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Digital Transformation in Retail Banking: Defining Creativity, Management, and Partnerships

What prevents banks from embracing the digital trend for retail banking? Indeed, cybersecurity and data privacy threats are among the top worries, followed by the prohibitive costs and complexity that technology poses. However, as with any shift, the digital revolution in banking necessitates a solid, all-encompassing strategy.

If Digital transformation is the primary objective to redefine creativity, management, and partnerships, then there are three crucial approach pathways:

Redesigning the client experience
Building a solid partner ecosystem
Investments in emerging technologies

Let’s start with the requirement of redefining client management and partnerships. Incumbent banks will do well in this regard from what the neo-banks mainly do: Freed from legacy systems, neo-banks rely on lean business models to offer innovative features for friction-less services that power access to specialized market bases.

Creativity in Operating Models and Business Strategy for Retail Banks

As strategic partnerships with leading banking technology providers such as Maveric systems bears out, digital transformation is about both the operational and cultural movements toward integrating digital technologies across all banking functions of the bank.

Creativity becomes indispensable when FIs are mandated to maximize customer value and bring an edge to compete in a saturated market. While technology is the foundation of digital transformation, banks must implement their digital strategies creatively to do more with less. After all, many digital transformations fall short because technology is the only factor considered. Crucial on the implementation checklist are addressing the cultural barriers and the change management needed.

Driving creativity, partnerships, and management in Retail Banks – What are the success markers?

The advice for retail banks can be summed in a single phrase – operate like a technology company. Breaking it down for actionable insights,

Employ data to enhance personalization and consumer engagement.
Choose technology stacks that lower expenses and accelerate innovation ability.
Adopting a flexible operational approach that adapts to rapidly evolving markets

Conclusion

Although the banking industry has historically resisted change, the pandemic’s potential effects and the severe competition from Fin-techs drove banks to speed up their digital transformation. Banks have many opportunities to profit from digital adoption, including increased consumer convenience, process optimization, and efficiency gains. To access these values, several of the most prominent banking institutions in the world have already embraced enterprise software development.

About Maveric Systems

Starting in 2000, Maveric Systems is a niche, domain-led Banking Tech specialist partnering with global banks to solve business challenges through emerging technology. 3000+ tech experts use proven frameworks to empower our customers to navigate a rapidly changing environment, enabling sharper definitions of their goals and measures to achieve them.

Across retail, corporate & wealth management, Maveric Systems accelerates digital transformation through native banking domain expertise, a customer-intimacy-led delivery model, and a vibrant leadership supported by a culture of ownership.

With centers of excellence for Data, Digital, Core Banking, and Quality Engineering, Maveric Systems teams work in 15 countries with regional delivery capabilities in Bangalore, Chennai, Dubai, London, Poland, Riyadh, and Singapore.

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Retail banking digital transformation – Choosing a digital platform.

Today’s uncertain economic climate has little tolerance or margin for underperformance. Banking faces severe tests. From knowing where to find and make profits to protecting and expanding strategic revenue streams, success in today’s evolving markets mandates that FIs must define and deliver value propositions that can win in the digital age.

Given the spirited forays of BigTechs and Fintechs, Retail banking institutions should discard older playbooks. The incumbents will do well to operate more like the Tech companies – advance their data capabilities, employ next-gen tech stack and embrace agile operating models.

The retail banking digital transformation will neither be a simple nor a quick fix. For one, a profound examination of consumer expectations is a first step, followed by shifting incumbent banks’ scale advantages in their branches to commit to innovations.

How should Retail Banks prepare for tomorrow’s customers?

Retail banks must reconfigure their value propositions to simplify and enrich the customer experience and create value. To do that, they need to choose digital platforms basis their capital investment appetite and the competitive landscape in which they operate. Three digital platforms support the entire value chain.

Daily banking platforms offer frictionless access to diverse retailers and service providers.
Complex lending platforms that support end-to-end ecosystem partnerships for life events and non-daily events.
Wealth and asset management services platforms offer hyper-personalized advisory support that helps investors increase and protect wealth across lifetimes.

Partner or a Vendor?

Digital banking platforms (DBPs) implement next-generation tech stacks to enhance self-service customer journeys and give customers increased decision-making powers. However, for DBPs ranging from development platforms/ toolkits that would enable banks to develop their services to highly packaged off-the-shelf services, the landscape ranges from global and local players and industry-specific backgrounds such as payment processing and core banking.

