In its annual London conference, held at the glamorous Waldorf Hilton hotel in London, Retail Banker International held host to a number of expert speakers and delegates discussing the current financial situation across the globe. Trends included the rise of start-ups in the market and the shifts in banking culture. Patrick Brusnahan reports
The Retail Banking Conference 2016, sponsored by Vocalink, kicked off with a keynote speech from Vocalink’s own market development director, Chris Dunne.
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Dunne highlighted one of the key themes of the conference; service was the way forward for banks, not necessarily just technology.
He said: “If you only focus on technology, you’re missing the point. People can get very attached to particular payment types. The biggest failing in getting rid of cheques was forgetting about certain demographics.
“In the UK alone, there are millions of people without appropriate broadband. Two thirds of adults have a smartphone, but that leaves a third of adults who do not. Branches remain significantly important. Do not forget the humans that use technology.”
Dunne also reminded a captive audience that the country is seeing ‘a massive growth in faster payments’ and there was ‘a queue out the door of people wanting to join the faster payments infrastructure’.
Maciej Jakubowski, head of design at Alior Bank in Poland, followed on a similar thread.
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By GlobalDataHe explained: “Everybody understands innovation in a different way. Banking is more than culture, innovation or payments. There’s a human factor. You need to look at it through your customers’ eyes.”
Winston Kassim, special products advisor at Royal Bank of Canada (RBC), explained that the personal factor was crucial, not only with customers, but with staff as well.
He said: “If a bank is going to succeed, it needs a significant story. A number of people said we needed to cut staff. We disagreed. We decided that we were not going to shrink ourselves to greatness and RBC ignited the passions of 40,000 employees.
“Trust is the foundation of our industry and our success and RBC continues to benefit from its investment in employees. From 2008 to 2015, our efficiency improved by an average of 500 points [in their performance metrics] If I was to change anything, we would have started this sooner.”
In the following panel, Jakubowski said that Alior ‘didn’t look for inspiration from other banks’ when looking to improve his model.
Dunne agreed with this and expanded: “Fundamentally, who you bank with is going to become less relevant. A lot of people are happy with their bank as it’s a secure place to store their money.”
The Future of Banking
Catherine McGrath, managing director of transactional products and commercial banking at Barclays, described the role of the bank not only to change, but to help its customers change alongside.
She said: “[Banking] is undergoing change similar to the industrial revolution. As a society, we’re going through big changes. The pace of customer adoption is accelerating and this pace is far beyond financial services. Every limit or restriction is an opportunity for a newcomer.
“If we see one thing in a part of our lives, we expect it in every part. If I can Facetime my friends, why can’t I Facetime my bank? Ordering currency should be as easy as ordering a pizza. We are fragmenting in how we use digital and choice is crucial. Seamless transition between channels is critical.
“Part of our role in society is helping customers move into the digital age. We recognise that it can be an emotional shift to digital. The importance of human contact is fundamental through combining first class technology with first class interaction.”
John Mahon, head of product research and strategy at EdgeVerve, further highlighted the focus on digital had to be parallel with the focus on customer service.
Mahon said: “The customer-centric mindset is becoming more and more popular. Disruption isn’t driven by technology but by customer experience. And [according to EdgeVerve’s research], 72% of banks see significant industry disruption ahead. Banks are broadly acknowledging disruption.
“41% of banks see start-ups as an evolving threat. Previously, it was higher than 70%. Now, it’s much more tech and [telecommunication] companies.”
He went on to describe the digital adaptation that banks need to undergo.
“Digital banking strategy means so many different things to different people. Yet, 69% of banks do not have a systematic digital strategy,” he explained.
Terry Cordeiro, head of product management – transformation at Lloyds Banking Group, believed that ‘customer experience is the next frontier’.
He said: “We are literally addicted to our smartphones. This has driven fundamental changes to our behaviour.
“Disruption is about the experience and not the technology. In that regards, customer experience is more about being end-to-end with a brand. Transformation is a significant investment and we have a responsibility to use data to help our customers be financially responsible.”
“We’re fooling ourselves if we think expectations are changing. They’ve already changed,” he concluded.
Challenging the Status Quo of the Retail Banking Landscape
Chaired by John Smith, managing director of EMEA at Fiserv, the next session of the day focused on the new entries in the market determined to shake things up as ‘traditional institutions are being put under pressure’.
Ricky Knox, the founder of Tandem Bank, purported that disruption was all about offering something different and something wanted.
“I do think there will be significant change and a tipping point in three to five years. However, is it really disruption or a gradual evolution?’ he asked.
Knox continued: “I have huge confidence in banks in the UK to improve their customer experience, but you need a quantum leap in what we’re offering. The challenge is finding the additional pool of value and, currently, banks aren’t set up very well to offer something different.
“People expect a different level of service from their customers now. 25% of the market is being taken up by innovation.”
However, Knox also highlighted the difficulties of being a start-up bank. “When building a bank, there is a challenge with the balance sheet. We only need small percentages of the market. There is quite a lot of interest in this area, but I think there will be consolidation and some start-ups will go away,” he concludes.
Norris Koppel, Monese’s CEO and founder, discussed the importance of ‘building from scratch’ as banks were ‘approaching from an outdated angle’.
He said: “Opening a current account can be painful. We have a unique ability to onboard the previously unbankable.”
With regards to building something from scratch, Mondo Bank follows a similar formula. Jason Bates, co-founder of Mondo, believed that it was the ‘perfect time’ to start a new bank. This was due to three reasons: legacy banks, regulatory change and the digital shift.
He said: “I found out early on that executives don’t get digital. People think they already have digital banks. Product thinking isn’t there anymore. It’s not banking as a service, but digitised products are not digital services.”
On this point, Alex Letts, founder and chief unbanking officer of Ffrees, said: “This perception is not being helped by behaviour.”
Keeping up with competition
Karina McTeague, director of retail banking supervision at the Financial Conduct Authority (FCA), kicked off the last session by discussing the role of the regulator in financial services.
She conveyed that this included creating a competitive marketplace, but banks had possibly become more distracted by digital than by regulation.
McTeague said: “Changes present real benefits to customers, but how do we support change without sacrificing consumer protection?
“Innovation promotes competition and our innovation hub has had 515 applications from firms. There’s some interesting stuff coming up. Digital capability is core to many strategies and big data is having an ever-growing impact.”
One bank focusing on the digital experience is Russia-based Touch Bank, a fully digital offering which received 70,000 clients in its first year.
Alexey Maklakov, chief digital officer at Touch bank, said: “If you want to keep your client base today, you need to understand the customer journey. From the beginning, we understood that you need to focus on current requirements. The change is about culture; the culture to serve and interact with your clients.”
McTeague concluded: “There is currently an enormous change in retail banking across the world.”
