The Banker asked European banks what they consider the future of retail banking to be. The results, put together with the help of Henrion Ludlow Schmidt and Enalyzer, highlight the sector’s strengths and fears as it heads into the 21st century.
What will the retail bank of the future look like, how it will operate and how will it change from the bank of today? The Banker surveyed the top 300 banks in western Europe plus the top 100 banks in central and eastern Europe based on our rankings and asked bankers for their views. With the help of Henrion Ludlow Schmidt, one of Europe’s leading independent brand consultancies, and Enalyzer, which markets cutting edge eResearch solutions, we received detailed online responses from 58 banks across 26 countries.
In brief, consumers are going to expect more in terms of accessibility, personalisation and product/service innovation and the successful retail bank of the future will be brand-led with all its activities – from recruitment to marketing, from strategy to implementation – guided by a constantly reviewed and differentiated brand vision. Such a bank will also make use of a greater degree of advanced technology, including online transactions, but will not shift to a virtual model – it will have to retain a real feel.
The key findings from the responses of the 58 banks are divided into topic areas as follows, and calibrated replies can be noted in the charts related to the 56 individual questions asked in six key question blocks.
Technology
The provision of online banking facilities and converging technologies will dominate the retail bank of the future to provide product information, give financial advice and to allow customers to access and manage their accounts online. Ninety-three percent of respondents see an increase in online transactions.
Internet banking will be the norm in five years’ time – 86% selected online as one of the top three methods used to contact banks – allowing 24-hour availability.
ATMs are regarded as one of the main future methods of contact with the customer (62%), which is interesting given reciprocity agreements diminishing branded experience and the discussion about the cashless society.
Banks will need to develop powerful technology solutions, driven by customer demand.
Bankers still expect personal callers at their branches (56%).
Mobile phone contacts are not expected to be that significant (30%) but there is the question of what impact 3G technology will make in the future.
Branding
Brand reputation and building stronger brands is of crucial significance to bankers planning the future of retail banking in Europe. Ninety-six percent think it is extremely important or important to build up brand reputation and personality to create stronger customer loyalty.
The majority thinks that the market will be dominated by strong brands (89%) but there is less support for the creation of ‘new’ brands (64% disagree or strongly disagree with this).
A strong brand is seen as extremely important to attracting customers, differentiating players from their competitors and gaining trust.
Transparency seems to be an important factor for building a strong brand (96%).
Opinions drift more apart on the subject of a shift to ‘virtual’ banks (40% strongly agree or agree whereas 60% disagree or strongly disagree).
Seventy-one percent strongly agree or agree over the importance of the development of cross-border networks whereas only 64% see cross-border consolidation coming.
Building up brand reputation and personality is regarded as much more important (96%) than building global networks (60%).
Bankers think brand reputation and personality create stronger loyalty than physical presence on the high street (83%).
More than one third believes that a strong brand does not protect the retail banking business from the effects of economic slowdown and recession.
Motivated staff (100%) and internal communications (95%) are considered to be the most powerful drivers to build a strong brand.
Products and services
The majority of the participants find personalised/individual products and services of high quality and innovation crucially important for supporting customers’ needs and aspirations.
Competence in financial advice is regarded as extremely important or important by 96%.
The product offer should be clear (86%) and the breadth of offer is also considered key (70%).
The most important ancillary products and services are 24-hour service (57%), pensions (57%), portfolio management (54%), financial consultation (54%) and insurance products (52%), whereas less than 10% consider stockbroking, communication products or legal products as important.
Low fees and service charges do not seem to be very significant. They are seen as extremely important or important by only 58%.
However, the majority of respondents think that reducing interchange fees for card transactions are less important.
Opinion is divided over the “one-stop-shop” – offering all products under a single umbrella.
Bank management and development
All respondents see the vital contribution of people, in terms of attitudes and knowledge. Bankers acknowledge that it will be their staff who secure their survival in the next five years.
Staff need to be skilled, helpful and motivated.
Having a company culture, a clear vision and values are important for the majority.
Among the most influential tasks/ functions in the organisation for shaping the retail bank of the future, the majority clearly regards customer relationship management (89%) as most important, followed by marketing and communications as well as IT and organisation (both 59%). Sales and quality management are also expected to become more influential (52% and 51%). More than two-thirds think the influence of knowledge management will stay the same.
More than one-third (38%) believe acquisitions will play a less significant role in the future.
Ethics and transparency are being recognised as significant business drivers.
The implementation of performance standards could help to improve financial performance (82%).
Local branches are still considered as extremely important or important by 70%.
Banks are likely to stay banks – free of coffee shops and gimmicks.
One-stop-shop and more relaxed ambience in branches are regarded as less important.
One respondent commented that the development of retail banking would depend highly on tax regulations.
Communications and marketing
Like branding, the importance of communications and marketing cannot be denied. Ninety-four percent expect marketing to be of growing importance in shaping the retail bank of the future.
Furthermore, pro-active marketing is regarded as very important to retain and foster the customer relationship (87%).
The bankers questioned see a strong importance of internal communications (see also Branding).
Market and customers
Banks are becoming more customer focused.
The majority agree that a stronger focus should be put on the private client sector (extremely important or important for 83%) as well as on banking for small businesses (89%).
Relationships with customers will change considerably – although personal contact will still be important.
The highest overall agreement is over the growing importance of customer relationship management, including attraction of customers but also building up customer loyalty.
Seventy percent of bankers expect their customers to become less loyal and to transfer between banks more frequently.
Seventy-seven percent believe ethical management of funds will increasingly influence customer choice.
Almost all believe that it is extremely important or important to differentiate from competitors.
The analysis of this data could be greatly extended given the wide range of questions and responses shown. And while the results of this survey came from 26 European countries, led by Spain with seven responses, the analysis in many instances provides critical food for thought for retail banks around the world.
