2018 was a big year for banking. Challenger banks, like Monzo and Starling, hit new user levels and started to push past being a niche, techy offering, into a mainstream offering. High street banks started fighting back though, by revamping their digital offerings and thinking about their strengths.
2019 will be just as important a year for the financial industry, and there are other political and economic challenges ahead.
What might 2019 mean for Britain’s retail banks? Here’s our key predictions, and recommendations for how banks should prepare.
Bank branches as digital hubs
In 2018, shrinking branch networks continued to be a tactic used by banks reaction to increasing infrastructure costs, combined with a general decline in usage of bank branches. Banks wanted to consolidate. As customers shift to almost fully digital relationships with their banks, they will demand exceptional user experiences that provide real value.
In 2019, we will witness banks focussing investment into their remaining locations. We will see banks deploying more in-branch technology that improves user experience, including video banking and smarter use of in-branch tablets to improve service and sales. This is especially true as they worry about throwing the baby out with the bath water – and cutting too much, too soon.
Location, location, location
We’ve already seen retail banks including Lloyds and Halifax open state-of-the-art branches in Manchester city centre and in central London, and this trend of banks investing in city centre flagships is set to continue, especially as such locations become more accessible as a result of investment in smart cities and improved transport links. We are likely to see them relocating away from underperforming locations and opening in areas of higher footfall and with more demand for banking services, such as out of town shopping centres.
Open Banking and PSD2
While Open Banking and PSD2 have prompted banks to think about their offerings, progress has been slow so far. The full range of potential threats and opportunities from Open Banking are yet to be realised. This is especially true as the digital natives, who at age 18 are now opening their own bank accounts, try to balance their demand for easy to use, integrated services (such as account integrators and budgeting apps) with concerns around data privacy.
Financial institutions will need to think creatively and capitalise on new technologies to offer the right solutions in the right moment to their customers.
Collaboration over competition
With banks still adapting to the changes set in motion by PSD2 next year, competition will only intensify in the market.
Through industry collaboration however, customers can get the best of both worlds.
FinTechs can expand their offerings, and traditional banks can maintain their share of the market and adopt new services into their existing portfolios. This leverages the customer experience and journey expertise that challenger banks have put at the centre of their offering, combining it with the infrastructure presence of traditional players.
High street banks challenge back
So, with this in mind, what do high street banks need to prioritise in 2019? 2019 should be the year that high street banks respond to the challengers. The gap is certainly closing. Here are our top 3 things that traditional high street banks must do in 2019 to get on the front.
- Get the (tech) stack right
Challenger banks had a distinct advantage in that they have been able to build platforms for the next generation customer from scratch. Heritage banks need to offer the right solutions in the right moment to their customers, but without the right investment in technologies like the cloud, they’re going to struggle to adapt.
- Remember physical footprints are a positive
As politicians also start to turn their eye to financial access, especially for rural and small communities, traditional banks have a responsibility and unique opportunity to adapt their offerings to meet new demands. This is especially true as the UK’s mobile data coverage and broadband speeds leaves some communities unable to bank online.
- Play to your strength
As traditional and challenger banks increasingly try to replicate each other’s strengths and successes. High street brands need to remember that they do have significant strengths, built over years of serving customers and delivering a wide range of services, which can be tricky and costly for challenger banks to match.