Negosentro | Retail Banking: The Changing Landscape of Banking | Maybe you are not very acquainted with retail banking. So, what is retail banking? It refers to the financial services offered by banks to individual customers. These services include deposits, loans, credit cards, and other financial products.
Retail banking is different from corporate banking, which provides services to businesses and institutions.
In recent years, the retail banking industry has undergone a significant transformation due to the rise of digital banking and online payment services. With the advancement of technology, banks are now able to offer their services through digital channels, making it easier for customers to manage their finances from anywhere and at any time.
The Rise of Digital Banking
Digital banking refers to the use of digital channels such as websites, mobile apps, and social media to provide banking services to customers. It has become increasingly popular due to its convenience and accessibility.
Customers can now open accounts, apply for loans, and make payments without ever stepping foot in a physical bank branch. The pandemic has further accelerated the adoption of digital banking as more customers prefer to conduct their banking activities online.
According to a survey conducted by J.D. Power, there has been a significant increase in the use of mobile banking apps during the pandemic, with 35% of customers using the app more frequently than before.
The Impact on Retail Banking
The rise of digital banking has had a significant impact on the retail banking industry. Banks are now investing heavily in digital channels to offer their services to customers.
This has resulted in the following changes:
1. Branch Closures
With more customers opting for digital banking, banks are closing physical branches.
According to a report by S&P Global Market Intelligence, U.S. banks closed a record 3,324 branches in 2020. This trend is expected to continue as more customers shift towards digital banking.
2. Increased Competition
Digital banking has also led to increased competition in the retail banking industry. Fintech startups and non-banking companies are now offering financial products and services that were traditionally offered by banks.
This has resulted in a more competitive landscape, with banks having to differentiate themselves by offering unique products and services.
With digital banking, banks can now offer personalized products and services to their customers. Banks can analyze customer data to understand their financial needs and offer relevant products and services. This has resulted in a more customer-centric approach to banking.
Online Payment Services
Online payment services have also had a significant impact on the retail banking industry. Customers can now make payments using their mobile devices or through online platforms. This has made it easier for customers to pay bills, transfer money, and make purchases.
The rise of online payment services has also led to the emergence of digital wallets such as Apple Pay, Google Pay, and Samsung Pay. These digital wallets allow customers to store their payment information securely and make payments without the need for physical cards.
The Future of Retail Banking
The future of retail banking is heavily dependent on technology. Banks will continue to invest in digital channels to offer their services to customers.
The following are some of the trends that are expected to shape the future of retail banking:
1. Artificial Intelligence (AI)
AI is expected to play a significant role in the future of retail banking. Banks can use AI to analyze customer data and offer personalized products and services. AI can also be used to automate customer service, reducing the need for human interaction.
Blockchain technology has the potential to revolutionize the retail banking industry. Banks can use blockchain to offer secure and transparent transactions. Blockchain can also be used to automate processes such as loan approvals and document verification.
3. Open Banking
Open banking refers to the sharing of customer data between banks and third-party providers. This allows customers to access financial products and services from different providers through a single platform. Open banking is expected to increase competition in the retail banking industry and offer customers more choice and better deals.
4. Biometric Authentication
Biometric authentication, such as facial recognition and fingerprint scanning, is expected to become more common in the future of retail banking. This technology offers a more secure and convenient way for customers to access their accounts and make transactions.
Sustainability is becoming increasingly important to customers, and banks are expected to play a role in promoting sustainable practices. Banks can offer green financial products and services, such as loans for energy-efficient homes and businesses.
The future of retail banking is heavily dependent on technology, with trends such as AI, blockchain, open banking, biometric authentication, and sustainability expected to shape the industry. As technology continues to advance, banks will need to adapt and innovate to meet the evolving needs of their customers.