London: A new era of retail banking will be transparent, made-to-measure, and multi-channel according to an Ernst & Young survey of 298 senior retail bankers across Europe.
The survey reveals banks' concerns about falling margins, rising customer attrition and pressure for improved return on equity and how their reaction to these pressures will change customers' retail banking experience in the future.
Omar Ali, head of Ernst & Young's EMEIA retail banking advisory team, comments: "The industry cannot continue as it is and generate returns that will satisfy investors. The survey results show that the days of selling opaque and complex products through expensive channels, using antiquated systems and processes, has gone — banks realize that they need to re-connect with consumers in order to protect their margins and their market share."
Customer attrition has increased across Europe
Sixty percent of banks surveyed report that the rate at which customers leave has increased. One in four banks experiences attrition rates of 10% or higher; attrition rates are highest in France, Spain and Switzerland. The survey highlights high fees, complex and opaque charging structures, and lack of trust as the main drivers for this customer attrition. This echoes Ernst & Young's Global Consumer Banking survey, published earlier this year, in which 60% of consumers listed quality of service as their main reason for leaving their banks and 50% said their trust in the global banking system had decreased since 2010.
Ali comments: "Customers' expectations are high. On the one hand customers want a secure branch-based bank offering low risk and easy access to their money; on the other they want personalization, advice, access through all channels, and complex products. The expectation of levels of service, are akin to other fee-paying industries.
"The market dislocation and the subsequent sovereign debt crisis have re-framed the debate about what retail banks want to be. The management actions that follow should see the industry come out stronger, safer, better for investors and with a more tailored and clearly defined offer for customers."
The survey highlights five key issues:
- Falling margins are banks' biggest concern.
- Significant improvements to customer services are planned.
- Digital channels cannot wholly replace face-to-face.
- Charging will become more prevalent but free banking will remain.
- Banks will struggle to meet their ROE targets unless they reform.
Full details are available here.