Incumbent retail banks are still struggling to address changing customer demands, according to research.

The World Retail Banking Report 2022, from Capgemini and Efma, says 75 per cent of customers surveyed are attracted to FinTechs’ “fast, easy-to-use products and experiences” that are “readily available while remaining low in cost”.

The report claims that retail banks are falling behind on their omnichannel experiences, with many customers looking to FinTechs which offer more personalised experiences.

The research says that retail banks could leverage data better by using artificial intelligence (AI) to “improve customer experience, create stronger connections and maximise customer value”.

But traditional banks are finding it hard to compete, the report reveals, with 70 per cent of banking executives “concerned” that they lack sufficient data analysis capabilities.

“Customers want to be provided with personalised experiences, regardless of wherever they may be on their own digital journey,” said Nilesh Vaidya, global industry head for retail banking and wealth management at Capgemini’s financial services strategic business unit. “The challenge, however, remains in execution.

"Retail banks must rethink their wider business models, restructuring to focus on providing the same personalised, lifestyle-enabled journeys that customers have come to expect from their digital interactions.”

Some retail banks are offering banking as-a-service and embedded banking solutions via the ecosystems of non-financial third parties. Platform models can help collect data for personalisation, making banks “well-positioned” to mine data ecosystems and derive real-time insights, said the report.

However, while platform-based models are not new for banks, many players are still struggling with their execution. The report found 78 per cent of banking executives “worried” about “cannibalising products” through ecosystem partners, and 72 per cent were concerned about brand dilution.

“The challenges must be faced to deliver the personalised, omnichannel experiences and ecosystem journeys that customers want, which will rely on embracing new technologies and tearing down internal silos,” said the report.

The report questioned 8,050 customers and 142 banking executives across 29 countries, including the UK.

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