Redefining the Future of Banking: Retail & Business
Retail and business banks are navigating a shifting operating environment, with changing interest rates, rising customer expectations, and intense competition. Many players are re-evaluating their underlying economics and growth strategies. While customer experience investments have been a long-standing focus, attention is now turning to their impact on overall performance.
This includes greater use of data analytics to better understand customer needs, helping banks increase share of wallet and cross-sell more effectively. Hyper-personalization has also become a critical tool to strengthen customer relationships, with loyalty models evolving as banks look to enhance lifetime value.
To deliver in these areas and more, banks must continue to invest in modern technology infrastructures that support integrated digital banking, automate essential services, and embed analytics and AI into customer journeys. These capabilities will become increasingly important as financial institutions prepare for a more hybrid financial system.
Capitalizing on digital banking beyond customer experience
Banks have been investing in digital experiences for over a decade to provide more intuitive and secure platforms that resonate with customers. While this has enhanced engagement and trust, they are now focusing on moving from building experiences to capitalizing on them.
Digital channels can unlock a range of growth opportunities, including more accurate next‑best product recommendations, hyper‑personalized offerings, and product innovation shaped by customer behavior analysis. These help boost share of wallet and enable banks to cross‑sell more effectively.
Data-driven insights are also strengthening customer relationships and reducing churn with “propensity to leave” models. For example, by identifying early warning signals like reduced engagement, banks can proactively contact customers with personalized support, leveraging “next-best interaction or product” models. This brings banking to a more human level, using data not just for efficiency, but to deliver empathy as well as reinforcement that human advisors are available.
To keep capitalizing, banks needs to maintain a focus on operational efficiency. Automation in areas such as onboarding and compliance checks are improving resource optimization and, ultimately, margins. Digital maturity also drives scalability. According to Temenos Value Benchmark data, there is a clear opportunity for the average retail bank to improve employee productivity through digitalization and complete the move to monetization of digital experiences.
A hybrid model for SMEs’ digital future
The future of small and mid-size enterprise (SME) banking isn’t solely digital; it’s hybrid, pairing robust digital capabilities with human advice. Digital offerings and transactions are important, but SME clients continue to value a human touch at pivotal moments. Winning models combine strong digital propositions with relationship managers (RMs) who orchestrate the full experience.
Although most banks already have core digital journeys in place, AI offers the next step-change to make those journeys smarter and more responsive for clients and RMs. Fragmented, manual processes can become end-to-end digital workflows that enable straight-through processing across onboarding, lending, payments, and investments.
But digital alone is not enough. SMEs want the flexibility to self-serve for straightforward tasks while accessing informed, proactive advice from RMs. In the most effective models, RMs are fully integrated into the client’s digital journey. They have visibility into key client actions and use digital tools that enhance productivity and anticipate client needs.
Blending robust digital platforms with AI and RMs isn’t about just adding a chatbot. The advantage comes as AI evolves from pilots into foundational layers embedded across workflows. The combination of speed through digital tools and trusted advice can help banks compete effectively with tech-only platforms.
At the same time, SME ecosystem competition is intensifying. As digital marketplaces and commerce platforms embed banking services into their offerings, lending risks becoming a commodity, which can weaken banks’ relationships and reduce their influence with SME clients. Banks will need to make strategic decisions about where they can provide the right client services and when to double down on advisory moments when depth and trust are crucial.
For banks, digital transformation has become table stakes. But the differentiator is a hybrid operating model that embeds AI into core workflows and focuses RMs on moments of truth.
By: Bain & Company
Hyper-personalization becomes the new battleground
If personalization has become the norm, hyper-personalization is now the differentiator.
Hyper-personalization goes beyond the types of data typically used for personalization, such as demographics, by incorporating factors such as behavioral patterns and predictive insights to anticipate customer needs and swiftly offer relevant products or services. For example, a retail customer might open their banking app and receive a personalized investment suggestion based on recent spending trends and life stage indicators.
Hyper-personalization spans multiple touchpoints and beyond cross-selling is playing an increasing role in customer acquisition, retention, and dynamic experiences (real-time adaptation to customer activity).
With the average product per customer at 2.59, hyper-personalization is an opportunity to boost product adoption and foster deeper customer relationships, according to Temenos Value Benchmark data.
Some banks are going as far as creating experiences for specific segments, such as restaurants within the SME sector. This could include AI-driven cash flow insights, highly personalized loyalty programs and partnerships with special offers on food delivery platforms – highlighting banking’s evolution from a transactional-based service to one that is more holistic and purposeful to the customer.
Driving loyalty with tiered banking experiences
The subscription economy has changed how consumers access goods and services, driven by a desire for convenience, value, and, for some, access over ownership. Advances in technology are accelerating this shift, making it easier and more compelling to buy services, extract insights into consumer needs and preferences, and deliver bespoke experiences.
Financial institutions are tapping into this trend by going further than their traditional rewards programs (such as cashback or earned points) and offering tiered, subscription-based experiences that provide exclusive features, personalized services, and bundled benefits for specific segments, such as frequent travelers or high-net-worth (HNW) individuals.
There are two main objectives behind this strategy: deepening engagement and loyalty by embedding banking into daily life, and establishing recurring revenue streams. Subscription models are also helping banks compete with digital challengers that have set new standards around convenience and already offer such subscriptions. Leveraging personalization, exclusivity and smooth digital user journeys, tiered banking subscriptions are helping banks to compete in an increasingly experience-driven market.
Connecting traditional banking with decentralized finance
As the financial system increasingly blends traditional finance with blockchain-based platforms, financial institutions are seeking interoperability across both. Banks are exploring controlled, secure ways to connect with DeFi protocols, tokenized assets, and stablecoin ecosystems in response to growing customer demand for faster settlement, programmable money, and 24/7 access to digital assets.
Rather than competing with DeFi, they are positioning themselves as trusted gateways, offering custody, on- and off-ramps, identity verification, and transaction monitoring.
DeFi’s growing footprint is increasingly difficult to ignore, representing an estimated €78 billion or 4% of total market capitalization.[1] It is predicted that stablecoins, a core component of DeFi, could reach USD $500-700 billion in the next couple of years, with the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), effective as of July 2025, providing a framework for adoption and issuance.[2]
Success in this space will require striking a balance between openness and control, with strong governance, risk management, and compliance. This includes AML, fraud prevention, and real-time monitoring across traditional and decentralized rails. Banks are also balancing innovation with ownership as they seek to capitalize on this trend while maintaining assets on their own balance sheet.
Those that invest in composable architecture, tokenization capabilities, and secure APIs will be best positioned to integrate DeFi.