7 trends in retail banking your financial institution should be aware of

Every financial institution should keep track of the modern trends in retail banking to stay afloat. PaySpace Magazine can help you with that

retail banking

7 trends in retail banking your financial institution should be aware of. Source:

Retail banking is constantly changing to meet public demand. Along with accelerated digitalisation, financial institutions are learning to be proactive and quickly respond to the shifts in customer sentiment. Rushing to the innovation blindly doesn’t necessarily produce the desired effect. A wise digitalisation strategy revolves around the customers’ needs and desires. Current trends are formed based on client surveys and the growing competition in the fintech segment. These are the main insights crucial for the future of every financial institution.

1. Digital access to complex financial products and services.

Online transactions are routine practice, the same as contactless payments. However, modern consumers want more digital banking experiences. Many banks are already offering the ability to open a new bank account or apply for a loan online. Recent research from the Competition and Consumer Protection Commission (CCPC) has also suggested that plenty of investors are ‘going digital’, as the majority (56%) of those surveyed are making new investments online. Leading financial institutions combine banking, wealth management and brokerage services in a single web or mobile platform. That gives customers seamless opportunities to switch between managing a cheque account and trading stocks.

2. Personal help is appreciated.

Despite growing digitalisation, many customers still want to be able to visit a branch or at least have a personal advisor available online. According to the EPAM 2021 report, 40% of 18–24-year-olds used their physical branch at least monthly in the past year. Besides, over half of them want better financial education from their banks. This aspect includes both online tips and offline financial consultations. Over one third of the surveyed cohort are looking for a more personalised experience with their finances. Therefore, financial institutions must provide more than a technical solution. They should guide and support customers on their way to financial stability.

3. Open banking.

Superior openness and connectivity are must-haves for any financial institution today. Many customers use different financial companies for different needs. Seamless integration between fintech service providers is a great advantage. Gen Z and millennials are likely to link their bank accounts to pay for recurring services, retail purchases, and digital wallets. These digital natives are more willing to experiment with new financial tools as well. While convenience and speed are clear benefits of connectivity, the power of open banking tools is deeper. In particular, open banking creates more personalised financial experiences, gives a holistic view of a consumer’s finances, and automates important financial tasks.

4. Data-driven solutions.

Financial institutions look for creative ways to leverage data and predictive analytics to enhance the customer experience and business growth. Data management has hidden opportunities for service efficiency and profitability. Accurate data about one’s spending habits or preferred payment means is a valuable insight into the customer’s needs. A combination of open APIs and AI-driven algorithms allows using data from multiple sources to process loan applications. More people gain access to credit opportunities today as machine learning models can be trained on the customer’s data. Their payment history, previous purchases, and exposures to debt are shaping individual risk profiles. Data-driven analytics also helps to identify fraudulent actions faster and more precisely. Moreover, data available to banks from third-party providers promotes informed decisions about marketing campaigns and sales channels.

5. Spotlight on savings.

Banks and fintechs are increasingly implementing AI-powered technologies to help customers automate their savings. Savings are vital for every individual in times of crisis. The pandemic and ongoing increase in the consumer price index stressed the importance of having some money put aside. At the same time, the 2017 Fed study found that 40% of Americans surveyed had less than $400 readily available to pay for emergency expenses. Younger millennials and members of Generation Z have grown up exposed to numerous economic crises and extended periods of fiscal instability. Thus, the matter of savings is very important to them. Customers are looking for both sound financial advice on this topic and smart ways to save without fuss. Competitive interest rates are important to over 90% of consumers. Banks with the best savings account rates and features have a big competitive advantage, because that is what consumers focus on the most.

6. ESG.

According to the survey from management consulting firm Kearney, almost half of European consumers consider environmental and social issues as a very important factor when choosing their banking provider. One in four European consumers (24%) are likely to switch if their bank is not engaged in ‘ESG’ practices. Younger people aged 18-24, are almost twice as likely to switch banks for ESG reasons, compared to those aged 55. Over 30% of young customers reported they would switch if the financial institution paid little to no attention to sustainability and ethics. Since consumers expect banks to follow sustainable practices that mitigate the impacts of climate change, financial institutions are adopting Green Banking practices. The latter considers all the social and ecological factors to defend the environment and preserve natural resources. For example, banks expand their online solutions, move most processes to the cloud to cut on paperwork, and promote responsible lending (rating environmental risk before granting financing to a corporate borrower). Green financial institutions also facilitate private investment into clean energy, domestic low carbon projects, climate-resilient (LCR) infrastructure, climate action, and other eco-conscious sectors such as water and waste management.

7. Cyber protection is above all.

Being the most obvious target for cyber attacks, retail banks enhance their regulations and security protocols to protect personal and financial data from cyberattacks. Innovative solutions like AI tools that detect attacks before they occur are increasingly common. With fraudsters aggressively targeting digital banking users for the last two years, financial institutions are tightening their access management and upgrading to modern, advanced authentication methods to protect their customers’ transactions and sensitive information. Not only biometric solutions and MFA but also orchestration hubs are currently employed. Hubs enable financial businesses to benefit from the capabilities of multiple fraud vendors while connecting to a single hub provider via an API or on-premise integration. A hub risk engine then integrates its output with internal data to assess risk and orchestrate the next steps. The hubs may work across organisations to monitor the entire transaction’s risk profile from the start to the end. They can use artificial intelligence and machine learning to evaluate if a user’s behaviour fits with what’s expected of a real person making a legitimate transaction.


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