The retail banking sector has been struggling since the start of the Great Recession. These institutions are facing higher operating costs and a consumer base that is not increasing its demand for banking services, especially higher debt. In addition, the marketing paradigm has changed for banks.
The latest research from PriceWaterhouseCoopers, PwC, underscores what many of us have heard about retail banking. New regulations such as the Dodd-Frank law, restrict banking profits. In addition, the CARD act limits the amount of money banks can make on their credit card operations. And the Basel III accords are driving up the capital requirements for banks and make it more expensive for them to operate.
At the same time, banks are facing a consumer base that is largely stagnant with respect to financial services. Over 92% of consumers currently have a bank. And a significant minority, 40%, have maintained a banking relationship with the same institution for over 10 years. But PwC research indicates that banks do have an opportunity to capture consumer business that extends beyond the checking and savings account.
Consumer engagement with institutions other than their primary bank, when it comes to financial services, looks like this:
- Credit cards 48%
- Mortgages 57%
- IRAs 66%
- Insurance 85%
But banks will need to do more than sell products in their traditional way to grow sales. PwC analysts say that banks are too product-centric and must shift to a customer-centric mode to win new business. Their current silo approaches “limit the knowledge any one business unit has about a customer's other accounts with the bank, hindering efficient product pricing, customer segmentation and cross-selling.” As banks focus on their customers and engage in new technology like mobile services and social media marketing, they can improve their relationship with consumers and build more profitable lines of business.[Source: Banks’ Best Customer May be the Stranger Who Just Walked Out the Door. PriceWaterhouseCoopers. PWC.com. 13 Jul. 2011. Web. 19 Jul. 2011]