As the United States emerges from the financial crisis, retail banks are striving to outperform their competitors via a branch innovation and transformation strategy while grappling with regulatory challenges and shifts in consumer behavior. Banks are also assessing the implications and opportunities created by mobile phones and social media. In our view, banking leaders need to quickly and decisively adopt new approaches or risk being left behind.
To capture a greater share of wallet, banks should evolve beyond "pushing" products to understanding and delivering on customers’ financial needs. The traditional banking model is organization-centric and structured around internal product groups. Through branch innovation, leading institutions are adopting a new customer-centric model to replace outdated product-centric models. And banks that gain a deep understanding of their customers through life cycle segmentation can leverage their knowledge to offer the right products to the right customers at the right time.
Acquisitions can also give banks a competitive edge, though they will need a well-executed strategy to more fully realize the benefits of the combined organization. And some institutions are beginning to implement customer-centric technology and operational platforms to support a coordinated channel strategy. Aging, non-integrated legacy banking systems are becoming a liability, as maintenance costs rise and customers demand real-time access to information and services. Banks should consider including modern distributed applications which may help their organization increase revenues and flexibility and decrease costs and risks.
Banks that execute a branch innovation and transformation strategy that focuses on the following six key areas of focus are better able to develop a competitive advantage and help position for profitable growth: customer relationships, product design, pricing, expense management, distribution channels, and regulatory and risk management. We see the leading retail banks establishing effective game plans to transform their businesses in a number of important respects.