Captain Mainwaring would surely have approved: the future of retail banking lies with human interaction between bank and customer rather than a faceless all-digital service, according to a study from Boston Consulting Group.
How much of Accelerating Bionic Transformation the bank manager from Walmington-on-Sea would actually have understood is another matter, because the study is dense with management jargon such as “a customer journey mindset” and “data-enabled location models”.
Its conclusion, though, is that retail banks can only succeed in future if they combine the convenience of online banking with human judgment. That “bionic transformation” has the potential to generate a 30 per cent increase in net operating profit for those banks by 2020, Boston Consulting believes.
There is plenty to play for. The study says retail banking is still an essential part of the global financial services industry, accounting for 45 per cent of all banking revenues. The improvement in the macro-economic environment means global banking revenues are on track to expand at an annual rate of 4.6 per cent between 2016 and 2020.
This is almost two percentage points higher than was seen before the financial crisis. The performance will be better in less developed parts of the world such as the Middle East, Africa and Latin America which are still relatively under-banked.
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In the US and western Europe growth will be more muted at 2.5 per cent. The general economic recovery and the emergence of the relatively wealthy middle classes in some less developed nations should mean that savings offerings will account for 30 per cent of global revenue growth, against 20 per cent through the years 2010 to 2015.
The Boston Consulting study suggests that reform of the branch network is one of the most important challenges facing banking because this accounts for about 30 per cent of total operating costs. It is not just a case, though, of shutting branches. Instead banks must use the data they have to forecast their customers’ needs, serve more of them per branch and achieve higher margins.
The report says those customers want both the “ease and immediacy” of digital banking and “a high degree of personalisation, differentiation and localisation” from their banks.
The future does not lie with those banks that purely provide online banking. Boston Consulting says those that still have a traditional branch network show margins more than 70 basis points higher than their all-digital rivals.