But more than a vendor, a digital transformation partner like Maveric is crucial to keep pace with the rapid rate of change and to employ new products and services quickly and effectively.

Digital banking platforms

Since the increase in mobile banking, DBPs have evolved to manage the whole customer lifecycle. Leading banks favor the interaction and customer engagement elements over transaction-centric services as part of their overall broader omnichannel strategy. Here are a few functionality-driven DBPs.

Online banking: Internet-based access portal for basic banking functionality (e.g., account information and payment transfers)

Mobile banking: Including SMS, WAP, smartphones, and tablets with the same functionality as online banking, as well as biometric and facial-recognition technology.

Origination/onboarding: Supporting direct digital applications and automated client onboarding
Customer engagement: Independently access, manage and customize end users’ account information.
Employee engagement: Banking personnel communicates with the client on the digital banking platform via devices to improve the customer experience.
Digital marketing and customer communication: In-application marketing alerts, banner adverts, and targeted marketing message support.
Analytics: Track individual customer journeys across multiple devices and channels.
Multichannel management and integration: Omnichannel experience within the digital channels, contact center, ATM, kiosk, and the branch and integrate new digital channels as required

Choosing a Digital Platform

Flexible system for dynamic product and service innovations.
A system that creates and launches new banking services with superior speeds.
Offers omnichannel banking interfaced seamlessly with multiple platforms.
Holistic client-tailored data repositories and dashboards.
Compliant across industry regulations and minimized operational risks.
Employs control and corporate governance tools to identify and rectify transactional issues.

Conclusion

To compete with technology companies, banks must use comprehensive data infrastructure to support data collection, storage, advanced analytics, and a digital marketing engine to translate analytical insights. Moreover, retail banking business models require an IT infrastructure that handles demand variations and processing capacities to deliver new solutions through faster turnaround times.

About Maveric Systems

Across retail, corporate & wealth management, Maveric accelerates digital transformation through native banking domain expertise, a customer-intimacy-led delivery model, and a vibrant leadership supported by a culture of ownership.

With centers of excellence for Data, Digital, Core Banking, and Quality Engineering, Maveric teams work in 15 countries with regional delivery capabilities in Bangalore, Chennai, Dubai, London, Poland, Riyadh, and Singapore.

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Challenges in the Retail Banking Industry 2022

Retail banking is at crossroads given the tectonic technology forces and the altered consumer behaviors post-pandemic. Before the year is up, expect leading retail banks to do more of the following.

Realigning their technology investments to enhance omnichannel and hyper-personalized customer offerings.
Increase cross-selling and up-selling to existing customers and focus on retention equally to customer acquisition.
Increase customer deposits rather than play the “rate” game.
Elevate their digital marketing efforts across social media and user-generated content.
Clear obstacles that prevent ecosystem partnerships, including Fintechs.

What does the future look like?

Even though strict regulations and new technologies continue to affect the Retail Banking industry, it may be that the biggest challenge for the industry is to keep up with customers’ fast-changing needs. Today, banks have a new type of customer: one who expects the same level of customer service from both banking and non-banking industries as he would from new digital consumer platforms.

Top challenges in the retail banking industry

Putting the customer back into the center.

A customer’s relationship with a bank has many crucial touch points where decisions need to be made, such as when the customer first signs up or when a problem needs to be fixed. Four customers rely on their Relationship Managers (RMs) and Customer Service Managers (CSMs) to research and choose the right products. With the advent of self-service channels, banks must reclaim their legacy customer “touch” by building a ‘Customer Centricity’ culture. While 75% of the largest retail biggest banks claim to be taking proactive steps in that direction, many others are yet to start.

Where is the ‘human’ in personalized service?

Every traditional retail bank finds it tough to offer customers a unique and personalized experience. When it comes to online banking, this is even harder to do. Most banking apps have a standard interface that doesn’t respond to specific questions. Also, the rise of Virtual RMs (VRMs) has given consumers another reason to be annoyed since they get calls from VRMs when they don’t need help. VRMs often don’t get to know the customer well enough or keep the call going long enough to find out what they need or how well they know the customer’s banking history.

The ‘old’ obstructs the ‘new.’

Most banking departments, specifically the marketers, can’t get the information they need to send targeted marketing messages. The data is stored in old systems, which makes it hard for different departments to share information. These old systems weren’t made for the digital marketing world of today. Banks need to put money into new IT systems so that marketers can get a 360-degree picture of their customers – behaviors, life situation, risk tolerance, and prior investment or financial history.

