Displaying search results for ""

Impact of Digital Transformation in Retail Banking Market in the UK

Impact of Digital Transformation in Retail Banking Market in the UK

With a slew of hyper-personalization initiatives, the UK’s retail banking market responds to increasingly intelligent devices, rapidly evolving CX, and real-time data processing. Coming on the back of a ravaging pandemic, stung with financial hardships, retail banks, like most banking organizations, scramble to reimagine a new future.

Today’s essential question is how far do the UK banks lag and the way to leapfrog?  

A study for Western Europe projects a future in which revenues dropped anywhere from 16 to 44 percent. The phoenix-like aspirations can come true as and when UK’s retail banking market can seize three primary opportunities: First and the easiest would be to capitalize on customers’ acceptance of digital behaviors that have evolved in the pandemic years. The second will be to launch new products (especially as physical branch numbers thin out, freeing up fiscal commitments). The third lever will pursue innovative risk mitigation approaches that aim for higher accuracy using real-time transaction data.

Digital Retail Banking in the UK – the new equation. 

The starting premise is straightforward. Before investments in digital skills and new transformation capabilities and next-gen technologies to empower customers can happen, the critical difference will come from a banks’ mindset that is not only aware of the sheer width of complexity at hand but also employs human ingenuity in the service of the single biggest (and most elusive) ‘bankable’ commodity – trust.

Digital Transformation in Retail Banking – A fair or unfair comparison?

Interwoven in our daily lives, ‘software’ has changed how we operate as a society; the definition does not completely extend to retail banking. So, on hand, it isn’t easy to imagine a life without Uber, Spotify, Netflix, Amazon, Alibaba, Google, and on the other hand, as a report suggests, only 35% of small-business executives say they depend on banks for financial advice, or only, 14% of customers experienced a financially impactful event in the last 60 months and sought help from their bank.

No matter where the verdict rests, retail banking embraces innovations in ways more than slapping more software onto an archaic system.

The influx of new-age tech in Retail Banking

The case for digital transformation – regardless of a bank’s current position, future aspirations, customer focus, brand promise, regulatory challenges, and capital constraints – is unequivocally clear: Go full steam ahead. However, there is an apparent reality that UK retail banks are coming fully to terms with, namely, the Brexit displacement. After all, financial services firms operating in the UK shifted 7.500 employees and more than $1.6T of assets to the EU.

The projections appear impressive, the disruptive technologies driving digital transformations in retail banking like Cloud/SaaS, API’s microservices, DevOps, Big Data, AI/ML, and Blockchain/distributed DB. One, the core banking platforms premised on the mentioned tech. can deliver complex functionality 20X faster, and two are 10X cheaper to run.

CX Plus

Traditional banks ‘ emphasis changes en-masse by learning from Amazon and Google (and their financial forays).

Circling back to the criticality of building trust, retail UK banks are incorporating a digitally augmented customer experience into their capability models. What does that entail?

From distribution and channels aligned to Millennial and Gen Z preferences (Omni-channel, contextual user experience, mass personalization, and open banking) to infusing analytics (flexible modular product engines riding on scalable, secure Cloud and operating on agile operating models), retail banking is combating the familiar pain points (high Opex, poor CX, reduced speed to market and weak real-time insights) with renewed vigor.

The Road to Recovery for UK’s Retail Banking

Admittedly, like other industries impacted by digital transformation, the pivot points are the same for retail banking – protect and grow market share and, at the same time, create new trust-based revenue streams.

An exciting study points out that one in four retail banks and credit unions had embarked on some form of digitalization in 2019 (and 45% had yet to launch in 2021.) Less than four of 10 feel they are halfway in their journeys, and here is the rub – only 14% have embraced Cloud computing and APIs or invested in ML workflows, or even deployed chatbots.

The reality is sobering. The ‘delusion of digital’ must be dispelled soon. 

How would UK’s retail banking CEOs know their transformation trajectory is a true one? Proof of the pudding lies in the eating.

Put the customer back into the equation and test for systemic friction (including the back end). For instance, the minutes it takes to fill out an account opening form, approve loan applications, or even the time it takes to bring a digital product to the market.

The answers will point to the journey ahead!



