Retail banking used to be a relatively straightforward business. Banks understood the needs of their customers, they knew who their competitors were and they operated under fairly predictable levels of regulation.

Those days have gone - replaced by a working environment where customers' needs are being reshaped by the digital and social media revolution; where competitors can disrupt from any sector and where the actions of government all over the world make anticipating new regulation an almost impossible task.

How then, in this feverish working environment can retail banks navigate a course to future success? Just as some of the threats to incumbent banks come from outside the sector so do some of the solutions. Here are ten lessons that the banking sector can learn from the way other industries have handled change–including some good and some cautionary tales.

1. Know your customer (and know who's influencing them)

The food industry has traditionally focused on speed and convenience to meet the needs of a hectic, eat-on-the-go world. Over the past decade, however, a big increase in demand for "natural" and organic products (driven by social media-fueled concerns around food safety and a celebration of fresh and healthy ingredients) has caused food producers to radically reassess consumer tastes and how they satisfy them. Artificial ingredients - like flavors and colorings - have been ditched, and new healthy food companies have been acquired by major producers eager to match consumer expectations. 

2. Don't hide from technological progress

In the world of consumer electronics, Eastman Kodak is well-known for providing a salutary lesson - its near monopoly in the photography industry that was brought low by new technology in the form of the digital camera. 

Ironically, that disruptive technology was invented by none other than Eastman Kodak themselves, back in 1978. For 20 years, the company earned billions of dollars from patenting digital camera's technology, but they crucially avoided developing their own digital capabilities for fear of cannibalizing core film and printing business. Ultimately, its competitors did just that, consuming Eastman Kodak's market share at the same time. 

3. Global success requires smart partners and collaboration

How can the financial services sector offer the global services and operational structure needed at a time when new competitors and game-changing technology present new challenges at every turn? 

Perhaps the aerospace industry can offer some guidance. To meet a global surge in demand for airplanes, major companies are expanding their horizons by forging international and inter-regional partnerships with new entrants to the market - some even rivals - that were inconceivable a few decades ago. In doing this, aerospace companies are up-skilling smaller, regional partners and improving the talent pool in emerging nations. This is leading to gains in market share in new regions, and protection against some markets' protectionist policies.

4. Empowering consumers to create a better product

Today, we take for granted the importance of user-generated content in online media - be it consumer reviews about books and restaurants, highly influential video bloggers on YouTube and Instagram or real-time customer service initiated through Twitter. Yet this shift in power from traditional content providers to those who were once just a passive audience has necessitated a massive cultural shift in the media industry, a re-evaluation of media production and governance, as well as an appreciation and embrace of new business models and pricing.

The rise of FinTech in retail banking will have a similar democratizing impact – empowering customers to take ownership of their own data (through Open Banking) while pushing traditional banks to develop new products by harnessing the information customers are prepared to share in exchange for better services.

5. Long-term plans must anticipate disruption

Further lessons can be drawn from the world of transport. For example, the idea of a tunnel underneath the English Channel had captivated the world of business for decades. It would cut the cost and time of shipping goods between the United Kingdom and Europe, and it would provide a gateway for new tourism and travel. That, at least, was the allure behind the near decade-long struggle to complete this most challenging feat of engineering and infrastructure.

The tunnel finally opened in 1993 at a cost of around $15 billion. Less than a year later a powerful new transportation competitor - budget airlines - would undercut its travel industry market share. In hindsight the tunnel's backers admitted they had wildly overestimated consumer demand and failed to spot the disruptive influences from both the budget airlines and revamped ferry services that could threaten its success.

6. Fix a problem before regulation makes it a crisis

For years, the booming technology sector had a dirty secret. Many of its elegant and ingeniously designed products depended on raw materials mined in war-torn regions. Aware of the reputational risk posed by these conflict minerals, some of technology's biggest companies came together to create a third-party auditing system to ensure their supply chain was "conflict free". This helped those participating companies demonstrate good governance and put them in a stronger compliance position when, in 2010, the US government enacted new regulations to disclose conflict mineral risks.

