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Simplicity is a tenet of the customer experience; very few people want things to be more complicated. Combine that truism with increasing expectations for instant online problem-solving and we can see why the forefront of retail banking is built on digitalisation.
For bank customers (all of us, really), digitalisation enhances our experience in a thousand unseen ways. Beyond its uses for customer ease and therefore retention, digitalising traditional branch services affords the banks a means of generating healthy revenues at a low cost in a low-interest environment.
Mobile banking apps and online banking are the obvious hallmarks, especially with the rise of smartphones. Indeed, Citibank claims that nine out of ten of its Asia-based transactions took place outside a branch. An annual study of 158 retail banks in 56 countries named analytics and big data as 2016’s most disruptive new technologies. Artificial intelligence has been applied by RBS and DBS Digibank (self-described as India’s first mobile-only bank) to create virtual customer assistants. A survey by IBM and the Economist Intelligence Unit indicates more than 90% of banks will be investing in blockchain technology, which underlies bitcoin, for deposit-taking by 2018. And growing regulatory pressures following the 2008 financial crisis have driven banks to open their application programming interfaces (APIs) to third parties to develop and implement.
The sort of structural changes all this will engender is heavily dependent on the type of technology itself. Research into the retail banking landscape from Efma and Infosys Finacle has 62% of respondents believing that more advanced analytics will have the greatest impact on business models, with APIs and AI coming in second and third. To stay on top of the developments, banks are striking strategic partnerships with their competitors, namely fintech start-ups. The Efma/Infosys survey reported 41% of banks are working with start-ups as suppliers, and 32% of banks are investing in them. Meanwhile, the downward trend for physical branches persists, as bricks and mortar are replaced by the likes of imaginBank, a mobile-only offering for millennials from Spain’s Caixabank, complete with commission-free transactions and a tech-friendly uncapitalised name.
An entirely online offering will satisfy a consumer base dominated by younger people, while the Federal Reserve found only 18% of customers aged 60 and over use online banking. A pop-up bank like that one PNC launched in Chicago and Atlanta a few years ago best suits retail operators with a mixed customer base of millennials and traditional branch users.