With only a fleeting few weeks left of 2014, RBI has asked industry experts to share their predictions for 2015. It remains unclear what will make its mark in the upcoming year and what will be left behind, but it appears that the sector will be as ever-changing as always
2015 – Top Trends in Retail Banks (Suman Kumar Chandra, Director Delivery, Virtusa)
Consumer behaviour, technology and regulation have been transforming the retail banking industry. However, with so many different technologies available, it is important that retail banks separate hype from reality when deciding on their key investments for 2015 to ensure they can gain the best Return on Investment.
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Product differentiation between banks is negligible today; instead, customer experience through service quality and personalisation of products would make all the difference. As a result of this new focus on having a customer centric ‘outside-in’ view, we believe the following trends will have a big impact on retail banks across globe in 2015.
- Tailored branches: In the age of digital banking, physical branches will still be needed for certain services. However, these physical branches will be ‘right sized’, with standard services re-routed to low-cost channels. Instead branch design, skill set of personnel, and performance management will differ across the network to meet specific customer needs. The focus will be on advice and sales of customised products and services, based on customer segment, with a personal touch. This will free-up costs by 30-50% and increase the sales per front-office employee by 20%.
- User experience: Customer experience is the highest priority for leading retail banks. To improve this, retail banks will offer a ‘single version of truth’ across all channels in a simple, consistent and secured way. Mobile banking will continue to grow, and increase its scope seamlessly. Digitalisation of banks with a human face will enhance the customer experience and improve the sales of products online. For example, video and audio enabled technology from call centres, or relationship-managers having access to CRM data, will not only resolve customer issues more quickly, but also increase cross-sell opportunity of relevant products. Therefore Data Analytics will play key role in terms of mining CRM and behavioural data for delivering targeted, personalised offerings to its customers when they need it urgently.
- Technology rationalisation: Retail banks are swamped with multiple technologies, from legacy to latest custom built ones. This leads to higher maintenance cost, operation in silos and poor operational efficiency. So consolidation of technology will be another key focus in 2015, helping banks to streamline the legacy systems. Greater adoption of BPM (Business Process Management) will help banks to integrate multiple technologies, while offsetting some existing technologies to gain cost efficiency. Cloud technology is another key area to improve cost and time-to-market for new products and services.
- Social media adoption: Social media acts a common platform for existing and potential customers, millennials in particular. It demonstrates real branding for banks that bank’s own marketing campaign cannot. 70% users believe recommendations through social media against only 20% who trust on conventional advertising. Social media strategy will therefore get serious attention from both CMOs and CIOs of Retail banks in 2015. Formulation and end-to-end implementation of social media strategy using high-end data analytics and prompt actions are fundamental to customer satisfaction.
- Innovation: Innovation in banking industry is limited, unlike the telecom, retail or technology industry. Unfortunately retail banks now face competition within industry and from non-banking world too. Moreover banks are going through a paradigm shift because tomorrow’s banks won’t be custodians of money, but that of information to give niche and customised services to customers in secured yet simple way. So innovation is essential for retail banks’ survival.
Banking rests on the foundation of trust that retail banks have already built over time and lost post-2008. 2015 is thus an opportune moment for retail banks to regain that trust when new players, both traditional and disruptive, have started to compete and own the same customer. What will make retail banks survive and thrive is having a better understanding of consumer behaviour, investing in the above areas wisely, and executing them effectively to wow the customers so that switching cost becomes very high in future.
Trends and forecasts for 2015 on the Retail Banking market (Howard Berg, Senior Vice President, Gemalto)
2014 was an interesting year for the retail banking industry, but as we near 2015 it’s clear that there are more interesting changes afoot.
The rise and adoption of new technologies in daily life is dramatically and irreversibly changing the landscape of retail banking. Banking customers are becoming increasingly self-directed, and expect their banks to deliver convenient, yet secure, ways to pay, manage their accounts, conduct simple operations and interact online to offer these services on all their mobile devices 24/7.
For banking players, this digitisation comes with an imperative of cost reduction, while a serious cross-industry battle is happening for the positioning in digital payment services with non-banking players and ultimately for consumers digital identity and security gatekeeper.
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By GlobalDataMore banks go digital
This digitization effort is very visible around the automation of banking services and fulfilment of payment devices, as well as the transfer of these services on the digital channels (phones, tablets, and computers).
While there will be a reward for those banks embracing the move to digitized processes (mostly on operational cost cuts), a risk of seeing customers adopt new digital services from other providers than their primary is well identified for those who are slow to respond to changing customer demands. In this context, "main street" banks’ role would be significantly diminished and value would migrate to more innovative (and efficient) providers.
While major banks have already started this digital transformation process and will continue on this path, we expect to see this trend extend to the bulk of other banks in 2015.
On-boarding new customers expands versus traditional branch services
2015 will see traditional branch banking touch lose ground to online on-boarding.
In addition, we also expect to see an extension of eBanking services such as loan contracts and account openings, resulting in an increasing need to authenticate the applicants and secure the transactions. All this needs to be provided in a "seamless" manner, the digital channels being integrated across the various product lines, and, ultimately, the bank acting as an aggregator of services.
The battle of payments intensifies
Payment is amongst all banking services the one generating the most frequent and sensitive touch points between banks and customers.
Banks are the traditional incumbent players in the payment industry, but they are under increasing pressure from new non-banking players with innovative and convenient value propositions, challenging their prevalent position and redefining some of the revenue streams.
To counter these new competitors, 2015 will see banks put together comprehensive offers relying on a variety of payment means, from traditional cards to cross-channel digital payment propositions.
