Top 10 Trends in Retail Banking 2018

Top 10 Trends in

Retail Banking 2018

What You Need to Know

Contents

Introduction

3

Trend 01:

Banks Make Significant Investment in Digital Transformation

4

Trend 02:

More and More, Banks Collaborating With FinTechs Through Different Models

6

Trend 03:

Banks Look To Leverage Digital IDs beyond Authentication

8

Trend 04:

Banks Strive to Bring Distributed Ledger Technology Out of Labs,

Into the Real World

10

Trend 05:

Banks Deploy AI and RPA to Increase Productivity and Efficiency

12

Trend 06:

Banks Leverage Analytics to Transform End-To-End Customer Journeys

14

Trend 07:

As Security Threats Recede, Banks Leverage the Cloud to Cost-effectively

Streamline Processes

16

Trend 08:

Digital-Only Challenger Banks Threaten to Beat Retail Banks at Their Own Game

18

Trend 09:

Alternate Lenders Leverage Alternative Data for Providing Credit Facility

to a Wide Range of Customers

20

Banks Connect With Third-Party Providers to Drive Customer-Centricity and

Implement New Models

22

Trend 10:

2

References

24

About the Authors

27

Top 10 Trends in Retail Banking 2018

Introduction

The global financial services industry continues to be disrupted, as FinTech adoption

gains momentum among banking customers. Augmenting customer experience

is the need of the hour as customers increasingly adopt digital products and

services and digital-only banks challenge incumbents to deliver better digital

innovation. As a result, banks are investing aggressively in digital transformation

to enable nimbler processes and support digital products and services. They are

also collaborating with FinTechs to learn and acquire innovative approaches and

technological capabilities.

Under pressure to boost revenue, cut costs, and at the same time deliver a better

customer experience, banks are investing in emerging technologies and processes

such as digital identity systems, artificial intelligence, and blockchain. In order

to provide seamless customer journeys, banks are automating their processes,

making increasing use of cloud implementations, leveraging analytics for better

customer engagement, and providing a more personalized and enriching customer

experience. Regulations are also spurring banks and FinTech collaboration through

various Open Banking initiatives, with banks now being mandated to share data

with third-parties through APIs.

To stay competitive, banks must remain cognizant of numerous implications from

within and from outside the financial services industry. This document aims to

understand and analyze the top-10 trends in the retail banking industry expected to

drive future dynamics of the banking ecosystem.

3

Trend 01: Banks Make Significant Investment in

Digital Transformation

Banks are investing aggressively to digitally transform as

competitive pressures and customer expectations rise.

Background

? FinTechs have accelerated the digital disruption and are maximizing the use of

technology, giving stiff competition to traditional banks

? Legacy systems and complex process architectures are limiting banks¡¯ ability to

enhance customer experience, impacting their advanced analytics capabilities

? Increasingly, customers are choosing their primary financial services provider

based on the ease with which they can operate their financial products, and are

demanding a personalized experience:

¨C¨C Experiences with companies across different industries, such as telecom and

retail, have reshaped customer expectations

Key Drivers

? Banks are facing stiff competition from agile FinTechs and digital-only banks that

offer superior customer experience

? Banks have a high focus on automation, big data, analytics, and innovation that

require an agile architecture to support the digital ecosystem

? Customers are getting more digital and tech-savvy, and this is creating demands

on legacy bank infrastructure to support new modes of engagement:

¨C¨C More and more, customers are migrating to digital channels that now form the

bulk of banking transactions

? To leverage the latest technologies and optimize cost efficiencies, banks are

looking at end-to-end digital transformation

Exhibit 1: Banking Executives Strategic Priorities

71%

Redesign / enhance

digital experience

for consumer

30%

Migrating customers

from physical to

digital channels

41%

Digital enhancements

for improving customer

experience

35%

Digital laggards in FS industry could

potentially lose up to 35% of the total

market share to digital pure-plays

Digital business/ digitalization is the #1 strategic business priority

for industry CIOs in 2016-2017

Source: Capgemini Financial Services Analysis, 2017; "The Digital Banking Revolution: Who Will Survive?¡±,

Je?rey Pilcher, The Financial Brand, Jan 31, 2017; "How a bank bet on ?ntech for its digital

reboot¡±, Bryan Yurcan, American Banker, Aug 30, 2017; Top 10 Strategic Priorities for Banking in

2017, Jim Marous, The Financial Brand, Dec 7, 2017

4

Top 10 Trends in Retail Banking 2018

Trend Overview

? Digital disruption has impacted the financial services industry, and banks are

investing heavily in digital transformation:

¨C¨C BBVA has invested extensively in digital transformation and its number of

digital customers increased from 33% in June 2016 to 39% in June 20171

¨C¨C When advising customers on mortgages, ABN Amro uses a webcam to

eliminate the need for customers to hand over documents at a branch2

¨C¨C BNP Paribas is investing €3bn on digital transformation, boosting spending on

digital initiatives by 50% over the next three years3

? Banks are bogged down by legacy systems, thereby hindering their ability to

innovate new products and services, thus impacting customer experience:

¨C¨C Banks having conventional paper-based processes and legacy systems are

finding it extremely tough to compete with financial institutions who have

new-age digital platforms

? Rapid growth in online and mobile banking, as well as empowered customers

embracing digital touchpoints, is further fueling the need for investments in

digital transformation

? Superior digital banking capabilities leads to better data aggregation and

predictive analytics capabilities, thereby improving cross-selling

Implications

? Digital transformation will be imperative for banks to automate processes and

lower their costs

? Effective digital transformation will help banks to drive agility and quickly launch

new products and services:

¨C¨C Banks will look to integrate User Experience (UX) design into their digital

transformation projects for a more accurate analysis of customers¡¯ needs

and preferences

? Banks will either reinvent themselves by transforming digitally or risk their

relevance in the fast-evolving digital economy:

¨C¨C With Gen Y and tech-savvy customers driving digital adoption, digital

transformation is no longer an option but a survival need

? Innovating on digital products and services will be the key to enhancing

customer experience

1

BBVA 2Q17 Results, July 27, 2017, accessed October 2017 at

2

¡°The Future of Retail Banking: Are Bots Ready to be Your Next Banker?¡±, Eric Kline, Nov 28, 2016, accessed October 2017 at



3

¡°BNP Paribas to spend €3bn on digital transformation¡±, Michael Stothard, Martin Arnold, Feb 7, 2017, accessed October 2017 at

c57ac5ca-ec9b-11e6-ba01-119a44939bb6

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