As Omnimarking grows in popularity, one of the most overlooked, interesting retail segments in terms of innovation is occurring in the world of retail banking. The industry is becoming increasingly anxious due to the services that technology companies can provide consumers for a fraction of the cost. You, the reader, are about to get your mind blown as we dive into the world of retail banking.
This innovation is apparent with the recent announcement that three of the four largest banks in America are introducing card-less ATMs in America’s largest cities. Customers of BofA, Wells Fargo, and JPMorgan will be able to access ATMs by entering a pin into their phone and selecting the amount of money to withdraw. The introduction makes sense as 90% of the consumers own a mobile phone. Moreover, the 35 year old magnetic strip technology is filled with security flaws. The enhanced security provided by mobiles results in the perfect addition to the banks multichannel-service platform.
As mind blowing as the technology is, the
magic really begins to shine when you begin to dive into the decision making process behind the introduction. In a 2014 PWC study, 55% of banking executives viewed non-traditional players as a threat to traditional banks. Moreover, 46% of executives perceive smaller banks as capturing a larger share of the market through increasing differentiation. The innovation we are seeing now in 2016 is the result that fear amalgamating into action by the executive teams. Historically, non-traditional players such as Tangerine (previously ING Direct) have entered the market and taken a large chuck of the big banks market share. These innovative new players have kept executives up at night since the 90s. And, it should have. Banking executives witnessed their friends in the Hamptons lose their positions as their companies lost market share to Amazon and Apple.
In terms of the consumer life cycle, millennials are needed to sustain future growth among banks. Once a consumer starts a family, they possess the largest amount of investable assets and take on the most debt. They need to be innovative enough to prevent a technology company from entering the banking market. Like the old saying goes, the best defence is a strong offense, and their offensive strides in innovation are simply a way of defending their market share. Finally, consumers are requiring a value proposition focused around a consumer-centric model of service. Old-banking was product-centric where consumers would engage with the products offered by the bank’s branch. Now, consumers want higher levels of service and more convenient methods of banking. Gone are the days where the banks’ trade area is created through strategically placed branches. The internet has become a valley for the consumer where their trade area can be any bank that best suits the customer’s needs. With this expanded area, the effort required to retain market share has intensified.
So don’t see retail banking as just another boring industry. Innovation is revolutionizing the industry, and the next four years will bring a lot more fierce competition.
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