The retail banking landscape is changing. Incumbents are vulnerable. Regulation weighs on their profitability, but also opens doors for new entrants.
Their brand equity is weak. Their pre-online core banking infrastructure is stretched to breaking point; it burdens them with high costs, yet fails to meet customer expectations in a digitally connected era of anytime, anywhere. These systems must be radically overhauled or they risk evaporation in a boiling kettle of technological disruption.
Over the coming years, regulation, obligations and flexibility will force banks to address shortcomings in their core systems. Let’s take a look at them each in turn. Regulation will be at the forefront of the minds of many retail banking executives in the years to 2020. They must implement key structural changes, such as ring-fencing retail and business deposit taking from other, riskier parts of their businesses, particularly investment banking. No easy task as traditional banks struggle to manage a patch-work of largely incompatible legacy IT infrastructure.
But regulation is also making it easier for new entrants to enter the market – testament to this is that a high street bank (Metro Bank) has recently been the first to open in the UK in over 100 years...