The news from GSMA in June 2017 that the global number of mobiles had exceeded 5 billion was a major milestone for retail financial services. The GSMA now projects a total of 5.7 billion by 2020, used by nearly three quarters of the global population.
Recent developments introducing video and voice as mobile features exemplify the industry’s heavy commitment to the strategically important smartphone. All channels continue to benefit from significant investment in a proliferation of digital innovation. This includes the rich dividends that are coming from an increasing respect and synergy between financial services players and fintechs.
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Previously recognised by Retail Banker International as the ‘World’s Most Innovative Bank’, Caixabank in Spain released a powerful statement in 2017 reflecting its continuing broad omni-channel thinking.
Branches future uncertain
The bank believes that “a higher number of branches is an indication of reach and client proximity – not a cost driver”. Equally positive comments about the role of its branches came from Commonwealth Bank of Australia, another digital leader. Despite much industry consolidation and some digital disintermediation, the number of branches operating globally had continued to grow and it entered 2017 at 1.08 million. However, the future of the branch remains uncertain.
The upward trend in the number of ATMs was forecast to continue beyond 2017, reaching 4 million globally by 2021 Despite this, there are now strengthening headwinds that will call into question further medium term growth. Among these is the ‘war on cash’. The closure of branches that host ATMs could also have a significant negative effect.
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By GlobalDataNew rules on capital introduced through Basel Three will sustain the pressure on the ROE of institutions in 2018. This will reinforce the need to be sure of a return from increasing digital investment.
Costly infrastructure such as digital labs and factories must be seen to offer worthwhile strategic advantages, and generate beneficial paradigm shifts in the business model. Legacy channel assets must be managed with rigour and objectivity to ensure that new network investment really does create value, and that closures do not destroy it.
Branches operating simply as transaction shops will be progressively disintermediated by digital, with consequential closure. Only the smarter banks that develop their branches as destinations will continue to enjoy a return.
In 2018, the ongoing flow of new digital opportunities will meet with significant financial strictures in many markets. This will demand disciplined and coordinated strategy development and execution, to ensure the most effective use of resources.
For the largest institutions, it may be difficult to achieve the standards and agility seen at smaller organisations like Bendigo Bank in Australia. Consumers still continue to reward those players (and their shareholders) that provide a wide range of channels.
Thus, as the savvy players continue to offer their customers a broad omni-channel experience, innovation is joined by coordination as a critical success factor.
David Cavell is a retail banking consultant
