Deloitte have issued a report entitled “Banking disrupted – how technology is threatening the traditional European banking model” which makes interesting reading as they suggest that the retail banking sector is now facing its greatest ever challenge.
Deloitte acknowledge that we have been here before and that the demise of the retail banking sector has been talked about in the past, but banks have managed to shrug off previous threats. However, they believe that the current challenges facing the retail banking sector are unprecedented and that their “…core advantages over new entrants are being eroded by technology and regulation”. They believe it is going to become increasingly difficult for banks to produce profits above their cost of capital.
The report also says that banks have a short window within which to take advantage of cheap sources of funding from central banks in order to generate profits but that these profits should and must be re-invested into strategic projects which enable them to fully utilise their branch networks and the data that they hold on their customers. This is seen by Deloitte as their “USP”.
In short, the retail banking experience for customers has to evolve into the same experience which customers receive when they interact with the retail sector as a whole i.e. banks have become much more responsive to their customers needs and how they interact with them.
What’s clear is that customers are not going to be satisfied with the current level of service interruptions within the sector and if banks don’t resolve these issues and increase their level of customer interaction, customers are going to vote with their feet or should that be with a click!