No Bank Is an Island

Adapting Retail Bank Business Models to Thrive in a Rapidly Changing Ecosystem
by Daniel Latimore, August 20, 2013
Industry Trends
Global

Abstract

Retail banking in North America and around the world is undergoing a profound generational change.

Pressure from outside sources — the economy, regulation, competitors new and old — has ratcheted to a fever pitch, while consumer demands and technology solutions are accelerating the need for new products, services and delivery mechanisms. Nimble new entrants challenge banks at the margin, and, increasingly, the core. These forces are reshaping the retail banking system in unprecedented ways.

Against this backdrop, banks face the ever-present pressures of increasing revenue and reducing cost.  To execute against these mandates they must focus on their customers, improve on how they organize people, process and technology to deliver to those customers, and decide the level of innovation appropriate to their individual strategy.

The most fundamental change, and the one that will require the biggest shift in mindset, is the increased importance of the overall retail banking ecosystem to individual banks. Simultaneously opportunity and threat, banks’ web of connections banks with vendors, customers and partners is more complex and more crucial than ever before. Navigating through, and profiting from, this ecosystem will necessitate fundamental changes in bank business models.

Celent examines these forces in detail and recommends that banks respond by making a essential change in mindset and behavior: recognize, and behave as if, they are but a part of a financial services ecosystem. By capitalizing on their relationships and bringing customers value from partners, they will strengthen the customer relationships that are the foundation of their business.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

 

No Man Is an Island

2

External Forces

4

 

Consumers

4

 

Technology

5

 

Competition

9

 

Regulatory

10

 

Economic

11

Bottom Line and Environmental Pressures

13

 

Increase Revenue

13

 

Decrease Cost

13

 

The Evolving Ecosystem

15

Changing the Business Model

17

 

Channels

17

 

Architecture

18

 

Innovation

20

Path Forward: Change Business Model / Ecosystem Rule

21

Leveraging Celent’s Expertise

24

 

Support for Financial Institutions

24

 

Support for Vendors

24

Related Celent Research

25

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