7. Embed responsible business practices into your corporate DNA

Today's fashion and apparel industry leaders face a daunting set of challenges - consumer whims being the least of their worries. They must plan for a future where raw materials are becoming harder to source, where access to water (a crucial part of producing most clothing) is dwindling and where guaranteeing fair working conditions (or failing for their employees and those of their suppliers) can impact both reputation and revenues.

Up and coming fashion brands like Everlane, HUT jeans, TOMS and Warby Parker have emerged with proactive sustainability thinking embedded into their DNA but, perhaps more telling, major companies like Levi Strauss and Nike reshaped their core sourcing, operations and supply chain strategy around sustainability because they believe it makes sound business sense.

8. Behind every smart multichannel strategy is smarter architecture

The FS sector today faces some of the same challenges that the retail industry has been tackling for the last decade - how to keep a brick-and-mortar branch experience relevant and useful to customers while also meeting their growing mobile and digital banking expectations. How then did the retail sector master this omnichannel approach to keeping the customer happy?

One lesson that retail learned and continues to improve on is that customers don't want an either/or approach to physical and mobile banking. Leading retailers like Apple offer joined-up customer experiences such as providing in-store tech support once you've researched a problem and booked an appointment online. This streamlines the tech support process both for Apple and its customers and provides the personal touch customers still crave when they need help. Optimizing online services so that they weren't seen as an add-on to offline shopping was another.

This will be particularly important for a FS sector where millennials and the Generation Z already take mobile banking for granted. Ultimately retailers are re-examining the purpose of their physical stores so that they continue to meet the needs of customers without hindering the adoption of online innovation.

9. Attract and hold onto talent

The professional services sector hires hundreds of thousands of graduates every year and is in a constant battle to retain them - especially when faced with the lure of taking their business skills into the technology sector. Attracting and retaining talent will only become more challenging in near future - studies show that millennial graduates seek global mobility, are keen to shape their own careers through entrepreneurship or intrapreneurship, look for value from experiences as much as pursuing a top salary and expect flexibility to grow their careers within an organization.

Already, the professional services sector is attempting to offer extra vocational training to help millennials move up the career ladder and it is embracing both flexible working policies as well as investing in gender and racial diversity programs. Expanding areas of expertise to meet the major challenges that society will face in the coming years offers another career path for employees who are looking for more meaningful work satisfaction.

10. Future-proof education for technological change

The telecoms sector faces a particular future challenge. It needs its next generation of employees not only to be digitally literate but also to understand machine thinking so it can create the products that will provide the backbone for our connected and increasingly automated society.

That's why leading telecom businesses such as Verizon and AT&T have invested in science, technology, engineering and math (STEM) training schemes for schoolchildren - especially young girls who traditionally have steered clear of these disciplines. By investing in STEM these telecoms are doing much more than simply supporting community education - they are preparing the next generation talent pool that they will need to draw on to be successful.

Takeaway lessons for financial services:

  1. If you can't react to customer behavior, buy a business that can.
  2. Don't be afraid to "cannibalize" your own successes - better you than a competitor!
  3. Looking beyond traditional partners for collaboration is a keystone of success in a business environment that has both more fluidity and yet more barriers than ever before.
  4. The cultural shift that has propelled customers to share so much of their information can help create better banking services and products.
  5. Design your program milestones to deliver value upfront and remain vigilant about potential disruptions to your long-term goals. 
  6. Don't let a known problem in your business fester in the hope you can muddle through. Get out ahead of it and be willing to collaborate with your competitors for the greater good.
  7. Grasp the risks associated with stranded assets and financial inequality while embracing the growth opportunities of impact investing. 
  8. A good branch experience will complement not replicate online and mobile banking.
  9. Innovation isn't only for customers. Retaining talent amid burgeoning FinTech sector will require a holistic employer worldview.
  10. Identify the skills the sector will need in the next decade and invest now to make sure you have the talent to match when you need them.


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