Retail Banking IT difficulties and arrangements in a hyper-associated age

Retail Banking IT difficulties and arrangements in a hyper-associated age

Retail Banking IT difficulties and arrangements in a hyper-associated age

As start-ups redraw the retail banking world map as we know it, there are estimates of $4.7T in revenue being displaced from incumbent financial services firms. The fierce competition coincides with the customers’ ease of switching providers. It appears the big-bang-banking moment is near. After all, the last 24-months demanded the execution of a virtual and untested retail banking services model. As customer restlessness runs at an unprecedented high, community banks, credit unions, and Fintech vie for the same pie. A study points out attrition rates in retail banking hovers around 11%, but the annual churn rates for new customers is close to 25% during the first year, half of which doesn’t make it to the 90-day mark.

Read that again: One in four customers will leave before the year runs out.

Compounding these churn challenges are the anachronistic siloes traditional banks cling to. When two departments in the same bank, a retail banker with transactional data and the wealth manager with a net worth or loan data, do not engage with the customer in a joint (or ‘Omni’ way), rich behavioral insights and sales opportunities are instantly sacrificed. In a world where customers are digital natives, operating out of multiple sources of truth is untenable.

Top five IT challenges and coping mechanisms for Retail Banks 

  1. Cost Reduction: A industry report highlights the top three priorities that consume the lion’s share of their budget: regulatory compliance, elevating customer service, and implementing new technologies. These draining effects and relentless cost reduction pressures leave little over for banks to innovate. How do banks resolve this challenge? IT cost investments for retail banks are best decided over a ‘skills maturity – market opportunity’ matrix. Integrated into the long-term strategy, C Suite leaders must demonstrate agility by estimating risks accurately and wiring that into their innovation growth plays.
  2. Answering pivotal questions correctly: When compared across their regional and global vision, core competencies, risk appetites, or capital constraints, no two banks are alike. As modernizing their core is a must to come good on customers’ digital expectations, retail banks face an exhausting slew of variables. Where does one begin? The front office or middle office, or back office? What are the critical use cases that should be pursued? What are key trends to be prioritized from an IT perspective – conversational banking, credit underwriting, anti-fraud, cyber security, AI-enabled biometrics, or Omnichannel banking? These questions do not come with easy answers. The way to move forward is via deep dives that assess revenue impact sizes and the ecosystem opportunities that work best for leapfrogging attempts.
  3. Addressing Open Banking: The third IT challenge that retail banks face for a year comes from Open banking. CMA (competition and market authority) and market forces have undeniably brought banks into an aggressive mode. The complex demands involved in creating open, collaborative platforms require refurbishing legacy systems, redefining banking ecosystems, building holistic business models that monetize data assets and avoid future data siloes. Understandably, open banking is relatively new, as leading retail banks vigorously prepare for it. Agile and responsive intermediary layers atop core banking are being implemented. These new systems allow for API engagement, enabling third-party providers to receive customer and transaction information. Another way banks are meeting the IT challenge is by actively collaborating with Fintechs to tap into new and unrealized revenue opportunities.
  4. Meeting the AI and ML challenges: The potential annual value of AI and analytics for global banking is tipped to cross $1T. Banks, like other industries, are thrust into an AI-powered digital age as data storage, processing costs crash, customer access, and connectivity increase each day, and the mountains of data generated by the second, call for ‘beyond-human’ decision-making abilities. What does this shift do to IT departments in traditional financial organizations? Under pressures to rapidly digitize, simplify and rebuild their processes to become more agile, IT leaders fail to precisely map how tomorrow’s winning equation will function with its AI and ML variables. The sweet spot lies in adopting a flexible and adaptive approach that presents challenges in a future-ready framework where technology meets its business potential.
  5. Enabling Innovation: In the climate of customer-centric business models, optimized distribution, leveraging data analytics, and proactively managing risks, the largest source of challenge for IT departments comes from the need to foster innovation capabilities. While banking leaders highlight the primary focal areas to innovate (customer interfaces and channels, customer need identification, products, and core platforms), banks are not exactly the hotbed for innovations. The reasons that aren’t difficult to decipher are not restricted to IT. First is the dearth of talent across data and analytics competencies and agile development capabilities (product and technology). The second block comes from limited ecosystem partnerships that hinder IT functions to create innovation crucibles for prototyping new products. The solution for this lies in changing the current mindsets, namely, leadership commitment (and innovation sponsorships) in cultivating a penalty-free culture.

Retail Banking’s 2022 playbook with Maveric Systems

Retail Banking’s 2022 playbook with Maveric Systems

Today, virus is not the only thing that prevents customers to physically walk into a bank. When retail banks do not invest (mentally and otherwise) in digital transformation, they are unwittingly joining hands with the virus. The Result? A drain on everyone’s resources – banks’, customers, and the economy.