The competition only grows.

Along with the above, the past years have seen exponential competition – Fintechs, challenger banks, and neo banks – pressuring legacy FIs to change their traditional processes and platforms. As start-ups proliferate with niche products and seamless CX, incumbents are left with few options other than to embrace digital transformations that may not be well thought through or in line with business vision. This can prove to be a formidable challenge down the road.

Vital questions for the future

Given the described challenges retail banks face in 2022, the questions below offer a quick way to map out the concerns.

Is the bank’s business model centered on the customer?
Are the ways business is done today hard to understand?
Is the technology used outmoded? Or does it predict customer problems before they occur?
Where is the ‘human’ experience in retail banking? Is it face-to-face or stuck up behind processes and platforms?
Are customers getting enough value for their investments and efforts? Are they interested enough?
Are there proactive ways to prevent cybercrime, and are these deterrent actions known to customers?

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Top Insights for Retail Banking Industry

What does the current landscape look like for Retail Banking?

Firstly, the post-pandemic retail banking industry is moving out of a climate of muted financial performance. Secondly, with common enablers of open hybrid or multi-cloud solutions, banks embrace Data & AI tech to combat security and fraud risks.

So far, breaking away from the pack signifies the next normal for the retail banking industry. And why is that? Now with most COVID protocols behind us, the urgency for retail FIs to accelerate digital transformation is driven by the sustained competition coming from Fintechs (Refer to infographic)

Here is a roundup of the Top Four Insights for the Retail Banking Industry

Tomorrow’s Competitive Advantage will come from Customization.

As part of their digital transformation journeys, top retail banks must invest significantly in high-tech analytics to improve Customization. Micro-segmentation of consumers through customer relationship management (CRM) data (such as socio-demographics, client strengths and product usage, and recent transactions) and digital behavior will be the integral aspects of digitally- agile sales programs.

From adopting various processes – increasing sub-segments in customer profiling, working through test-and-learn strategies, personalizing communications with each customer (altering the email subject line, tweaking the language tone, optimizing communications for the time of the day), and constructing a multichannel contact tree are mechanisms that will boost customer centricity.

Retail Banking’s next battleground is Digital Sales.

Successful FIs have figured out how to address more, and higher-value client needs digitally. Even though the global crisis slowed monthly unit sales across channels in many markets, it did accelerate the redistribution of the sales mix as channels recovered at different rates.

Leading retail banks are accomplishing top-tier digital sales by continuously developing the digital customer experience and optimizing it across the customer journey.

Here are a few optimization examples from CX journeys

Deploying and testing new features
Using customer relationship management (CRM) software to make preapproved offers
Shortening the application and approval process by pre-filling information
Employing digital signatures to speed up the fulfillment process.

To quickly digitize multiple priority customer journeys, more and more banks are establishing a digital “factory” – bringing together hundreds of staff to build new, best-in-class digital experiences and products.

Upping the ante in Retail Banking through Digital Services

Banks have helped clients feel secure using digital and telephone banking during COVID-19. They have therefore enabled the next generation of digital services. As of May 2020, people have shown great satisfaction with digital channels, and anywhere from 60% to 85% of consumers in Western Europe, including those aged 65 and up, prefer to utilize digital for everyday transactions.

Successful banking businesses have reported that increasing their mobile strategies has resulted in five times the engagement. Almost a third of all digital purchases today come from the mobile app. Several factors, including more exciting app features, frictionless user experience, and creative capabilities, are all responsible for this surge.

The infographic below traces the shifts in banking business models. The rate at which it evolves across various geographics is different and determined by regional influences.

Amping up the “human” in virtual channels.

To improve customer service through the call funnel, leading retail banks invest in cutting-edge Data & Analytics technology. Using chatbots to keep digital customers has helped reduce customer service calls. Conversational and adaptive IVRs today draw on a wealth of interaction history to deliver targeted answers to individual users’ questions while freeing up agents’ time to focus on more complex cases. When calls get through to agents, innovative tools like voice-to-text transcription create data sets that can be mined for insights using text analytics, sentiment analysis, and natural language processing.

It’s no secret that several financial institutions have dabbled in remote advice models like branch-to-hub or hub-to-home banking. Through screen sharing, remote advisory can mimic the benefits of face-to-face meetings and digital capabilities, such as identification for quick fulfillment and a more gratifying experience. Ultimately, these features link clients with the most qualified specialists for their inquiries, allowing for more productive dialogues.

