Customer needs are changing
In retail banking, customer needs are changing. Younger people are more willing to switch to embrace an improved service and there are plenty of new challengers out there ready to give them the experience they’re looking for. So what does this mean for the 'traditional banks' and their IT teams?
Peru Consulting asked 1000 consumers and 100 Senior IT Leaders in the banking sector their views on the changing landscape of retail banking. The results, published in our report - Retail Banking IT: Turn to Face the Change – offer a startling insight into the scale and speed of change and the challenges faced by traditional banking’s IT leaders.
When asked about the specifics of banking transactions using mobile phones, nearly two thirds (63%) of consumers in the 18-44 age group stated this was important to them, while only 14% of the 55-64 age group felt the same.
More generally, there's little comfort for the retail banks when it comes to customer loyalty, with 38% of 18-24 year olds and 41% of 25-34 year olds set to change the bank that provides their main account within the next 12 months.
It is clear that new providers are offering improved services and making the decision to switch ever-easier and there is no question that, in order to survive, the legacy banks are going to have to respond – and fast!
A recent list identified 55 challenger brands offering retail banking services from Abacus to Zopa. For example, Revolut is a newcomer which enables peer-to-peer lending, allows you to spend and transfer in multiple currencies without fees, and also categorises expenses. Both services take minutes to set up on your phone.
Then there's GAFA - Google, Amazon, Facebook and Apple. Potentially the largest threat on the horizon for the traditional retail banking sector. Their response from consumers as to what would make GAFA banks attractive were clear:
So, we asked the Senior IT Leaders why they though their customers would be likely to switch banks. Strangely, while 64% recognised that challenger banks are taking their market share, less than 5% recognised that customers might be tempted by new technology such as mobile apps. Given the strength of the GAFA companies and fintechs, this is a dangerous blind spot for the traditional banks.
So what can be done to turn the 'supertanker' of a traditional banking institution fast enough to meet the headwinds of change?
A clear IT strategy will certainly help to give teams a clear and aligned purpose, but it needs to be built upon an understanding of what the customer wants and expects.
Products and services, and the way are delivered, need to be developed accordingly. It's then a matter of delivering the roadmap and maintaining a clear scorecard that tracks progress in a transparent and visible manner.
It's easy to feel overwhelmed by the increasing demands of legacy estates, changing regulation and relentless security threats. However, for the retail banking sector, there has never been a better time to rally the team around a clear and focused strategy that will give consumers, and the business leaders, what they want.
As one of Peru’s Principal Consultants, Ian Robinson has put his strong track record in driving innovation, transformation and optimisation.to good use, delivering successful change for AIB (Allied Irish Banks), Natwest, Coutts and Barclays.