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Digital Transformation In Retail Banking Research Team | Posted On Tuesday, March 12,2019, 06:20 PM

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Digital Transformation In Retail Banking



The retail banking facilities are aimed at individual customers which is why it is also called ‘consumer banking’. With digitization across various sectors, retail banks are open to technology and innovation from Fintech firms, online banking and non financial platform companies, to keep up with the market competition. Bank executives predict that in future, most of the customers will carry out transactions through net banking and e-wallets. Surveys show that banks are heavily investing in block chain technology as well as artificial intelligence AI, to enhance customer service and efficiency.

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Digital Transformation In Retail Banking

The Evolution of Retail Banking:

The system of banking has gone through a sea change in the past few years. The customers are inclined more and more towards digital banking. Online banking is more accessible through smartphones and banks. The customers view internet banking as an easy option for carrying out regular banking transactions, which is why the number of transaction in the branches is reducing each day. Lot of banks are shifting to paperless banking promoted by the rise of internet banking through smartphones and tablets. So, all of those apps on mobile devices have paved way for a more streamlined approach to access money, without the need to leave the comforts of your home.

SEE ALSO: Retail Banking

The Value of Bionic Banking:

Digital banking not only gives banks the opportunity to deal with a global crisis, it’s also a platform for new opportunities. With digital banking, these financial institutes have already adjusted to changing regulatory framework, digital and data revolutions, shifting behaviour of the customers and change in work culture. To keep up with the market competition, banks need new tools to enhance services as well as maintain their market position.

Bionic banking is the step forward for banks to meet customer’s expectations as well as retain market position. Bionic banking is combining banking with a human touch. Bionic banking provides digital functionality, speed and convenience, as well as thoughtful, caring human interaction, when the customer needs and demands it. It is the future of retail banking that the banks must adopt.

SEE ALSO: Bionic Banking

Bionic retail banking has the following features:

  • Clear vision
  • Future proof distribution model
  • Customer Friendly Approach
  • Technology and operational excellence
  • Organisational vitality
  • Financial and risk control

The Importance of Being Open (to Open Banking):

Open banking is a system that provides the user with an interface/ network to access banking services of a particular financial institution, through the use of application programming interface (APIs). Open standard banking uses APIs that enable third party developers, build applications and services around the financial institution.

Open banking not only benefits the users and the customers of the bank, but also stands to provide a new financial ecosystem. It enhances market competition between banks, allows innovation and creates regulation for data privacy and safer online transactions.

Most of the retail banks have accepted the open banking system. This can be either due to competition among banks, regulations or the impact of digitization. Initially, open banking was not accepted as there were questions regarding the safety of transactions and privacy of data. However, with time, open banking is not only accepted, but is also viewed as an opportunity for growth and innovative business models. The potential benefits of open banking are substantial: Improved customer experience, new revenue streams, and a sustainable service model for traditionally underserved markets.

The Cost Cutting Imperative

After the global crisis, the profit margin of the banks even in advanced economies remains at an all time low. This can be attributed to costs growing at a much higher rate in comparison to the revenue. In Europe we see that bank’s average return on equity has drastically reduced to unsustainably low levels. 

Therefore, there is urgency on the bank’s side, to recover the losses as well as maintain the profit margins. To boost their revenue, they must cut operational costs. This requires offering credit at lower interest rates, curb opening of new branches, encouraging customers to use online/net banking, pursuing low cost organic growth and building scale through M&A and partnerships.

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