Retail Banking 2020 - Evolution or Revolution?

Mar 2014

Powerful forces are transforming the retail banking industry. Growth remains elusive, costs are proving hard to contain and ROEs remain stubbornly low. Regulation is impacting business models and economics. Technology is rapidly morphing from an expensive challenge into a potent enabler of both customer experience and effective operations. Non-traditional players are challenging the established order, leading with customer-centric innovation. New service providers are emerging. Customers are demanding ever higher levels of service and value. Trust is at an all-time low.

Against this background, 70% of global banking executives believe it is very important to form a view of the banking market in 2020 – to understand how these global trends are impacting the banking system in order to develop a winning strategy.

Executives are divided as to who will be the primary beneficiaries of these trends. Just over half (54%) believe that large banks will be the winners in 2020. The other half (46%) see smaller banks capturing share through increasing differentiation. Executives are also divided as to the threat posed by nontraditional new players: 55% believe they pose a threat to traditional banks, while 31% believe they present innovative partnership opportunities.

Executives also differ in their views by geography. For example, fewer US executives think it important to form a view of the industry in 2020 (61%) than executives in the emerging markets (79%). And many more US executives view non-traditional new market entrants as a threat (71%), than executives in Asia (42%), where more view them as an opportunity (44%) for partnering and prospering together. This divide between developed and emerging market thinking is a theme throughout the survey.

In the report, we address these questions and concerns, and consider how global macro-trends will impact the retail banking industry.

Priorities for 2020

However, the pace of change is increasing and banks need to do even more to ensure they are well-positioned to succeed in the future. Through our proprietary research and insights from client engagements, we have identified six priorities for success in 2020. They are:
  1. Developing a customer-centric business model
  2. Optimising distribution
  3. Simplifying business and operating models
  4. Obtaining an information advantage
  5. Enabling innovation, and the capabilities required to foster it
  6. Proactively managing risk, regulators and capital