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Will digital disruption lead to the death of retail banking?

12th Jul 2015
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Bye Bye Banks?, a new book from Adaptive Lab’s James Haycock and former Daily Telegraph technology editor, Shane Richmond, says the financial sector is on the cusp of a revolution driven by digital disruption, and that traditional retail banks may struggle to survive unless they consider launching “standalone beta banks”.

Haycock and Richmond’s assessment of the sector is the result of extensive qualitative and quantitative research from 110 senior managers, directors, C-Level executives, CEOs and presidents within the retail banking sector.

They cite a combination of factors that could soon lead to the death of traditional retail banking, including the burden of legacy technology traditional banks are struggling under, the challenges thrown up by upcoming ‘challenger banks’ and the rapid change in customer preferences that has seen mobile banking become a key player as part of the digital disruption.

New players such as Metro Bank have received huge traction in retail banking through disruption and a focus on technology and customer experience as a driver.

And there are said to be as many as 25 other challenger banks in the UK awaiting regulatory approval from the Financial Conduct Authority that are set to add to the competition incumbents in the sector are facing.  

The upshot, according to Haycock and Richmond, is that incumbents will start to consider launching “beta” banks in retaliation, in order to benefit from the lean start-up opportunities involved.

“There is an increasing amount of conversation about the arrival of tech startups competing with the traditional retail banking business model which will clearly have the same impact of shortening corporate lifespan,” says James Haycock, managing director, Adaptive Lab.

“If you step back from all this chatter there is a three stage scenario that looks likely to play out. Firstly the incumbents will get displaced by a better customer experience and price, second that their revenues will be diminished in a market of higher switching frequency, before finally their core competency is challenged - in this case the arrival of the blockchain will disintermediate the banks completely.”

Additional key findings from the book’s research include that customers seemingly no longer trust traditional banks, and that the inability to react to changing consumer needs is set to be a critical factor in whether customers switch to new challenger banks in the near future.

Retail banks are acutely aware of this fact, however, and many of the UK’s big banks are in the process of multi-billion pound digital transformation programmes, with mobile banking regularly broadcast as being central to their evolution.

Join MyCustomer for a dinner debate at 1 Lombard Street, London on 17th November and a breakfast briefing at the Gherkin on the 19th November, and discuss the challenges of digital disruption in the banking sector with key industry experts and fellow professionals. 
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