Technology In Retail Banking Is Accelerating: Can Companies Keep Up?
Subroto Som, Executive Vice President, Head of Retail Banking Group at Mashreq Bank talks about how the future for retail banking may be even more radical than most currently believe.
These are dramatic times for the retail banking industry. Digital disruption is forcing players in this market to reassess their strategy, operations and everything in between. With the proliferation of technology in our everyday lives, customer expectations and behaviors are also changing at a rapid pace. In this era of instant gratification and shortening attention spans, consumers expect speed, accuracy and omni-channel experience, which has spurred what we might term as a digital arms race between banks and new incumbents.
Consumer habits have changed and continue to change at a fast pace; and there is a large and growing appetite for digital services. The demand for services such as mobile banking is no longer limited to time and space—the embedded and real time customer experience has become paramount.
It would be no exaggeration to say that digital transformation is now vital for banks that wish to remain relevant in the future. And the pace at which banks will have to change will continue to accelerate, not due to the pace of technological developments but because
of customer adoption. While it is imperative that banks adopt new technologies, they also have to be nimble on their feet and be able to change their course of action quickly when needed.
In the banking industry some of the biggest disruptions stem from technology companies that are entering financial services through fintech, and it is time for legacy banks to think more like a technology company. This emerging digital economy will also mean that banks will have new opportunities in multiple ecosystems. Collaborating with technology companies and fintechs, rather than competing with them will indeed be a possible strategy, especially given that most fintechs are startups and therefore much more agile than a large bank.
With this in mind, we at Mashreq are investing in partnering with and incubating fintechs. It’s a mutuallybeneficial relationship: fintechs help deliver point solutions to point problems, while we provide them with the real-world use-cases that enable them to scale up their solutions. Everybody wins.
With the increased digitalization in our lives, it should come as no surprise that retail banking in particular is transforming at a significant rate. Today, 97% of Mashreq financial transactions are completed through automated and digital channels, which is a clear indicator of customer preferences. This remarkable shift in consumer behaviour is what drove our decision to reshape our branch network to make them more efficient and to deliver a convenient digital experience to customers. Close to 65% of non-financial transactions follow a similar route.
Developments in e-commerce and mobile technologies have also radically changed the way we transact today. The change has come about in just a short decade, which is remarkable given that banks had been operating in pretty much the same manner for centuries. Be it spending on retail, food and beverage, travel or financial services, today customers want to be able to purchase goods and services anytime and anywhere—through their smartphones and tablets— and this is what is driving digital spending growth at an unprecedented rate.
At the heart of this transformation is technology such as AI and robotics, which are advancing extremely quickly. Adopting these technologies can dramatically improve efficiency and increase savings, which the bank can pass on to its retail customers. In our case, these technologies help drive customer experience. Robotics, for instance, has enabled us to automate our operating procedures, thus reducing manual entries and activities that are repetitive in nature. The happy byproduct of this is reduced human error and greater customer satisfaction.
Another area that is playing a key role in the transformation of the retail banking sector is data analytics. Analytics enable banks to get better insight into customer preferences, which in turn allows them to develop more focused new products and increase the level of transparency when it comes to their transactions, fees and charges.
In light of these changes, it’s safe to say that retail banks of the future will have to complement the lifestyle of their customers. Customers will expect an integrated and seamless experience across all of their bank’s channels. Every customer interaction, be it a branch visit, transaction through a robot or machine, or a mobile banking app will have to be seamless, convenient and interconnected.
Another big change in the retail banking sector will be greater use of a combination of AI and data analysis to offer sophisticated and value-added advisory services to customers. In essence, the unification of these technologies will help customers spend their money more efficiently or save towards their shortterm financial goals—and this may be achieved without human interaction. Additionally, the ubiquitous ATM will likely evolve into a 24/7 service center, rather than being merely a cash-dispenser.
To take advantage of these trends and technologies, banks may have to change the core technology architecture and modernize them. Making changes only on the customer-facing channels may become increasingly slow and expensive.
Last but not least, digital-only banks will play a significant role in transforming the banking space. Using AI and big data they will be able to offer a simpler, intuitive and innovative banking experience to customers. All in all, the retail banking landscape will go through a seismic shift, due to the rapid advancements in technology and customer adoption.
Going digital brings its own sets of threats and challenges, including the growing risk of cyber security such as phishing attacks, identify frauds and data leaks. Financial institutions and authorities in the region need to mitigate these risks and strengthen their existing security infrastructure to address these challenges.
The bigger banks, and the more widespread, will have to challenge internal culture and mindsets, and the ones that remain steadfast on their digital transformation journey and continue to innovate will eventually emerge victorious.