The paradigm shift that retail banks see today centers on ‘convergence’. In other words, an uptake in digitization is accelerating the trifecta-fusion of – technologies, industries, and ecosystems. There is no ‘one’ product, service, or value proposition. Look, for instance, the way money is created (Gig economy), transferred (UPI’s), stored (e-wallets), and even, owned (the nascent NFT economy).

2022’s Retail Banking Outlook – what are the key factors?

Adopting a playbook that matches the nimbler FinTech’s and BigTech’s, pursuing scale with M&A’s, running greener operations, managing the intersection of cyber risk and financial crimes; a recent study highlights an important factor at the heart of banks’ 2022 growth strategy: create a new financial architecture with digital assets.

Before discussing specific digital apparatus that retail banks should embrace, let’s build elements of the business model that will sustain in today’s unique environment. Because digital transformation (or any new shiny tech) after all, is a secondary means to the primary end – a banks’ growth – be it through expansion, optimization, M&A, new revenue creation, or a mix of all.

Essential elements of business models that will drive 2022’s retail banks

In an environment that prides resilience over all other, retail banks can make largest gains, when their business models are anchored in superior customer experience. Talking about it is one thing, engineering it intelligently across customer journeys, is another. Of course, these elements when orchestrated robustly elevate the customers’ experience. Presented as a checklist, are questions for retail banking product owners.

  • Value for money: Is cost commensurate to the financial benefit received?
  • Appropriate: Do features offer unique solution in the current circumstances?
  • Education: Are features- benefits- trade-offs stated transparently?
  • Resolution: Is proactive identification & quick remedies intrinsic to the product?
  • Trust: In ambiguous times, do retail bank products bring ‘peace of mind’?

That last attribute – Trust – is game changing for another reason. Once the pandemic-effect recedes, companies will undoubtedly innovate their digital services, to hold on to customers that were overnight digital adopters. Right? Now, according to a McKinsey report, the industry that gains the most from this positive change is none other than retail banking! To seize that advantage requires horizon-based actions.

Retail banks marching full steam on digital mandates – actions and benefits

Immediate term

These start with picking of low hanging fruits – placing customer’s interests before the bank’s. Personalizing omni-channel touchpoints that increases intimacy is another. And a third, will be to base marketing campaigns and sales narratives on themes that accentuate customer trust.

Medium term

Along with focus on customer trust, medium-term digital transformations must innovate across 4 distinct aspects of the customer value chain: privacy & security, e2e service availability, UX/UI strategy and the Phygital (physical + digital) interactions like chatbots, apps, and in-branch technologies.

For starters, these slews of initiatives will keep the wolves away from the barn.  But surviving is hardly thriving.

Tectonic Forces in Retail Banking

There are clear tectonic forces that rock retail banking. Accelerating globalization amidst geopolitical concerns, upheavals in the way we work, urgency of social – environmental sustainability, and advances in embedded finance for digital natives.

The obvious question that forms is – If the future has arrived early, what does retail banking do?

Like we nudged earlier, the longer-term solution will be to create a digital apparatus (or, the financial architecture) through new-age assets. What does that entail?

Long Term

In short, retail banks must realize potential of their tech. investments. From increasing adoptions across AI, cybersecurity, cloud computing, robotic process automation, and advanced analytics; there are enough indications that global banks – JP Morgan, BNP Paribas, HSBC, Citi, ING, Barclays, Japan Post Bank, Wells Fargo to name a few – are indeed embracing quantum technologies.

Beyond these technologies, rather concomitant to them, are the entire matter of digital assets (or NFT’s) built on Web 3 (a.k.a. the crypto economy).  Leading retail banks today are regarding this segment with considerable interest. The next ‘moon shot’ – decentralized finance – is just getting started, with everyday advances reported across hardware, software, processes (mining and transactions), and applications (trading, remittances, and payments).

The combined market cap of all crypto currencies, as a Newsweek report  puts it is approximately $2 Trillion – the same as Apple, the world’s second largest company.


Even though there is uncertainty in regulatory status, not to mention concerns regarding security, privacy, and control; Digital assets are beginning to offer unprecedented opportunities (especially in emerging markets).

But, before breaching the next frontier of digital assets, retail banks must get their existing worlds in order. Harnessing the power of data and analytics, modernizing their core technology, building a digital culture and mindset, and optimizing via next-gen automation – all- will help create the much-needed and stunning digital experiences.

After all, successful (and sustainable) digital transformation stories – DBS Singapore offers one – make for fascinating learning and also inspiration.