CAGR of Online Banking Market from 2020 to 2027
(Global News Wire)
Total transaction value of digital payments worldwide in 2020.
Share of population using digital banking in the United States in 2020
The Future of Retail Banking: trends shaping the industry
New technologies and trends have been transforming the consumer banking sector at a rapid pace. Digital solutions, such as mobile budgeting and planning apps or robo-investment solutions, are seeing significant adoption from consumers. The Covid-19 pandemic has only acted as a catalyst and accelerated change in the industry, forcing even the slowest retail banking players to quickly make decisions on digitising their processes to adapt to the changing conditions.
Covid-19 accelerates Fintech
Startups with customer-centric digital products serving niche underserved segments are emerging in consumer banking and are threatening traditional retail banking products such as credit and savings accounts.
Retail banking startups have been gaining traction. Favourable regulatory reforms (particularly in Europe) and growing willingness to adopt digital channels for financial services (strengthened by the Covid-19 pandemic) are key factors behind this traction.
While some innovation trends like chatbots and digital transformation of processes have improved customer experience, others such as open banking have changed the face of the industry, allowing new players to compete with banks in areas such as payments and foreign exchange.
Incumbent retail banks' response to FinTech startups
As a result of increasing competition from neobanks and startups, incumbents are starting to deploy their own digital-only offers, such as Goldman Sachs’ Marcus, which offers no-fee loans and high yield savings.
Equipped with more resources and packed with digital features, traditional players’ responses to increasing competition can provide them with considerable edge. However, players must create enough differentiation. JP Morgan, who launched its own challenger bank Finn, dropped it a year later, likely due to the lack of differentiation with its conventional mobile banking app.
Along with expanding their business model, incumbent banks should integrate data, analytics, and AI to drive their technology, operations, and customer service.