RETAIL BANKING AND SOCIAL AND DIGITAL EVOLUTION
Retail Banking today is a complex organization that evolves in an environment strongly impacted by both societal and technological developments as well as by a regulatory framework linked to the evolution of the risks within the banking profession.
It is therefore imperative for the retail banker to integrate the influence of this context into his future strategic choices.
These developments have not only impacted the growth potential of retail banking activity, but they have also led to changes in its organization as well as in the interactions between the retail banker and his customers on the one hand and his employees on the other hand.
We will not focus on developments related to regulatory aspects relating to Basel prudential rules, anti-money laundering and the financing of terrorism or even good governance and compliance.
We will limit our scope to the major societal and technological developments and their impact on the organization and activity of retail banking in its relationship with both internal and external customers.
II. Retail Banking and Socio-Cultural Evolutions
It is worth highlighting a gradual change in consumer behavior whose satisfaction and loyalty are at the heart of the bank’s concerns as guarantor of its sustainability. This comes from the generational changes observed successively since the post-World War II period, namely:
- Born between 1946 and 1965, the “Baby Boomers” began their careers in the late 1970s and today have reached retirement age.
- “Generation X” born between 1966 and 1979 is today at the top in terms of career and financial situation. Work is at the heart of the concerns of this generation, egocentric, stressed, which adapts less easily to new situations, for fear of losing their job.
- Born between 1980 and 2000, “Generation Y” aka “Millennials” who will be between 20 and 40 years old in 2020 is a “connected” generation that trades online, uses smartphones and whose purchases are strongly influenced by the social networks.
- Members of “Generation Z” born from the year 2000 have not yet arrived on the labor market. Considered to be the silent generation, technology dominates their daily lives. This generation was born with and cannot live without the internet, which has become its main communication tool to interact both privately and professionally.
The immediacy and diversity of sources of information mean that the consumption behaviors of financial products are changing significantly: Customers are now better informed, more impatient, more demanding and more volatile.The concerns of young people on ecological issues, for example, mean that they will also develop a more favorable attitude towards the bank which, in addition to its economic role, invests in social or environmental and sustainable development issues.
III. Retail Banking and Technological Developments
Innovations and new forms of competition have prompted the retail bank to review its organization as well as its product and service offering.
FinTech, a term resulting from the merging of words “finance” and “technology”, offers financial services based on new digital technologies.
Thanks to its technological advantages and certain regulatory asymmetries, FinTech has managed to capture market share without really calling into question the domination of the big banks, which tend to favor partnership strategies.
FinTech offers both B to B and B to C services, even developing offers for retail banks.
FinTech targets niche activities (money transfer, crowdfunding, etc.) and is characterized by its agility and a business model centered on customer needs.
FinTech thus benefits from a technological advantage over the retail bank which is struggling to modernize its IT systems and facing very high maintenance costs of existing tools and the growing costs linked to cybersecurity.The rapidity of technological transformations leads banks to perceive startups as potential allies. In recent years, several banking groups have entered partnerships with FinTechs to offer their customers better quality services without having to develop their own systems.
For example, BPCE acquired Fidor Bank and LePotCommun.fr, BNP Paribas acquired Compte Nickel and Crédit Mutuel acquired Leetchi and MangoPay.Most banks are now ready to take the plunge to improve their customer experience while reducing operational costs
Moreover, with the development of Big Data, the emergence of new players in the financial market with GAFAM, Telco and Neobanks has come to compete with traditional banking.
Focused on the user experience, 26 neobanks in France with 3.5 million active accounts allow customers to take advantage of services that are not yet included in the applications of traditional banks. In general, these online banks are subsidiaries of banking groups.
