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Retail Banking

Retail banking is responsible for roughly half of all banking revenues worldwide. This share is not likely to change dramatically between now and 2021, a period during which industry revenues are projected to rise by 5.3% annually to reach approximately $2.54 trillion.

To be sure, economic benefits are increasing for traditional retail banks that have implemented the most effective digital strategies. Across six major geographic regions—North America, Asia-Pacific, Western Europe, Latin America, Eastern Europe, and the Middle East/Africa—most institutions are about midway through their digital transformations. Many have made progress in digitizing for cost, although they still need to move from pilots to large-scale initiatives to reap the benefits of their investments. Most are less far along in digitizing for value, however. To make further progress in this area, banks must address two emerging imperatives: personalization and continuous delivery.

To enhance personalization, which is emerging as a primary mechanism for increasing both customer satisfaction and economic value, banks should use improved data and technology to get a clear sense of each customer’s financial and behavioral DNA—then develop individualized offers on that basis. Moreover, to remain flexible, banks should build sophisticated routing platforms that ensure continuous delivery of the personalized experience—through digitally empowered relationship managers, automated customer-care centers, and self-service technologies.

The Value of Bionic Banking

Retail Banking and Big Data

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: 

  • Improving current practices. Leverage the vastly improved understanding of customer behavior provided by big data to improve specific areas with point analytics. 
  • Transforming core banking processes. Use platform analytics to regularly introduce data-driven improvements along the full value chain of core processes. 
  • Boosting IT performance. Use the benefits offered by big-data technologies—such as scalability, easy use of multistructured data, and economics—to improve or radically change legacy IT. 
  • Creating new revenue streams. Leverage the insights generated by banking data, most likely in an anonymous way, to create new revenue streams.

Reaping a Pricing Windfall in Retail Banking

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:

  • Optimize price structures and levels on the basis of the value perceived by customers and on competitive dynamics, while taking into full account all product costs and risks.
  • Differentiate pricing by segmenting customers, even to the individual level when warranted, according to such criteria as willingness to pay and value to the business.
  • Improve price realization—that is, achieving previously established price levels and goals—by, for example, increasing the effectiveness of discounts and promotions.

Financial Institutions
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