Post-pandemic future: Better banking is on the way 08 December 2021
The Innovation in Retail Banking Retail Report 2021 takes the pulse of an industry that is looking ahead. Roberto Ferrari, Head of the Future Innovation community at Efma, identifies a couple of main findings in this report.
This year’s Innovation in Retail Banking report, sponsored by Efma and Infosys, sheds light on a number of important trends in the industry. This was a unique year, given the sustained global impact of Covid-19 on retail banking. For this reason, we wanted to measure the many ways the pandemic has influenced retail banking and what that might portend for the future.
Some key findings emerge from the research that point to how retail banking will evolve. First, there is widespread recognition of the importance of innovation. Two-thirds of respondents indicated that their own financial institution is planning to significantly increase innovation.
The pandemic has highlighted the importance of transformation efforts and staying ahead of competitors. But how, exactly, will innovation manifest? From the research, it is clear that banks are thinking about their customers, with innovation efforts being primarily directed to improve digital delivery.
This includes user experience, omnichannel design, and customer journey processes. These areas will be the first focus of innovation. This was confirmed in many control questions, and also when talking about open banking where the first benefit respondents are seeing is an improved UX.
This is quite a change from the pre-pandemic status quo. The pandemic has accelerated a transformative trend that was moving too slow. For the first time, retail banks are making UX and processes their top priority, instead of being product-focused. Historically, retail banking has been structured around its products. Therefore, innovation has been primarily used as a means to improve and launch new products rather than change the overall digital delivery of such products across channels.
A customer-focused approach is a much more impactful way of innovating, as it requires rethinking the way banks work and operate.
The pandemic also forced financial institutions to rethink the way they work and are organized. Organizations were forced to rethink processes and how they can be simplified through digitization. Over nine in ten respondents declared that their own organization successfully created a hybrid workforce model (remote + office), with most of them saying it was very successful.
Are banks ready for the future? What do they need? What keeps them up at night? The perception is there is much more optimism regarding the possibility to innovate and change retail banking, given the aforementioned points. There is also a clear understanding on what it takes to get there: top management support, combined with the right tool-kit. Data, the cloud, workforce digitization, and an API-based ecosystem are widely agreed upon as the most important change enablers.
Interestingly, most bankers considered blockchain’s importance still far away, and it was not considered as relevant as the other drivers. Looking at these four drivers of change, it is no surprise that respondents believe that the biggest threat comes from Big Tech companies, as they are naturally very strong in all these areas.
In order to confront these challenges, financial services executives globally report needing stronger support from top management along with the requisite investment. The major changes that are underway: changing how banking is designed and delivered, and equipping the workforce with the tools and processes necessary to innovate, require buy-in from the top down.
Innovation is driven by culture. And a culture is only as successful when all members live and breathe it every day. In the future, we will witness a continued and stronger push for innovation in retail banking, with a greater acknowledgment at all levels of what is needed.
Download your free copy of the Innovation in Retail Banking Report 2021