The interest rates offered by these neobanks are very competitive, the banking experience is simplified, the registration procedure is fast, and all operations are carried out quickly. (Source: Actionco.fr)
The development of artificial intelligence is part, with the blockchain, of the technologies allowing the banking and finance professions to accelerate their digital transformation
IV. Retail Banking and Customer Relations
The impact on the customer relationship of the digital transformation process initiated by the banks has materialized through the creation of innovative products and services (chatbot, roboadvisor, etc.) the simplification of operational processes (workflow, etc.) to facilitate the journey customer and create a memorable digital customer experience.
The consumer is looking for a simple, fast and inexpensive service and now wants to be able to “consume the bank” at any time, wherever he is and by means of various interconnected terminals/channels “ATAWAD: Any Time, Any Where, Any Device”.“Zero paper – zero move” results in a significant drop in the frequency of visits to branches.
The retail bank is required to move from a multi-channel distribution to the benefit of a cross-channel approach by offering the possibility to its customer to initiate a transaction on a first channel and to conclude this same transaction on a second channel.
The creation of a multi-channel banking department ensuring the management of interconnected distribution channels has thus become a strategic imperative.The digital revolution contributes on the one hand to the intensification of competition in the banking market and on the other hand, offers new opportunities for diversifying the range of customer services.
In this sense, crowdfunding platforms have experienced recent development by offering MSMEs sources of financing different from traditional bank loans and more suited to their needs. According to the crowdfunding barometer, France had 205 crowdfunding platforms in 2020 which in total collected around 1,020 million euros, an increase of 62% compared to 2019. However, these sums remain marginal compared to the bank loans mobilized by French companies, whose outstanding amount is around 1,200 billion euros. (Source: Finance pour Tous)
The exploitation of Big Data at the level of the marketing strategy aims to improve knowledge of customers to establish a closer link allowing a pro-active approach in terms of adequacy of the product to the profile/need of the customer.“Big Data” represents a heterogeneous mass of exponentially growing digital “mega-data” produced by customers, the use of which by the bank requires increasingly sophisticated specific computer storage and analysis tools
V. Retail Banking and Managerial Approaches
The evolution of management methods resulting from generational evolutions requires meeting new expectations and requirements of employees in terms of quality of life at work, which has become an essential component of modern management: employees today aspire to more recognition, mobility, support, participation in decisions as well as a simplification/shortening of hierarchical levels.
Today’s manager is therefore now under an obligation to improve communication within his team and to promote cooperation and the use of collective intelligence, which is increasingly necessary for the involvement of employees and the bank development.
At the same time, technological developments have enabled the bank to introduce new forms of work organization regarding the layout of spaces and working hours (open space, flex office, etc.) and “digital working” tools as well individual (smartphone, tablet, etc.) and collaborative (Wi-Fi hotspot, videoconference, intranet, etc.)
Teleworking, for its part, experienced a strong acceleration following the pandemic linked to Covid-19 and should remain a regular practice in the future as long as this results in productivity gains improving the operating ratio of the company. Bank.
The digital transformation and the exploitation of new technologies by banks in collaboration with new players in finance only make real sense if they are felt positively by both customers and employees.
A global study carried out by Finastra (company specializing in software development) before the Covid-19 pandemic among nearly 800 financial and banking institutions in the United States, United Kingdom, Singapore, Germany, Hong Kong, the United Arab Emirates and in France, shows that strategic partnerships with FinTechs are multiplying and are perceived as a success by banks.
Nearly 80% of them believe that the partnerships concluded with these startups have greater advantages than the costs incurred since they improve the customer experience while reducing operational costs.The bank must now act not only with a view to ensuring customer satisfaction but also employee satisfaction, failing which it will come up against the difficulty of retaining its customers and retaining its best talents.
FinTechs represent a major challenge in terms of innovation, growth, and employment worldwide. These innovative companies use digital, mobile, and artificial intelligence technologies to provide more efficient and less expensive financial services.They offer a growing variety of solutions, both for retail and corporate customers. Many factors have favored the arrival of these FinTechs. In addition to the emergence of new technologies, there are also economic, sociological, managerial and generational developments.