EMV is reaching a truly universal status
With the US market adopting EMV next year and China also pursuing migration to it, the standard for interoperability and security of in-store transactions launched 15 years ago, is now becoming globally recognised.
This universal adoption across a massive installed based sitting right at the heart of the banks payment offering means it’s their most valuable asset in this battle of payments – a position that will continue strengthen as adoption increases in 2015.
The contactless wave will accelerate
Most of the cards issued in China this year and next year are dual interface cards, and in many countries, these now outnumber traditional ‘contact only’ cards.
This massive deployment and adoption of contactless technology has paved the way for other ‘form factors’ (including the mobile hosted payment applications) and the emergence of payment through wearable technologies. As NFC continues to become more mainstream and new wearable devices come to market 2015 will be the year that more payments start to be made in this way.
NFC Mobile in-store payment will take off
2015 might eventually be the year when NFC mobile proximity payments take off, in the wake of Apple Pay and HCE announcements this year. It’s clear that people are still getting to grips with the technology as research from InfoScout reveals highlighting that 95% of iPhone 6 users with Apple Pay either weren’t aware they had it or didn’t use it. As Apple helps make NFC payments more mainstream however, the industry expects this to change quite dramatically in 2015.
We also expect more new initiatives will be revealed that will start to merge in-store payments and online cloud-based payments delivering a more consistent customer experience.
While maintaining security as a pre-requisite
Security is the foundation of trust, necessary to foster the adoption of these digital banking services. In an increasingly complex ecosystem, security solutions will have to adapt without hindering the user’s convenience in their service experience.
Furthermore, tokenization, biometrics, diverse secure elements and trusted environments will be combined to offer the best trade-off between usability and security of sensitive data.
As you can see there is a lot going on the retail banking space and 2015 is set to be an extremely interesting year. It will be interesting to look back next year and see how each of these progress but far and away the most exciting trends have to be around universal EMV adoption and new innovative ways of enabling NFC and mobile payments through new forms of wearable technology.
2014 Look-backs and 2015 Trends (Gaurav Johri, Senior Vice President and Head of Banking, Financial Services & Insurance, Mindtree)
2014 saw four distinct trends adopted by the industry.
- We observed that big data management and analytics topped the list of challenges faced by clients in 2014. We expect it to become more complex with the rising magnitude of data year on year. Organisations have realised this and are building and enhancing data management capabilities. The insights from data are helping balance the conflicting pressures around risk, regulatory, capital, and changing client requirements.
- Regulations challenges have been omnipresent. BASEL III was a key area of investment in 2014. The stringent requirements for ensuring adequacy resulted in increased pressure on firms.
- Organisations are embracing the development of an organisation-wide risk governance model. Other regulations aimed at ensuring transparency, investor confidence and systemic risk control ended up being growth drivers for the industry. Key regulations in 2014 included Dodd-Frank, EMIR, FATCA and AIFMD.
Looking forward, we expect the following trends in 2015.
Regulatory compliance: FATCA and GATCA will continue to attract top spend globally. Financial institutions will invest in specialised and prebuilt testing frameworks and accelerators to ensure their compliance systems are reliable and resilient. EMIR will draw big investments in the UK and Europe and LEI would become a global initiative.
Analytics and Data governance will be a core focus area in treasury functions, and is expected to be a vital agent of change, for firms to realign their business models while managing risk efficiently.
Firms have realised that maintaining close customer relationships will be key to long-term success. With a focus on clients, spending on the front office and client-servicing functions may increase. Firms are likely to invest in technologies that enable relationship managers have more face time with clients through digital channels, give them fuller visibility of and access to trading/investment/payment information as well as supporting tools (e.g. portfolio management, next best action etc.).
With rapid advancements and shifts witnessed within the financial industry in 2014, the upcoming year will witness a growth in business innovation.
What will happen in 2015? (Alan Fahey, head of retail banking, Business Process Solutions, DST)
The retail banking sector is on the cusp of reverting back to the days when your local bank manager would sit you down and talk you through your finances over a nice cup of tea. Except for one main difference, you won’t actually organise your finances in the bank.
Banks no longer for ‘banking’
As we head into 2015, the banking landscape is undoubtedly moving towards an online focused approach to everyday retail banking. Money can be easily moved, payments made and even cheques cashed online without the need for human interaction. And banks are driving the change in this direction as fast as the public is able to adapt. Meanwhile, the bricks and mortar high street banks will not get the opportunity to disappear completely, but are likely to become slimmed down versions of their former selves; more akin to Metro Bank’s ‘stores’ than the ‘branches’ of the big banks. In these ‘new’ establishments, staff will be on hand to help guide the customer through their financial needs and ease the transition to online banking for customers who aren’t familiar with it – something we’re already starting to see with Natwest’s "helpful heroes" campaign, where staff are specifically tasked with helping customers gain access to the full spectrum of banking services.
This transition means that, as we move into 2015, physical banks will be freed up exclusively for service and sales, with customers booking appointments to discuss each new foray into banking services at the various stages of their lives.
Data centric banking
What it will also mean is that banks should have greater access to customer data, and in a form that requires minimal human processing. Through a general shift to online/mobile banking in 2015, banks with the technology to develop a thorough understanding of their customers will gain access to more data that can be used to understand their needs, preferences and how they integrate with the bank’s systems. Feeding this information back to staff on the ground in order to help them shape that customer’s financial journey, will soon become one of the most important ways to drive loyalty and build upon the ambition of the ‘lifetime customer’.
