Home > blog > 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!


Article by

Maveric Systems