Global retail-banking revenues rose by an estimated 3% in 2015, from $1.54 trillion to $1.59 trillion. The growth rate of global revenues is expected to show relative recovery during the second half of the decade, rising close to precrisis levels.
Yet despite this anticipated rebound, the retail-banking industry faces unrelenting, disruptive challenges. Banks that hope to prevail must urgently pursue digital simplicity. They must develop digital and data capabilities that radically simplify their businesses while dramatically improving the customer experience through greater efficiency, quality, and speed.
Banks will have to make this digital transformation amid a welter of challenges and risks. They face ongoing margin pressure, as well as intensifying competition. Regulatory oversight will continue to tighten. Return on equity will remain constrained as fines and restructuring costs affect profit, while revenue growth will struggle to keep pace with increased capital requirements.
Ultimately, in order to achieve retail-banking excellence, or REBEX, banks need to be more proactive and precise in targeting and engaging customers. To survive, they must reimagine every element of the customer experience—deepening, broadening, and customizing the customer relationship in a newly agile manner.
Retail banks are data businesses. A large part of their competitive advantage is based on better use of the information that data provides and the insights it affords.
Yet our work with leading retail banks around the world shows that despite an early start in using new data streams, as well as considerable resources, most banks are far from realizing big data’s full potential compared to many other industries.
There are at least four areas in which focused and coordinated big-data programs can lead to substantial value for banks in the form of increased revenues and higher profits:
Pricing goods and services is an important capability for companies in every industry worldwide. For today’s hard-pressed retail banks, it is a critical one. Yet few banks mine the full potential of pricing to generate significant revenue and profit.
Superior pricing performance offers a potential windfall for banks caught in the current cross fire of slow growth, heightened competition, price-conscious customers, and intensifying regulatory change. Although success requires a dedicated initiative to define an optimal pricing strategy, the payoff is substantial. Pricing programs can provide a sustained revenue lift of 5% to 15%, all of which goes directly to the bottom line.
Ultimately, there are three levers that banks must pull to capture the full value of pricing: