Next-decade banking: Steps to success in an era of seismic shifts

By Jason Hill

A moment of truth faces retail banking leaders ahead of a decade of disruption – a period characterised by geopolitical tension, deep economic uncertainty, a cost of living crisis, and environmental instability.

Banks have always had a key role to play in wider society. Now, tested by the arrival of new entrants, and with industry divergence ahead, it might seem like a time for leaders to decide whether to stick with what they know or twist to the new. In our view, banking leaders need to do both: harnessing their traditional strengths and reserves of trust, while adapting to a wider ecosystem of competitors and partners, embracing new technologies, and taking decisive action to protect and strengthen their futures.

Our cost of living research shows that now is the time to act. Many customers are deeply dissatisfied with current banks: 73 percent of UK consumers report that their bank’s products and services are not tailored to their financial situation; and only 21 percent say financial services providers play a proactive role in their financial life.

Reframing the role of banks

A defining decade

To explore how this decade of divergence will play out, our Vision for banking report surveyed 600 banking and technology leaders to understand the implications and outcomes of four potential retail banking futures identified by our FutureWorlds™ methodology.

We developed four scenarios for retail banking in 2030, exploring the implications for banking leaders based on technology advances and the development of full-service and specialised banking players. These worlds explore the rise of centralised big-tech, continued dominance by full-service incumbents, the onward march of specialised fintechs, and a world of specialised, traditional banking players. Each scenario brings unique features and far-reaching effects on customers, society, and the environment.

Our research uncovered some key questions and intriguing contradictions. For example, just two thirds (69 percent) of respondents expect traditional banks to continue dominating the industry in 2030 – hinting at the decline of their traditional foothold.

And while full-service banks are expected to increase or maintain their presence in the industry, 47 percent of respondents predict that large businesses from outside traditional finance will play a larger role. Almost a third of all leaders (31 percent) expect new entrants originating from outside FS to dominate the industry by 2030.

The importance of trust

Trust is a critical and unanimous focus for the banking sector – especially as the memory of the financial crisis lives on. Almost half of business leaders (47 percent) believe that consumers place the greatest trust in full-service banks. And leaders from outside traditional banking – the fintechs and big-techs – rate traditional banks higher for trust than these banks rate themselves.

With trust a critical differentiator, our report explores the potential of retail banks to help customers and communities to prosper, provide a safe and robust financial system with trust and integrity at its heart, and green the future through decarbonisation and environmental protection.

Taking ‘no regrets’ action

Even if the future is beyond banks’ control, there are a number of key areas where banking leaders can take positive action now to prepare for success in an uncertain world.

Our research explores the steps that retail banking leaders can take now to create value for all stakeholders in the future. They will also help develop new ways of thinking, enhancing long term flexibility and preparing banks for any future eventuality. These six steps are:

  1.  Lean in on customer trust: our research identifies the key builders of customer trust, including fair pricing, admitting to mistakes, and responding readily to negative feedback.
  2. Express purpose through finance: we found that traditional banks are more committed to environmental, social, and governance (ESG) concerns than technology firms, with a majority of banks seeing conscious consumerism as central to their future business models.
  3. Put people first: faced with increasing competition for talent, tomorrow’s winners will be those that embrace new approaches to talent and culture.
  4. Take a smart approach to regulation: a future-focused, flexible view of regulation can help banking leaders shape future scenarios and influence critical business decisions.
  5. Identify and develop a role in future ecosystems: focusing on flexible partnerships, with the same focus on partnering as other strategically important areas, will be increasingly critical to success.
  6. Invest in the right technology, in the right way: our report outlines a three-step approach to enable technological flexibility without the need for wholesale replacement of mainframes.

Future developments will mark a decisive break with past assumptions. Accepted ideas about products, technology, customer needs, and business models are likely to change.

Our report steps into the future – yet doesn’t look to predict it. Instead, the aim is to ensure that banking leaders succeed, however the game goes. And it’s not only them that will win. Through bold action now, banks can position themselves to help customers, their communities, and our planet.

About the authors

Jason Hill PA financial services expert

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