Retail banking used to be a few ‘big names’, the leading high street banks, such as Barclays, HSBC, RBS, and Lloyds built up over many decades (in some cases, centuries). They have grown and acquired their smaller competitors and are an established presence in all our lives. Retail Banking in the future may not be the same; there is new competition with innovative new firms and competing young banks. To keep on top of the pool, these veterans need to bring all guns out blazing and adapt with advanced modern weaponry in the face of dynamically transforming retail banking.
High Street to Online
Over the last third of a century, major retail banks have cut down on their high street locations. From over twenty thousand in 1988 to less than half in 2012, it is clear that technological advancements such as the internet and online banking have contributed to the significantly lower demand of physical institutions. Still, high street bankers refuse to erode out withholding if there aren’t any other institutional locations in that city/town. “Challenger banks” including Santander and Metro Bank are fresh meat on the market, aspiring to dethrone old-timers with the extravagance of no heirloom structures to draw from – they can create an entirely unique new system integrated with tech to fit the modern digital era.
One Stop Shop to Account Specialists
Historically, financial systems served every individual fiscal need – savings accounts, checking accounts, fixed deposits, etc. Offering an array of customer commodities increases the chance of fulfilling all demand, decreasing risk and collectively profiting as the favourite products rake in enough revenue to compensate for the dissatisfactory goods. Customers used to seek all financial solutions from the same bank, focused on a profound client-supplier relationship. However, the patterns are changing, and consumers are always looking for the best bang for the buck, changing their loyalties to companies where products are the most promising. Thus, challenger banks have the upper hand with niche, focused commodities, specialising in quality.
Splitting Leaders of Banking into many constituent banks
Within the last 30 years, banks have aimed to establish themselves in the market. Three-fourths of all consumers were satiated by four crown providers in 2014. To prevent mergers and market domination by a single entity, innovations including the “Current Account Switching Service”. This breaking of old retail banks is impossible to completely carry out, but the challenger banks are creating a divide in the economy, tearing up old patterns and utilising unique methods to gain the support of consumers.
However, seasoned players who have previously posed a threat to the powerful four are not out of the running. Reports from TSB (a spinoff of Lloyds) state that they had garnered a tenth of the new UK account market share. TSB was an asset given up to resolve the 2008 taxpayer Lloyd bailout, currently at 631 branches but looking into building 20-30 more.
Moreover, the UK’s Santander is a key member, providing a smooth transition for clients seeking to trade over to another account. Santander’s 123 accounts are pulling in the beefy stock of consumers with week-long conversion amenities. Also, even more, petite foundations have demarcated their positions with specialised market sectors.
For example, Aldermore deals only with loaning capital to startups, tiny enterprises and mortgage holders. Atom Bank is a digital-only single bank service that has much-reduced expenditure to profit margins with a 30% difference. Challenger banks are twice as vast regarding retail lending market share, covering mortgages and unsecured loans in three years, from 4% in 2010 to 7% in 2013 and set to grow more.
What’s more, novel institutions are at an advantage with rapid, higher quality facilities in contrast to the ancient setup of their ancestors, too vast and deep-rooted in old patterns to remove the multiple layers of internal processes. Small institutions are also well-placed to provide personalised services both on the front-end when customers walk into a branch and behind the scenes when deciding whether or not to grant a loan.