Three forces are transforming retail banking. The first force, a legacy of the crisis, is a change in the structure of the industry as banks de-lever, as regulation responds and as customers see banks in a new light. The second force is a shift in the financial needs of an ageing population. The third force, and probably the most important, is the digital revolution, which will transform what customers expect of their bank and open up retail banking markets to new forms of competition.
Of these forces, new technology is probably the most important because of the impact it can have on what customers’ experience, on competition and on bank business models. However, its impact might not have been so large had it not been for the crisis, which has weakened customer trust in existing players at the same time as burdening those players with new regulatory demands and legacy costs. It is not at all clear what the retail banking world will look like in ten years’ time. But the change will be profound and profitability lower.