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Top Trends in Retail Banking: 2020

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Financial services is undergoing a paradigm shift that is forcing incumbent retail banks to rethink growth strategies as they struggle to remain relevant. Growing competition from BigTechs, FinTech firms, and challenger banks has added to the complexity created by increasingly stringent regulatory and compliance requirements. Customers now expect a seamless customer journey and personalized offerings because they have become accustomed to top-notch individualized service from GAFA giants Google, Apple, Facebook, and Amazon. The changing ecosystem offers established banks new, unexplored opportunities and encourages a transition beyond traditional products to meet the exacting requirements of today’s customers. Bank collaboration with FinTech and RegTech partners is becoming commonplace. Incumbents are exploring point-of-sale financing and unsecured consumer lending, while they also boost their digital channel competencies to reach a broader customer base. Banks are beginning to accept open APIs and are working with third-party specialists to create an open shared marketplace. Technological advancements such as AI are fueling efforts to evolve customer onboarding and touchpoint processes. Increasingly, banks are turning to design thinking methodology to understand the customer journey, extract deep insights, and develop a more refined user experience across the customer lifecycle.
Our analysis of the top retail banking trends for 2020 offers a glimpse into the fast-changing banking ecosystem and explores the tools and solutions being used to face new-age challenges.

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Top Trends in Retail Banking: 2020

