Global Retail Banking Consumer Trends - Oracle
Global Retail BankingConsumer TrendsThe Changing Shape of Consumer Banking Relationships2020-2021 Global Retail Banking Consumer Survey and Report by Oracle Financial Services
IntroductionPop-Tarts vs. Peanut Butter:What Should Banks Be Providing?Back in 2004, with Hurricane Frances steamrollingWouldn’t it be nice if it were that easy for consumertowards Florida, Walmart’s data scientists werebanks? Just figure out what people are in search of atscrambling to create a forecast of their own: Whatthe moment of need—a credit card to finance thoselast-minute grocery items would shoppers most likelymany B&Q runs, for example—and offer it up on thebuy before the hurricane hit?digital equivalent of an aisle endcap.They had reams of consumer data on their side, asBut are Pop-Tarts really the right thing to buy withwell as recency, as another hurricane had devastateda hurricane approaching? Ask disaster and survivala region close by just two weeks prior. From it all,experts and a more realistic answer would be peanutWalmart’s data geeks arrived at an astonishingbutter. But Walmart—or the likes of Amazon—isn’tshopping forecast: Strawberry Pop-Tarts.obligated to provide the best option, just the mostLocal Walmarts quickly made room on their shelvespopular one.for thousands more boxes of strawberry Pop-Tarts.Consumer banks, on the other hand, have a muchAnd sure enough, they sold out within hours.different, more personal relationship with customersIt is one of the early tales of the power of personalconsumer data and personalization.2 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationshipsdue to the intimacy of personal finances. Consumerstrust their banks and trust that they won’t be gougedor taken advantage.
Facing Continued HeadwindsFast forward to 2020 banks face challenges that wereunfathomable in 2004. Agile FinTechs are slicing offlong-established customers with spending and paymentproducts. And data-driven behemoths like Google, Apple,Amazon, and Alibaba are looming with personal financesolutions that likely eclipse the functionality of what legacybanks can yet offer. But will consumers trust their financialdata to the likes of these companies?Frankly, the data suggests maybe: 64% of young consumerswould recommend their bank for various spending, savings,borrowing, and investing products. Yet 56% report theywould be willing to switch to banking solutions offered byGoogle or Apple if/when they are brought to market.56%Would likely switch to a bankingsolution from Google or Apple3 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships“Young customers are seekingdigital banking solutions thatenable them to make personallyrelevant money choices in themoment—and don’t requirethem to personally sort throughpaperwork or, worse, have tocontact or talk to someone.Tomorrow’s banking won’t be businessas usual. It will be far more personal(and consequential) than ever before.
Let’s Jump Right InTo help banking providers quickly glean insights from this report, we’ve broken it down bycommon product groupings and their popularity (e.g., current usage) among respondents.The Big Picture for BanksPaymentsSavingsOvercoming the ShortsightednessPayments Despite Reliability of Plastic, ViralConsumers Choose Reputation Overof “Delight”Alternatives Capture Interest (and That’s OK?)Rates and Even vestmentsOutcomePersonalization and Process Matter,Consumers Want Easy, Cheap InvestmentsEspecially as Loan Amounts Growbut Don’t Believe They Can Do It AloneInvest in Highly Personal,Page16-21Page 19 MortgagesPage 20 Other LoansPage22-254 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking RelationshipsMeaningful ExperiencesPage26-28
The Big PictureOvercoming the Shortsightedness of “Delight”
The Big Picture for BanksOvercoming theShortsightedness of “Delight”No doubt, you’ve read industry report afterIt’s Oracle’s view that banks shouldindustry report extolling the virtues andabsolutely invest in technologies thatprofitability of “delighting the customer,”let banks build and bring to market newbut legacy banks can’t afford to squanderproducts quickly and present them toexpensive digital investments withcustomers at the moment of need.shortsighted implementation and planning.However, we take the holistic view thatBuying strawberry Pop Tarts may be quicksome areas, such as digital paymentsand “delightful” in the moment of purchaseand person-to-person transactions—they’re fast, cheap, and require little effort(i.e., the smaller transactions of theor thought—but could easily be consideredday), may be better left to third parties,shortsighted once days if not weeks of noso banks can focus time and capital onelectricity or services follow a hurricane.developing better, more personalizedWhat is “delight”rooted in?Easy, Convenient, Targeted, Instant GratificationWhat should banking be?processes to help consumers throughthe big transactions of life, like buyinga first home or securing a comfortableretirement.Relevant, Informative, Meaningful, Long-term6 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking RelationshipsSetting UnrealisticExpectations Is NOTDelightfulA common pitfall of chasing anAmazon like data-driven experienceis that, when it comes to the intimacyof personal finances, banks are likelyto have blind spots in their data andcustomer profiles. Continuouslyoffering a customer a mortgage whenthey already have one elsewhere isSPAM; presenting a customer a creditoffer and then denying the applicationis flat-out infuriating.
