Retail banking in 2020
Beobank benchmark pinpoints three focal points in customer-centric retail banking
The traditional banking model is undergoing a substantial transition towards a customer-centric model due to several challenges currently facing retail banks. The Beobank benchmark proposes three focal points in order to meet these requirements: choose the right customers, provide the experience they expect (either digital or face-to-face) and use short-term and long-term metrics. Throughout the report, examples of financial institutions are provided to emphasise that retail banking will not look the same in 2020.
This benchmark is the first step in the research project on customer centricity that we set up with our Prime Foundation Partner Beobank. “We’ve benchmarked Beobank against the relevant best practices and are investigating what changes could still be implemented and how,” explains Professor Kristof Stouthuysen. He goes on to outline the challenges the global retail banking industry is facing: “Especially in highly developed Western markets, the ‘new normal’ is characterised by slow growth, uncertain long-term liquidity, significant loan losses, rock-bottom interest rates and changing client preferences (such as the demand for convenience and around-the-clock access to banking services). As a result, banks need to get ahead of these challenges and make smart choices about what customers to serve, how to win and where not to play.”
The ‘right’ customer
A crucial aspect in transforming a bank where the customer plays the lead is selecting the right customer. A retail bank can use different sophisticated segmentation techniques to forecast future customer behaviour in order to target the most valuable customers for them. Subsequently, specific actions can increase the value of the customer and provide superior customer experience. Examples of ways to enhance customer retention or loyalty are organising tailored marketing campaigns, making relevant recommendations on product offerings and delivering personalised services. Kristof: “To offer tailored marketing campaigns and personalised services, the isolated product silos need to be reshaped. Instead, integrated business units concentrated around customers are essential to establish collaboration and information-sharing.”
Digital and face-to-face
Technological innovations will also play an important role in optimising the distribution channel to offer a superior banking experience. In Western Europe, the popularity of digital channels is still increasing, with an expected usage rate by 2016 of more than 80% and 60% for online and mobile banking, respectively. These channels give customers immediate access to banking services.
However, as research associate Ineke Teunis points out, bank branches are also still very much appreciated by customers: “They represent the core strategic channel for gathering deposits that ‘stick’, as well as for enhancing customer relationships, cross-selling and generating true value. The service models of branch networks may be shifting owing to new economic realities and continually evolving technology, but the crisis has deepened the need among individual customers and small businesses for reliability and reassuring face-to-face contact. As a result, the role of the bank branch will be more important than ever in the post-crisis era.”
Short-term and long-term metrics
In order to foster these transformations, specific metrics can be taken into account in order to monitor performance levels. Ineke: “Short-term sales targets will be supplemented with long-term customer-oriented metrics, such as customer satisfaction or the lifetime value of customers.”
Feedback from Beobank
“The banking landscape is indeed undergoing a transition”, Guy Roosen, Head of Investment Products & Advisory at Beobank, confirms. “Technology, customer needs and the competitive playing field are changing rapidly. For banks to maintain successful, they must invest in the way they engage with their customers. It is clear that a holistic approach with a balanced execution of these three focal points is crucial on the journey towards customer centricity; building an engagement model with our customers in a segmented, multi-channel approach.”