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Challenges Greater than Y2K Await Retail Banking Industry
PricewaterhouseCoopers research reveals that no major bank is fully prepared for the dramatic impact that the Internet will have on the banking industry. Not since the 1930s has such a widespread sense of unease swept through retail banks around the globe.
These findings are the result of a report produced by PricewaterhouseCoopers and the Economist Intelligence Unit, who have again teamed-up to analyse the issues facing top retail banks. Most alarmingly, "Creating Tomorrow's Leading Retail Bank" discovered that not one single institution has fully grasped the size of change required to handle the Internet's impact.
Angus Hislop, Senior Banking Partner, PwC, said:
"Most banks mistakenly see the Internet as just a futuristic delivery channel. After compiling this report, we believe that the Internet will revolutionise the structure of banking business models around the world. The Internet will change how banks communicate, both internally and externally, and how they manage employee and customer relationships,"
He also said:
"Some of the more progressive banks surveyed, agreed with our findings, yet there is no evidence any bank has begun to co-ordinate their disparate efforts towards transforming their entire enterprise. What we are talking about is a paradigm quake, that we believe will rattle the entire banking industry."
Research reveals that, geographically, U.S. banks are way ahead of European and Asian banks in accepting this new reality. Most European banks have recognised the trends, however, some are still clinging to the hope that the super-sophisticated consumer is more of a North American phenomenon.
Angus Hislop, PricewaterhouseCoopers, said:
"European banks had better take notice of what is starting in the U.S. and Canada. They may have a bit more time to react to the sweeping changes than their North American counterparts, but they don't have that much time."
The explosion of the Internet and real-time technology, coupled with consumer readiness to use these channels, has outpaced the banking industry's delivery capabilities, at least in North America and soon in Europe, too. For the first time ever, technological shortcomings are increasingly costing banks customers in a significant way.
As Robert Hedges of Fleet Financial Group says in the report,
"All the great work done by banks to build brand value will not be able to offset what search engine technology is about to deliver."
Over the past decades banking technology has preceded a change in customer habits, in many cases solutions preceding demand, such as ATMs installed before widespread consumer acceptance. Over time, banking technology has actually disconnected the customer from the bank and impaired the bank's ability to create customer intimacy.
Tom Jenkins, Banking Partner, PricewaterhouseCoopers, said:
"The web allows us the opportunity to re-create the customer relationship, and we believe, to establish an intimate, personalised association that is based entirely on the customer's terms. From that viewpoint, the Internet is one of the most exciting, positive things that has happened to enhancing customer intimacy in banking history".
Only by raising the level of technology and efficiency in all areas of a banking corporation can institutions achieve a level of "virtual customer intimacy." Virtual customer intimacy will be the goal for which all banks will strive. It will be the key to success in the coming years and enable large banks to beat competitors, both traditional and non-traditional alike.
Tom Jenkins, continued:
"When we speak of banking technology, we are talking about a lot more than a customer being able to bank on-line. We are talking about every aspect of client service and product delivery (ATMs, web access, defection protection, call-centres, etc. But more importantly, the ability to create a highly-personalised interaction for a consumer or business customer, uniquely crafted for them and delivered at a low cost".
PricewaterhouseCoopers' financial services industry group created the "Tomorrow's Leading" series to examine the industry trends facing financial services institutions and what successful companies will need to do in order to sustain profitability in the 21st century. In addition to Tomorrow's Leading Retail Bank, the series includes Tomorrow's Leading Life Insurer, Tomorrow's Leading Investment Managers and Tomorrow's Leading Investment Bank.
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