Why Retail Banking Should Become Retailing Banking

Recently, a U.K. based market intelligence provider announced in one of its reports that Britons were more satisfied with their supermarkets’ service than their banks’. No doubt, the banking sector’s fall from grace during the financial crisis has something to do with it, but let’s also give credit where it’s due. 

The retailing business has always been a step ahead in paying attention to customer needs. With markets becoming more competitive and margins shrinking, retailing firms have learned to provide better experience to customers as well as drive their supply chain for greater efficiency. Access to massive distribution and a captive consumer base round off these strengths nicely. Retailers are also known for creating convenient, faster, cheaper products and services. Segment-of-One is being practiced in retailing for more than a decade now, which help these retailers extend it seamlessly into their banking transactions.

The big cheeses of retailing that have entered financial services are using their competitive advantages to mount a challenge to incumbent players.  And while their financial business is tiny and product range narrow, they can still give traditional banks something to think about.

For instance, a large U.K. supermarket chain, which also offers basic banking services, is sifting through its immense consumer data to track down linkages between a customer’s weekly shopping pattern and probability of loan default. How many banks employ this level of analytics to uncover new risks and opportunities?

Take a look at the websites of retailers-turned-banks. Note how they’re using social media to build communities, spread financial literacy and get closer to their customers. How many banks other than Wells Fargo, Bank of America and a couple of others have accepted the reality of social?

That’s not all. Banks can also learn from non-banking retailers. Especially how to respond to consumer trends.

The focus on wellness and healthy living has prompted many a food brand to position itself as a custodian of consumer health. How many banks have acted to restore the financial well-being of customers beleaguered by a crisis that was created by the banks themselves?

Consumers are beginning to favor products and companies which are socially and ecologically responsible, show empathy for local ethnic groups or participate in the local economy. Grocery retailers in the U.S. have responded by starting outlets in underserved “food deserts”; a supermarket market chain – named in the Fortune list of “100 Best Companies to Work For” hasn’t fired a single employee in nearly 100 years; and another chain store has recreated the ambience of Mexican marketplace in its Texas outlets to cater to their mainly Hispanic customer base. Barring the odd exception such as U.K.’s CFS, how many financial institutions have pursued an inclusive and socially rooted strategy?

I think what retail banks need is a healthy dose of retailing. Which other industries might make better banks? Write in.

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One Comment

  1. davidpinski says:

    Walmart already acts a a defacto bank (check cashing, reloadable cards, billpay, etc) for their customers, Target owns two bank charters (remind me again why they have them other than they inherrited them from DH). Frankly, I don’t see any of them creating a better bank. It is just another revenue opportunity to them. Branch banking has evolved significantly in the past twenty years with many consumer choices. Branches as cafes, in supermarkets, full service, fully automated without people, online, mobile…  I would argue that banks have experimented with the retail model more than almost any other business.  Besides, is the consumer’s retail banking experience more important than the banking products behind them?

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