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How Customer Preferences Shape the Future of Retail Banking

The financial services industry is undergoing a significant transformation, confronting many challenges and opportunities in the digital era. According to McKinsey's Global Banking Annual Review for 2022, the banking sector has reached a 14-year high, and this growth trend is expected to continue into 2023.

However, the landscape has its challenges. Emerging technologies, evolving customer expectations, and dynamic market conditions pose new challenges for banks, demanding customer-centric strategies to remain competitive and capitalize on the available opportunities, as stated by Finextra.

In this context, it is imperative for modern banking and financial services to assess the evolving dynamics and refine their banking strategies carefully. The key challenge lies in providing hyper-personalized experiences that can enhance customer retention and reduce customer churn.

Now, the question arises: How can retail banks ensure their relevance in the future? To address this concern effectively, we will delve deeply into the changing dimensions of retail banking and explore how to overcome these challenges by delivering the ultimate customer experience.

Understanding the Evolving Landscape of Retail Banking

Retail banking, a critical sector within the financial industry, encompasses a wide range of tailored financial products and services for individual customers. These offerings include deposits, loans, payments, cards, mortgages, and investments. 

For numerous financial institutions, retail banking represents a significant source of revenue and a key driver of profits. Additionally, it plays a vital role in fostering customer loyalty and satisfaction.

Over the past few years, digital transformation has been reshaping various B2C industries, offering customers faster and more convenient experiences. As a result, customer expectations and habits in the retail banking landscape have evolved significantly, leading to a greater reliance on online channels.

In response to this digital shift, many banks have strategically aligned themselves with the momentum of digital banking. However, it is essential for these institutions to "humanize" the banking experience, regardless of the channel, as highlighted by Deloitte. 

Today's retail banking industry has thus evolved into a landscape where providing omnichannel services with high-touch interactions is paramount. In fact, a staggering 76% of retail banking customers now expect and demand omnichannel experiences.

In the coming years, the retail banking institutions that thrive will be the ones capable of effectively handling challenges, embracing digital transformation, and delivering customer-centric services that go above and beyond expectations.

Now, let's delve into the finer points of the changing customer, technology, and market dynamics to explore how banks can achieve this remarkable level of success.

Changing Customer Expectations

Customers today are more demanding, tech-savvy, and conscious than ever before. They expect banks not only to provide them with financial services and products but also to function as full-time operating financial advisors.

Therefore, financial institutions must pay close attention to the following three main dimensions:

  • 24/7 Availability: Customers expect round-the-clock access to their banking services. They want the ability to perform transactions, check balances, and seek assistance at any time of the day, irrespective of geographical locations or time zones.
  • Full-Time Customer Support: Nowadays, 40% of customer contact requests are made outside of business hours. So, customers expect efficient customer support whenever they need assistance. This includes prompt responses to queries and quick resolution of issues. Banks must invest in robust customer service teams and leverage technologies like chatbots and AI-driven support systems to enhance their responsiveness and engagement.
  • Seamless Omnichannel Experiences: As customers interact with banks through various touchpoints, including mobile apps, websites, social media, and physical branches, they desire a seamless and consistent experience across all channels. In fact, omnichannel strategies provide 90% more retention than single channels.

Emerging Technological Advancements

Staying ahead in this digital era requires banks to embrace key technological trends shaping the future of retail banking such as;

  • Artificial Intelligence and Machine Learning: AI and ML are revolutionizing banking, from customer service and fraud detection to personalized product recommendations. Analyzing vast data helps banks gain insights into customer behavior and financial needs, enabling tailored solutions and proactive assistance.
  • Mobile Banking and Contactless Payments: Mobile devices play a central role in people's lives, driving the popularity of mobile banking apps. Banks must prioritize intuitive, secure, and feature-rich applications for effortless financial management on the go.
  • Blockchain and Cryptocurrencies: Blockchain can transform banking processes like cross-border payments and identity verification. Cryptocurrencies present new financial transactions and investment opportunities. While banks need to assess risks and regulations, exploring these technologies can provide insights into potential future disruptions and opportunities.

Shifting Market Dynamics

So, now that we've evaluated the effects of changing customer expectations and emerging technologies, let's explore the significant shifts in the banking industry that require adaptability and agility from financial institutions.

Firstly, fintech companies have disrupted traditional banking models with their innovative and specialized financial services. Fintechs, known for being customer-centric and technologically advanced, are attracting a growing customer base.

Secondly, the banking regulatory environment is constantly evolving, impacting operations, compliance requirements, and customer interactions. Ensuring compliance with changing regulations is crucial for building customer trust and avoiding potential penalties or reputational damage.

Lastly, banking customer demographics are shifting, with younger generations entering the market and older generations adopting digital banking. Understanding the unique preferences and needs of these different customer segments is essential for banks to tailor their services and marketing strategies effectively.

Future-Proof Banking Strategies: Embracing the Customer-Centricity

Amidst the dynamic banking landscape, where competition is fierce, regularly optimizing the customer experience is crucial for retail banks to maintain their competitive edge. Doing so can lead to 3.2x faster growth compared to competitors who lack customer-centricity.

So, banks must invest in user-centric design and ensure seamless experiences across all digital and physical touchpoints. Regularly monitoring customer feedback, industry trends, and competitive developments is essential to maintain agility.

This necessitates collaboration with highly skilled customer experience professionals who possess industry expertise and a dedication to continuous improvement.

By integrating these customer-centric elements into their business models, retail banks can shape a future of banking that not only meets customer demands but also maximizes their competitive advantage.

We are Here to Help You Bank on Seamless Experiences

At Mplus, we understand the challenges and opportunities faced by the banking industry in its pursuit of customer-centricity. As a seasoned BPO service provider specializing in CX solutions and services, we are dedicated to enabling banks to deliver seamless experiences to their customers.

With our expertise in omnichannel strategies, robust customer service solutions, and native-speaking team members, we are ready to help you optimize your customer journeys and provide contextually relevant experiences.

Together, we can develop future-proof CX strategies that prioritize your customers, fostering enduring relationships and sustainable growth.

Partner with Mplus today and embark on a journey to set your bank apart in the dynamic and competitive financial services landscape.

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Also, Buzzeasy, our AI-powered tool designed to enhance customer satisfaction and deliver seamless experiences, can also assist you on your journey into the future of retail banking.

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