Powering next phase of retail banking

A reference work once defined retail banking is a key component of the banking industry, where banks only work with consumers, not businesses and allow consumers to purchase homes, cars and consumer products by providing mortgages and loans, which consequently, provide needed liquidity to keep the economy growing.

  Another explained that it is when a bank executes transactions directly with consumers, rather than corporations or other banks, with service offerings like savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards. The term is generally used to distinguish these banking services from investment banking, commercial banking or wholesale banking. It may also be used to refer to a division of a bank dealing with retail customers and can also be termed as Personal Banking services.

 Why is the retail banking the toast of many financial institutions? In this era of financial inclusion and quest for cash-less economy, where emphases are placed on banking the unbanked, improving the under-banked and reducing physical cash in circulation, it becomes a veritable tool, with its variety of product offerings, for seamless transactions. In fact, the revolution in the nation’s payments system landscape as evident in the huge patronage of mobile money, agent banking and the use of other electronic channels in recent times has now become the driving force of retail segment in the industry.

  But where lies the future of the retail banking? Customers now expect more than an excellent mix of products: they are looking for superior customer experiences that fulfill basic expectations while providing added value.

  According to EY’s 2014 report, customers selected “the way I am treated”, as the second most important reason for trusting their banking provider, followed by “financial stability” of their bank. Customer experience is also the most common reason for opening and closing accounts, more so than fees, rates, locations and convenience. Yet, strategic partnerships with other service providers that can create a niche, along with innovative technologies to drive the ideas to reality are fast becoming the next phase of the retail banking landscape.

  The good news, of course, is that consumer confidence in the banking industry is on the rise as banks become central in virtually every economic activity. The challenge, however, is that an increasing number of financial service providers are competing for the same customers and the opportunity cost of falling behind the competition is extreme. 

  At the second Jeff & O’Brien Roundtable Conference on the Future of Retail Banking in Africa, Heritage Bank Limited, reiterated that improved customer experience, technology and thorough exploitation of the emerging alternative markets in the non-oil sectors of the Nigerian economy are keys to growing emerging retail banking sector.

  The Managing Director of the bank, Ifie Sekibo, who was represented by the Executive Director, Ivory Banking, Mrs. Mary Akpobome, however, said that given the country’s over-reliance on the oil sector and the effect of the fall in foreign exchange rate, banks need to redefine their retail banking strategies to cater for the emerging retail business opportunities in the nation’s non-oil sector.

  “Retail Banking in Nigeria is evolving. Traditional way of Banking is changing. It is going to even change more with the digital age that we are coming into. Reliance and over reliance on Brick and Mortal branches is going to change. Customers are going to have a lot of alternatives on how to interface with the market. Today, we hear of non-oil sector as alternatives to the oil sector. We can see what over-reliance on the oil sector has done to our economy. If we had focused greatly on these alternatives, the exchange rate would not have hit us as much as it did”, he said.

  According to him, those emerging alternatives, which form large chunk of what today’s retail banking need to focus on, include businesses managed by middle-men, farmers, entertainers and other medium-sized businesses that are the new money spinners which have got the banking industry to rethink their customer management strategies.

  “What those alternatives have done to the industry is to get banks to rethink their strategies; to rethink the industry they want to play in, to also rethink the market they want to pitch their strategies to ahead of the future, because the future is going to change. Retail Banking Strategy means looking at a much wider scope of customers and how to reach them in their respective communities. Is it through alternative banking centre? Is it through Agent-Banking? Is it through cash-point or through other platforms?” 

  He added that with the successful acquisition of Enterprise Bank by Heritage Bank, the nation’s retail banking service is about to witness the best of product offering established on “unique customer experience, culture of excellence and people skills”.

  Also, the bank’s Group Head, Cowry Banking, Davidson Regha, noted that the success of retail banking in Africa would require partnerships and combination of different competencies from other industries to drive innovative and successful retail banking service. 

  He explained how Heritage Bank had successfully created a best-seller education product called SkoolBank in collaboration with specialists in the education industry, as well as the partnership with professionals in the entertainment industry to grow the rising retail banking demand from the sector.

  But an international retail banking expert, John Berry, observed that Nigerian banks must build their retail banking strategies around people, processes, products and places with strong emphasis on differentiation to be able to navigate the current changing tides of retail banking. 

  According to him, to create a successful retail banking system, banks must create a unique culture that differentiates their brands, adding that “it is easy for other brands to copy your pricing, but not your unique customer friendly culture”.

  Berry advised that banks must turn their customers into brand advocates through unique experiential services offerings. 

  “If you are able to turn your customers into advocates, they will buy more products, use the products more regularly, stay longer, tell others about your services and make it more profitable. I will say build a retail brand that is differentiated through functional service and consumer experience”, he admonished.

  The Group Country Director, Jeff O’Brien, Pascal Odibo, said the expectation of his organization regarding the event was “to trigger the conversation and hopefully steer the sector into some radical engagement on the mix of dynamics that will shape who plays, dominates and indeed set the agenda for retail banking in our region in the next decade or two”.