  1. 1. Top Trends in Retail Banking: 2020 November 2019 Link: https://www.capgemini.com/top-trends-in- 2020/
  2. 2. 2© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Use of Blockchain solutions to improve KYC and identity management programs Banks are exploring unsecured consumer lending Collaboration with FinTechs to explore point-of-sale financing Workforce preparation for Digital-era The Open X ecosystem Contextual banking Intelligent Bank Open Banking Deep Customer Insights Banks are leveraging AI to create a seamless customer onboarding journey Banks embrace design thinking Data-Driven Compliance Collaboration with RegTechs continues to rise Technology innovation is driving banks’ risk compliance initiatives 04 03 02 01 06 05 07 08 09 10 Top Trends in Retail Banking for 2020 by Capgemini
  3. 3. 3© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Source: Capgemini Financial Services Analysis, 2019 Trend 1: Digital-era workforce preparation has become a top priority Impact of technological advancements and rapid digital disruption 3© Capgemini 2019. All rights reserved | Within this dynamic ecosystem, employees’ legacy competencies are quickly becoming obsolete. Traditional banks must future-proof their workforce to compete with new-age digital financial institutions Traditional training cannot meet changing business priorities and the ever-shifting demand for required capabilities Bank staff require skills in AI, ML to derive insights and automate processes and improve customer experience. Top Trends in Retail Banking for 2020 by Capgemini Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance
  4. 4. 4© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Trend 2: Banks are collaborating with FinTechs to explore point-of-sale financing Source: Capgemini Financial Services Analysis, 2019 4© Capgemini 2019. All rights reserved | Drivers Banks are collaborating with FinTechs to move into the PoS financing Banks still require FinTech technology and talent to drive PoS financing PoS financing offers vast market potential and is gaining traction among online shoppers. Banks need FinTech’s technology to create a winning combination Banks cannot ignore the shift in consumer spending behavior toward PoS financing More customers will get onboard as technology advancements simplify adoption of PoS financing FinTech firms have established a PoS lending ecosystem A bank/FinTech platform will benefit merchants as they can drive sales by offering customers instant loans at no extra cost Implications Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  5. 5. 5© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Trend 3: Banks are slowly beginning to explore unsecured consumer lending through digital channels Source: Capgemini Financial Services Analysis, 2019, TransUnion, “FinTechs Continue to Drive Personal Loan Growth,” February 21, 2019, https://newsroom.transunion.com/fintechs-continue-to-drive-personal-loans-to- record-levels/. Future Growth Opportunity in Unsecured Lending Person loan balances in the US increased by USD 21 billion in 2018 In US, FinTech loans now comprise 38% of all unsecured personal loan balances In US, average unsecured personal loan debt per borrower is USD 8,402 as of Q4, 2018 Size of personal loan balances in the US is USD 138 billion as of 2018 Personal loan originations in the US increased by 22% during Q3, 2018 Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  6. 6. 6© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Source: Capgemini Financial Services Analysis, 2019 Trend 4: Blockchain solutions being used to improve KYC and identity management programs 6© Capgemini 2019. All rights reserved | Benefits of using Blockchain in KYC Process One source system for customers to upload KYC data Improved data security Bank accesses KYC data from blockchain Immutable database assures data does not change in time Other institutions verify KYC already performed by bank Blockchain can reduce operational cost, save time Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  7. 7. 7© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Trend 5: Banks embrace design thinking Source: Capgemini Financial Services Analysis, 2019; Medium, “What is Design Thinking? (And What Are The 5 Stages Associated With it?),”Benjamin Hunter Miller, September 5, 2017. Design Thinking Methodology Empathize Define Ideate Prototype Test Define the challenge & explore the human context Research, observe, understand & create a point of view Brainstorm ideas good & bad, don’t stop at the obvious Implement the product, show & don’t tell, start to refine the product Start creating, experiment, fail cheap & fast Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  8. 8. 8© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Key Drivers Complicated onboarding experience may significantly impact customer loyalty Personalized experience that can readily meet millennials’ expectations Onboarding experiences from Facebook and Amazon have changed customers’ expectations Banks can use AI to enhance customer support services Challenger banks also pose a threat with quicker turnaround time Expedited loan approval process with AI powered risk assessment Key Benefits Trend 6: Banks are leveraging AI to create a seamless customer onboarding journey Source: Capgemini Financial Services Analysis, 2019 8© Capgemini 2019. All rights reserved | Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  9. 9. 9© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Trend 7: Collaboration with RegTechs continues to rise Source: Capgemini Financial Services Analysis, 2019 9© Capgemini 2019. All rights reserved | Rise of specialized RegTech players Increasingly stringent regulatory requirements Technology enabling innovative compliance solutions Increasing cost of compliance Legacy systems that preclude efficient compliance Greater volumes of sensitive data to manage Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini Retail Banking Trends 2020 | November 2019
  10. 10. 10© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Trend 8: Technology innovation is driving banks’ risk-compliance initiatives Source: Capgemini Financial Services Analysis, 2019 10© Capgemini 2019. All rights reserved | Drivers Data growth has created the need for more effective reporting Banks must update their legacy systems with automation, cognitive and AI Increasingly complex regulations around anti-money laundering (AML) and KYC Banks waiting to adopt technology may wind up playing catch-up with competitors Advancements in ML, NLP, RPA (robotic process automation), and advanced data analytics Banks must expand budgets to cover workforce training programs in compliance Risk management in today’s complex environment demands effective handling of large volumes of data Collaboration with RegTechs to help banks meet regulatory requirements Implications Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  11. 11. 11© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Trend 9: The Open X ecosystem of the future will require players to work collaboratively Source: Capgemini Financial Services Analysis, 2019 11© Capgemini 2019. All rights reserved | Benefits of a Open X ecosystem Hyper-personalization Offerings customized at individual level Portfolio expansion Leveraging products of other ecosystem partners Customer penetration Ability to reach new customer segments Process efficiencies Creating operational synergies working with ecosystem players Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  12. 12. 12© Capgemini 2019. All rights reserved |Retail Banking Trends 2020 | November 2019 Source: Capgemini Financial Services Analysis, 2019 12© Capgemini 2019. All rights reserved | Trend 10: Contextual banking empowers banks to provide superior customer experience Drivers The contextualized experiences offered by Netflix and Spotify – have set new customer experience standards. Contextual banking can optimize the execution of every transaction Customers expect banking tasks to be simple, efficient, appropriate to the context Banks need to leverage data from all sources and channels to create a contextual data repository AI, and ML have enabled banks to continuously learn about consumer preferences and create personalized offers Banks need to invest in big data, advanced analytics, and AI to build data insights Technology is enabling banks to obtain real-time customer data and target their personalization Contextual banking can enable banks to initiate cross-selling of products, or services Implications Intelligent Bank Open Banking Deep Customer Insights Data- Driven Compliance Top Trends in Retail Banking for 2020 by Capgemini
  13. 13. A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of over 200,000 team members in more than 40 countries. The Group reported 2018 global revenues of EUR 13.2 billion. About Capgemini Learn more about us at www.capgemini.com This message contains information that may be privileged or confidential and is the property of the Capgemini Group. Copyright© 2019 Capgemini. All rights reserved. People matter, results count.

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