Retail banks are feeling the pressure, according to Capgemini’s latest World Retail Banking Report.
Customers are demanding smooth, personalised service – which banks struggle to deliver – while tech companies become an increasingly popular alternative, according to the report.
Customer expectations was the clear disruptor of retail banking in 2018, according to the banking executives surveyed in the research, followed by regulatory pressure, demand for digital channels and emerging technologies.
The report, produced in conjunction with Efma, found retail banks were struggling to meet the disruptive customer expectations. Around half the time retail banks don’t deliver a satisfactory service, according to the report. Barely half (51.1 per cent) of respondents said they had a positive experience with their retail bank branch. Bank websites recorded slightly higher satisfaction levels (51.7 per cent) but both channels satisfaction levels worsen for younger and tech savvy retail bank customers.
“This less than stellar result may be because bank investments largely target augmentation of front end interfaces versus improvement of the end to end customer journey,” the authors write.
Big tech muscles in
Meanwhile, big tech companies – renowned for delivering digital experience – become a potential alternative to traditional financial institutions. According to the report nearly a third of customers said they may turn to big tech firms for financial products and services. Unsurprisingly, that confidence in tech companies increases for younger and more tech savvy customers.
Moreover, the number skyrockets to 70.2 per cent when individuals are already considering switching banks, suggesting stickiness remains a vital advantage for incumbents over big techs.
According to the report, switching to a non traditional provider will be particularly attractive in the APAC region with several well established digital payment services including Alipay and Tenpay, popular payment arms of Chinese tech giants Alibaba and Tencent.
“With a vast customer pool, reliable infrastructure, and solid brand reputation, big techs are likely to challenge banks and become significant players in the financial services industry,” the report said.
However, for Australian banks tech companies are not necessarily a foe. Incumbents here are looking to generate non traditional revenue streams and target niche areas of the banking value chain, according to Philip Gomm, head of financial services at Capgemini ANZ.
“Australian banks are interested in collaborating with fintechs and big techs to make this happen, with 58 per cent of banks beginning to think of their business as a platform. The bank of the future will look nothing like the bank of the past,” Gomm said.
“Banks are interested in new revenue streams beyond traditional avenues and made increasingly possible by building an open banking ecosystem. To stay one step ahead of their competitors and identify new forms of revenue, many are looking into collaboration with third parties to delight customers with new experiences.”