Of all the forces weighing on the banking industry, from open banking to Brexit, there is perhaps none as fundamental as the change in consumer behaviour. For decades, banks have relied on customer inertia as a valuable component in the business model; even mis-selling scandals and the launch in the UK of the seven-day switching service have failed to prick customer apathy.
Yet, as the findings of our third annual report into the Retail Banking industry make clear, customers are changing. Their interactions with digital technology, from messaging services that manage their friendships to one-click shopping and the taxi that comes at the swipe of a smartphone, have created an expectation for that same immediacy and convenience in other areas of life. And there are plenty of new wave challenger banks and FinTech start-ups that are more than ready to serve this appetite for smart solutions that give customers more control over their money and make life better.
Banks are aware they need to change. We find an industry not only alert to the possibilities of chatbots, robotic processing automation, artificial intelligence and voice-assistants but also planning fundamental business model innovation in the next five years as banks launch marketplaces and anticipate generating revenues from non-FS services as they seek to emulate the industry-blurring success of the biggest platform businesses.