Retail banking is also known as consumer banking in which large commercials banks operate conduct mass market banking using local branches as a mean of interaction between the large bank and the final consumer. The benefit of retail banking is that it let’s established banks to interact with final consumers in an efficient manner and also improves the final reach of the bank. The growth of the retail banking segment was considerably high in the recent years especially in the Asia Pacific region because banking as core sector entered various countries only after the 1990s.
The future of the retail banking sector is very uncertain which can be characterized by slowing growth rate of the open banking segment primarily due to consumer resistance. Studies prove that the consumers that are availing their services are losing faith in their country’s banking system. This is due to various scams and frauds that are being done right under the authority’s nose. Largest banks are the main target for these frauds and scams which are often quite slow in adopting newer modes of regulatory standards due to their widespread retail network and highly decentralized network of operations. However, some of the major banks have recently identified this hindrance and are coming up with adequate mechanism which is considerably swift in adopting new regulatory framework.
According to the study, ‘2018: KEY TRENDS IN RETAIL BANKING’, some of the major banks and organisations that operate in the retail banking segment include ldermore, Amazon, Bank of America CYGB Electronic IDentification Funding, Circle Habito, HSBC, ID Now,iProov, KBC, KlarnaLufax, Marcus Monzo, N26 Nationwide Orange Bank.
Retail banks are undergoing major technological transition and require a robust mechanism that can ensure that tackling stiff competition that they are facing from rising Fintech firms. Fintech firms are using new innovative technology into the financial business aspects not only banking but also insurance. Some banks have realized their inability to compete with innovative Fintech firms are offering them an opportunity to collaborate with the large banks which could prove to be beneficial for the small firms also which take advantage of the large banks network. Banking companies are focusing on technology aspects especially in the automation of procedure. Not only this but they are also focusing on big data analytics and constructing a technological platform to support the entire infrastructure. Since the consumers are increasing usage of mobile applications, banks are also trying to roll back on the number of retail outlets in order to reduce their operating cost and are shifting to online operations. Banking companies and large organisations that are operating in this segment are developing Artificial Intelligent powered machines that can learn from the entire process and later conduct the activity on its own.
The big companies in this segment hold huge market share and competition is highly consolidated with only a few companies enjoying major market share of the industry. All the major banks which are also unable to undergo the technological changes and are unable to adapt to the dynamic environment shall face challenges in the future. The new entrants shall need to establish themselves with required technological infrastructure in order to gather market share which would ultimately lead to their success.
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Ankur Gupta, Head Marketing & Communications