56%Say their bankingexperience has improvedduring past two yearsTop 5 “Used Very Often”Banking Solutions (Global)1Bank’s Mobile App2Bank’s Online Banking Platform3Interesting FindingNo Debit/Credit Cards?!94% of the survey respondents are 30years old or younger. This is their perceivedecosystem, even if an app uses a card number.7 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking RelationshipsTraditionalofferingsBank’s Physical Branches4Digital Wallet(Apple Wallet, Google Wallet, etc.)5NewentrantsDigital Payments(Apple Pay, Alipay, WeChat Pay, etc.)
Priority When Looking for aLong-Term Financial PartnerLeveraging Trust and Data toDeliver Meaningful ExperiencesBanks are not altruistic, and their primary goal is profit.4.0To that end, their greatest competitive advantage is thedecades and terabytes of proprietary first-party datatheir consumers have bequeathed them. As technologyvendors have been screaming for years: It’s time banks3.0Priorityput it all to effective use.The challenge, however, is doing it in a way that builds2.0rather than erodes trust (the #1 determining factor inchoosing a long-term financial partner).Walmart can sell a bajillion Pop-Tarts and banks can1.0load up consumers with high-interest credit cards. ButWalmart isn’t the one that suffers if consumers are leftwith a bad taste in their ence8 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships
PaymentsPayments Despite Reliability ofPlastic, Viral Alternatives CaptureInterest (and That’s OK?)
PaymentsDespite Reliability of Plastic,Viral Alternatives Capture Interest(And That’s OK?)Digital payments have been a key storyline in the global pushAfter all, the vast majority of digital payments—all theto digitize banking, as younger generations have embracedVenmo and Zelle and Cash App payments to pals—aredigital wallets, person-to-person payments and onlineminiscule. Given the very high initial costs and the ongoingpayments with extreme gusto. While the popularity of digitalmoney-losing proposition of adding digital payments to apayments has exploded, so do the questions about its costsbank service, it may be in a bank’s best interest to simplyand usefulness for legacy banks.let the myriad of third-party payment services have at it.Satisfaction of Recent Payment Experience(5-point scale)20%Traditional Plastic:Alternative Payments:4.103.93“Very likely” to use an alternative methodfor all payments in next 12 months10 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships
Customers Want in the MomentOffers and PersonalizationThere is no evidence these everyday miniscule transactionsWhat does matter to younger generations whengenerate true long-term loyalty. If anything, consumersselecting a payments provider is not what hashave shown a willingness, given the small size and “free totraditionally generated interest and usage in theme” nature of digital payments, to experiment and jumppast. Traditionally, cash back rewards have been thefrom service to service, often driven by peer “influencers.”gold standard for attracting and keeping customers,And, when push comes to shove, the data reveals that anbut today’s younger customers want “in theold-fashioned plastic card transaction is a better, moremoment” offers and personalization and likely findreliable experience to the Millennial and Gen Z generations.the redemption of cash rewards too tedious.Top Factors When ChoosingPayments ProviderLoyalty program with personalized offers (tie)Interesting FindingBudgeting Tools StickinessRespondents say personalized budgetingFuss-free, easy transactions (tie)advice would be “most valuable” additionto their current payment solution butCash back rewardsTraditional offeringsfor banks11 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationshipsalso report it being least important whenchoosing a new solution.
