Future of Retail Banking

It used to be that banks with the most square footage dominated the marketplace, garnering a huge customer base with each physical location. Bank of America, one of the largest banking institutions in the U.S., has more than 5,000 branches with some other banks going above 6,000. Looking to the future, however, this physical infrastructure will likely not be the determining factor for a new customer by 2020. Instead, omnichannel digital banking and personalized experiences will make or break a bank’s success. Given the high cost of operating a branch - from payroll to property costs - banks would do well to consider streamlining physical locations and cutting costs. Leading banks will divert available funds to innovation and work to predict customer needs into the future.

The Intersection of Big Data and Retail Banks

Big data can be applied in the banking industry to drive personalization. Much of a person’s financial health revolves around credit history, and as banks move towards utilizing their large stores of data, they will formulate more comprehensive views on credit risk. Big data not only allows banks to weigh risk, but also to provide superior customer service. For example, by tapping into social networks, a bank could learn about a customer’s upcoming wedding and provide specific incentives or offers to help in the budgeting process.

Keeping Up with Customer Demands Through Technology

Innovation is of key importance for the banking industry, and the pace of change is destined to increase. All demographics are demanding better technology and customer service. For the senior population -- ages 60 and up -- the demand for new ways to interact may increase as these consumers move away from taking out home loans and move into retirement facilities or otherwise downsize their living accommodations. Banks will need to utilize tools such as video conferencing instead of requiring a client to visit a physical branch. That also means helping aging customers plan and thrive in extended retirements that are a result of increased life spans. For Millennials and Gen Xers, the demand is increasing for tools such as mobile apps that allow them to access, monitor and move their money around with the tap of a finger. Social media banking will come into play as well, allowing customers to bank through social media and permitting banks to take social networking potential into account when evaluating a customer’s credit.

Engagement Online Means Engagement in Person

Surprisingly, the adoption of technology does not mean that branches are unnecessary. Research indicates that customers who use digital banking channels more than once a week are 60 percent more likely to be active retail branch users than those who do not. The digital and physical will continue to co-exist. Cutting-edge institutions will offer anytime, anywhere service for customers who expect a multi-channel retail banking experience. These financial institutions will find ways to perfectly balance the customer’s need for branches while streamlining the system to create a more profitable company.

Yodlee and the Future of Retail Banking

Envestnet | Yodlee is a pioneer in the FinTech and Big Data space and we believe that the future of retail banking will revolve around the personalization services outlined above. With the power of Open Banking and its associated APIs, we believe you will see more and more institutions choosing offerings that best suit their individual customers and their needs. For the Millennial consumers, this may mean a la carte offerings, as these customers are more open to trying new tools and solutions than, say, an older Baby Boomer consumer. For financial institutions, this also means reduced cost, making Open Banking an easy choice when it comes to ROI. Envestnet | Yodlee offers robust products that can help financial planners and institutions better personalize their services to this ever-changing marketplace of consumers. The first is our Financial Wellness Solution, which offers tools such as AI FinCheck and OK to Spend. These are white label solutions that can be fully configured and quickly integrated and deployed to provide customers with simple ways to manage, automate and analyze a variety of aspects of their finances. Our newest enterprise data management solution, Envestnet Vision, mixes intelligent data with machine learning and advanced analytics to provide holistic and personalized insights for advisors, bankers and their clients. This serves as a single source of data, analytics and reporting solutions for advisors, developers and a variety of financial institutions. Whatever the future of retail banking brings, we are certain it will be an exciting time for both customers and financial institutions, with more and more tools to help consumers lead healthier financial lives and cost-effective solutions for banks, wealth advisors and others who provide financial services.