Conclusion

In sum, there are two crucial questions retail banks must address before drawing up their next growth strategy:

How likely are banks and other FIs to see digital channels overtaking physical locations as the primary means of selling their products and services?
After the pandemic, do banks expect a reversion in customer behavior to pre-outbreak norms?

Answers to these two questions will prove crucial in the final analysis.

In 2022 and the following year, expect to see more retail banks reevaluating their revenue drivers, searching for new product launch prospects, and reorienting their offerings towards an advisory and insurance slant.

For retail banks, with escalating revenue and growth pressures, it is advisable to employ advanced analytics that identifies relevant growth niches so that optimized digital sales journeys and innovative marketing approaches can fuel growth.

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List of the retail banking services offered by the Financial Sector

What Is Retail Banking?

Retail banking, also called consumer banking or personal banking, is a type of banking that serves individuals instead of businesses. Retail banking is a way for regular people to manage their own money, get credit, and safely put cash in the bank. In terms of services, there are checking and savings accounts, mortgages, personal loans, credit cards, and certificates of deposit services that retail banks offer (CDs).

Most people use local branch banking services, which take care of all of a retail customer’s banking needs on-site and are used by most people. Financial representatives help with customer service and give financial advice at local branch locations.

A customer might not use all these retail banking services, but the most important is putting money into a checking or savings account. This is a common and safe way for people to keep their money. Also, it lets them make money on their money by earning interest. Both checking and savings accounts come with debit cards that make it easy to get money out of the account and pay for things.

How a Retail Bank makes money

A retail bank keeps the cash that its retail customers deposit. It then lends the money it gets from these deposits to other clients. The banks make money by charging higher interest rates on these loans than they pay on deposits from customers.

Retail bank types

Basis their size, there are many different kinds of retail banks, from small, locally run local community banks to the retail banking services of large, global corporate banks like JPMorgan Chase and Citibank.

Small Banks.

They work in a small area through branch banking and offer almost all the same services as the big banks. This makes them well-known among the public. But compared to them, they have smaller market shares and less money in the bank.

Large Banks.

These big banks are based in big cities and have many branches. They also have a lot more employees than small banks. Also, many retail customers buy them because they are so popular.

Online Banks.

As the name suggests, online banks do their business over the Internet and do not have physical offices. Also, they run through an official website that can be accessed anywhere in the world. Most people now prefer to do their banking from the comfort of their own homes.

Products and Services for Retail Banking

Saving Bank accounts.

Also called “interest-bearing accounts,” this is an excellent example of retail banking for basic deposit accounts to keep cash safe and earn a reasonable interest rate. The banks put the money away for short-term needs and usually limit cash transfers and withdrawals.

Checking accounts.

These deposit accounts make cash withdrawals and deposits for regular payments easy and, in most cases, unlimited. They are also called “transactional accounts” because customers can use debit cards to buy things and pay bills online. Still, they pay less interest than savings accounts.

Debit Cards.

These payment cards are used to pay for things without cash. The money is taken directly from the savings or checking account. They also link directly to the bank account and can be used at ATMs (ATMs).

Deposit certificates (CDs).

This savings account holds a set amount of capital for a set amount of time, and the bank that offers these accounts pays interest in exchange. When the money is cashed in, the person gets both the original amount and the interest.

Credit Cards.

Banks give out credit cards so customers can borrow money for digital transactions with a set line of credit. Cardholders must pay back the total amount, plus any interest, on or before the due date to avoid credit risk.

Home Loans.

These bank loans enable customers to purchase homes. Also, second mortgages mean that customers can use the value of their home as collateral to borrow money.

Personal Loans.

These loans involve getting money from banks, online lenders, or credit unions to pay bills. Also, monthly payments pay the multi-purpose unsecured loan back over a few months or years.

Conclusion.

Most people think of a retail bank when they think of a bank. Retail banks offer their customers a wide range of products and services. Every city has bank branches where people can get retail banking services like mortgages, credit cards, personal loans, CDs, and checking and savings accounts.

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If Digital transformation is the primary objective to redefine creativity, management, and partnerships, then there are three crucial approach pathways:

Creativity in Operating Models and Business Strategy for Retail Banks

Driving creativity, partnerships, and management in Retail Banks – What are the success markers?

Conclusion

Top challenges in the retail banking industry

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