SavingsConsumers Choose Reputation OverRates and Even Recommendations
SavingsReputation Over Rates and Even RecommendationsWhile younger consumers have no qualms experimenting with a myriad of emergingpayment providers, one thing is clear: When it comes to protecting and building their hardearned savings, they have little interest in working with anyone but well-established banks.When it comes totheir savings,young consumersstrongly favortraditional banks.Primary Savings GoalsBuy a homeGo on vacation/holidayBuy a vehicleReduce debtStart a side business010%20%30%40%13 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships50%
Are “High Interest CDs” the Stale PopTarts of Banking?For several years now, an emerging global trend in retailbanks now face a remarkable low rate environmentbanking has been the rise of secondary “direct banks” orfar beyond what’s been seen in the last decade. Thoseslim online-only banks with often minimal product slatesshort-term savings accounts are now quickly beingconsisting of high-interest savings and certificate accounts.drained, those now very high-interest CDs are liabilitiesTheir target market is very specific and well known: “rateon the balance sheet, and consumers are refinancingshoppers,” who have no problem moving around chunksout of the downstream loan product produced with theof their money to capture the best deposit rates availableoriginal deposits.with little thought given to loyalty, experience or evenservice. Some of these banks don’t even offer mobile appsor telephone customer service.While extremely successful of garnering deposits throughaffiliate marketing and recommendation engines, theseInteresting FindingFamiliarity Still Matters MostEven if another bank offered the desiredsavings recommendations and plans, only 17%of consumers would be “very likely” to moveaccounts and 53% said they stay put anyways.14 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships
Savers Want Assistance inReaching Their GoalsSavings accounts are the anchors of banking and the keyAccording to the data, top draws for today’s young bankingto driving long-term, multi-account customer relationships.customers are personalized tools, calculators and contentAs expected, most younger banking customers are usheredto help them make the most of their savings and reach theirinto their first bank accounts by their parents and at theirgoals. Additionally, basic recommendation tools based onparents’ preferred institution. It’s one of the beautiful,trends in spending can help savers maximize future income.reliable traditions of banking. Even so, it helps to offer thecarrots that attract switchers and new customers—or keeprestless current ones in the fold.Top Factors When Choosinga Savings Account123Provides personalized savings plans andadvice for reaching a specific goalRewards for reaching savings milestonesA strong reputation (security, reliability)Many banks have added a range of tracking features and subaccounts to help users focus their savings toward financialgoals such as buying a home or a car, which naturally sets upa future offer of credit.“Most Valuable” Features toHelp Save in the Future12315 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking RelationshipsMonthly recommendations based onspending habitsMonthly recommendations based onsimilar customers (age, location, habits)Account proactively moves funds intohigher-yielding accounts
BorrowingPersonalization and Process Matter,Especially as Loan Amounts Grow
BorrowingPersonalization and Process Matter,Especially as Loan Amounts GrowMortgages: Highly Personal LoansNeed a Highly Personal ProcessBanking study says younger consumers want lessSavings and mortgages go hand in hand whenhuman contact, not more. They don’t want to have toforming long-term customer relationships. However,visit or call their bank for assistance with their accounts.all signs point to the highly emotional first mortgageBut, when it comes to their biggest life purchases (aexperience being frustrating and unsatisfying forhome or a car), they absolutely want to hear from theiryoung customers—a trend that threatens traditionalbanks—and often.banks’ most lucrative pipeline.The longer and more personally important the loan is,the higher the levels of interaction, transparency andaccess desired.Nearly 2 out of 5consumers“unsatisfied” with the mortgage experience
Top Sources for Advice on Home Loans*Friends and familyVarious bank websitesLoan comparison sites010%20%30%40%* 1 in 4 consumers do not seek advice; automatically choose primary bankFirst and foremost, customers are eager to work with a trustedsource, so their first option is to turn to the known quality oftheir current bank, often at the behest of friends and familywho likely also bank at the same institution. But, the datashows, the experience is fractured with unclear requirementsand a lack of outreach and communication on the status ofapplications. Nothing spells “doom” for a lending relationshiplike a missed closing date.18 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships60% choose their primarybank for a first mortgagebut just 32% use them fortheir next home loan.
