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Disruption in Retail Banking

On the back of my recent post, Delivery 2.0: Blurring the Lines Between Retail and Delivery, the next industry about to have its moment is quite clearly Retail Banking. Why? Because, as customers of banks, it’s becoming less clear by the day what their value is. In the same way that retail stores have been severely challenged in recent years and the High Street in most towns has become nothing more than a collection of pound shops, charity stores and convenience grocers, banks are also shutting up shop.

Gone are the days of the friendly bank manager, the need to deposit and withdraw from a physical location and the over-the-counter discussion one would have with the teller. Put simply, once an account can be switched at the click of button, the retail banking industry becomes a commodity, a utilitarian service that offers little value to the mainstream customer. If you think about it, the insurance industry has already become a 'digitally brokered - marketplace' with the rise of the comparison sites like MoneySupermarket and Comparethemarket, so why not your current account? If it’s simply a transient holding spot for your monthly wages and a negotiation on your overdraft or loan charges, what real benefit does a bank add?

Some retail banks got well ahead of the game in the early 2000s, for example when Barclays launched its online service. It was simple, crude but effective in being able to manage basic transactions. It was an MVP that proved effective in building out digital services that I for one have now become glued to as I can do everything I need behind a 5 digit pin code on my mobile phone. I can even call the bank when I need to through the 'call us' button in the app and I will be instantly authenticated and prioritised in a queue to talk to a real person. Now it's simple, effective and very slick.

So why do I stay? Certainly not because I have a proactive 'money management' service from Barclays nor because they offer the best rates in town, but because I have a deeper intrinsic loyalty with them (and perhaps a nostalgic one) as the bank that gave me my first account when I was a bright eyed 14-year- old depositing my 1 and 2 pence savings in bags across the counter.

And here is the challenge if we remove the nostalgia and the perceived brand loyalty, customers want to save money or make money from money. Everything else is bells and whistles unless it’s a relevant add-on like holiday insurance, will writing services, or gadget insurance, etc…

A bank has access to all my spending habits, behaviours, direct debits and when my premier banking manager now comes to my home to talk to me (which is a breakthrough) I ask her, “I simply want my money managed in the most effective way. Can you do it?"

The answer so far has been no!  

But this is changing. Through our work with Suncorp Bank and others, we are seeing this transition come to life, a real focus on the customer, a real focus on value for money from your money, not just the traditionally transactional nature of our interactions with a bank.

When it becomes as easy to switch my bank account as it does my gas bill, my car insurance, what is left? We are seeing a clamour to build better tools for customers such as mobile banking which will be a temporary lifeline, but what is the real value proposition of a bank when switching really takes hold?

Thoughtworks has a trusted reputation with Financial Services in rebuilding core banking platforms, insurance and intermediary services. If you would like to know more about how we can help you keep your customers please get in touch.

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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