like the banks of today. To survive, Banks have to be more than Banks. They have to be a silent partner, a friend, offer support by going beyond offering transactional services. Banks will offer their customers all kinds of lifestyle benefits in the future. I see the relationship between Bank and customer becoming closer, tighter, more supporting and familiar.
Banks will still need people but one of the biggest changes we will see is a change in behavioral culture inside banking. Bankers will have to throw away the old transactional model, where staff are stiff, arrogant, aloof and unfriendly, to become much softer and friendlier. More like retailers and less like bankers.
If I am only 50% right, the future is one of great change in the banking industry. There will be winners and losers, but one thing is for sure, the power in the relationship will reside firmly with the customer. So, if there are any bankers reading this who are not ready to change, there is a good chance you will either be out of a job, or your bank will be swallowed up and cease to exist 10 years from now. So reinvent yourself, celebrate change and be a winner.
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