Top Factors When Choosinga Mortgage LenderImprovements Consumers Wantin the Mortgage Process1123Strong reputation for having customers’best interests at heartSpeed of application and fundingEase of submitting documents and process23More information up front to help choose the rightsolutionA faster process from application to approvalMore human interaction and assistance throughoutInteresting FindingOnline Lenders More Attractive to Experienced BorrowersThree times as many consumers (15%) look to online lenders for refinancing ratherthan for a first mortgage (5%), suggesting alternatives become more attractive asborrowers become familiar with the mortgage process.19 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships
Other Loans: Rates and Offers More Relevant,Process Still KeyWhen it comes to smaller-size loans, the shift in focus for consumersWith less emotional stress tied into these loans, themoves from “please help me do it!” to “what else can you do for me?”data shows customers are generally more satisfied andmore willing to rate shop, look to outside sources foradvice, and seek out complementary bundles, such asinsurance discounts offered alongside a vehicle loan.Top Reasons for a Loan (Non-Mortgage)Top Sources for Loan AdviceVacation/holiday123Buy a vehicleCollege educationStart / grow abusinessWedding010%20%30%40%20 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking RelationshipsVarious bank websitesFriends and familyLoan comparison sites
Top Factors When Choosinga Lender (Non-Mortgage)Improvements Consumers Wantin the Loan Process1123Special offers or bundle related to the loan(e.g., discount on insurance if buying a car)Strong reputation for having customers’best interests at heartSpeed application and funding23More information up front to help choose theright solutionA faster process from application to approvalMore human interaction and assistance throughoutEven so, the data reveals that banking providershave the same blind spots in their loan processes,as young consumers feel uninformed and leftout. Improving communication and outreachthroughout the lending experience is key toensuring banks remain the first go-to whenconsumers seek financing for key life events.2/3rds of Consumers“Satisfied”With general borrowing experience21 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships
InvestmentsConsumers Want Easy, Cheap Investmentsbut Don’t Believe They Can Do It Alone
InvestmentsConsumers Want Easy, CheapInvestments but Don’t BelieveThey Can Do It AloneMain Reasons to InvestGrow moneyInvesting, long the bastion of brokerage houses,is a new vibrant frontier in banking. Advances intechnology and API-driven Open Banking haveReach financial goalgiven banks the ability to let customers monitorand make investments right alongside (or near)one’s savings and current accounts. Bankingcustomers reap the benefits as more banksSave for retiremententer the area and offer more tools and options.Other023 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships10%20%30%40%50%60%70%
Retirement is not (yet) thekey driver of young consumerinterest in investingOf course, given the age and lower incomesof our survey audience, much of our data onTop Sources for DecidingWhom to Invest With123Investment comparison sitesVarious bank websitesFriends and familybank provider investing is aspirational wants,as many customers are new to investing orhave few assets in the market. Even so, we cansee that investing is a very attractive area toMillennials and Gen Z and they are starved foreducation and advice in the area.24 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships64%Are satisfied by theinvesting experience
Newcomers Want Guidance andReassuranceInteresting FindingOutside Advice Big Factor, DistractorUnlike other product areas in this report, the choice ofThat’s the biggest takeaway from our survey respondents:investments is heavily influenced by outside advice andWith low- or no-cost trades and investments, the barrieronline content. While helpful in comparing costs, these siteskeeping young customers out of the market are entirelycan set unrealistic expectations for returns, etc. Curatingmental. The majority of respondents were clear in wantinguseful, accurate investment content, whether original ormore advice, both digital and human, to help them becomelicensed, can ensure a more positive investment experience.comfortable and confident with their investment choices.Top Factors When Selectingan Investment ProviderImprovements Desired ofInvestment Solutions11223Full visibility into portfolio withalways-on investment adviceEasy ability to track investmentsanytime, anywhereLittle to no admin or s
7 I Global Retail Banking Consumer Trends I The Changing Shape of Consumer Banking Relationships Top 5 “Used Very Often” Banking Solutions (Global) Traditional offerings New entrants 1 Bank’s Mobile App Digital Payments 5 (Apple Pay, Alipay, WeChat Pay, etc.) 2 Bank’s Online Banking Platform 3 Bank’s Physical Bran
Keywords: Retail banking, Challenges, Products of retail banking, Trends in retail banking, SWOT analysis of Retail banking. Introduction: Customer has their own taste and preferences, in this, how a service provider has to think towards satisfying the needs of the customer is very important in the entire sector. .
Occupier Services Retail Banking DEFINITIONS RETAIL BANKING Retail banking, also known as consumer banking, is the provision of services by a bank to individual consumers. Services offered include savings and checking ac
PwC Retail Banking 2020 5 Against this background, 70% of global banking executives believe it is very important to form a view of the banking market in 2020 – to understand how these global trends are impacting the banking system
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Asia Financial Institutions Retail banking in Asia. Foreword. Retail banking in Asia is on the cusp of a new era—an era of amazing growth and opportunities but also an era that will see downward pressure on returns. Asia will reach over USD 900 billion in retail banking revenue by 2020, growing at about 14 percent per year from 2010.
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