Since the emergence of credible competition from alternative finance and tech companies in the 2010s, retail banks’ customers have started to demand more flexibility, convenience, and personalization. To stay competitive, most traditional retail banks have since tried to adapt some of their competitors’ practices, heralding a new age of customer-centric banking.

However, not all consumer banks are necessarily prepared to undergo digital transformation or leverage current technologies to deliver the personalization customers now need. Fortunately, the continuing success of digitalization efforts by retail banks all over the world provides a template that other institutions could emulate.

Here’s how retail banks can more effectively transition to personalized digital consumer banking:

Acquire an up-to-date digital banking platform

The first step a bank needs to take to maintain relevance in today’s retail finance landscape is to invest in the right digital banking solution. The technologies the bank will acquire need to enable personalized digital banking features while also highlighting the superior experience expected from traditional banks.

This means that retail banks should focus on possible solutions that can smoothen as much of the banking experience as possible. Candidate platforms should be able to offer banks a way to create highly personalized experiences across mobile, desktop, and even traditional channels without customers getting bogged down in forms and processes. 

Most importantly, the selected retail banking solution should also empower banks to offer individualized products to customers. This is an area where fintechs have largely failed and retail banks have the potential to succeed.

This will all require cloud-based software with advanced machine learning and artificial intelligence capabilities to securely automate processes and dynamically respond to the needs of both employees and customers. Additionally, serious investments in employee and management training should be made to enable banks to make full use of their acquired platform.

Fortunately, both the cost and risk of digitalization have gone down in recent years. Finance technology providers have had years to refine their offers assuring banks of mature solutions right out of the box. Also, the continuing wave of banking digitization means retail banks now have several successful cases to study, guiding their digital transformation. This means that retail banks’ efforts to digitally transform are now much more likely to succeed.

Find inspiration from other retail industries

Traditional banks leverage their stability to reduce risks and produce good outcomes for their stakeholders. However, this cautious approach means that they tend to be laggards when it comes to adopting technologies and methods that are otherwise commonplace in other industries.

For instance, many banks are still lagging when it comes to leveraging customer data to build a quality user experience. This is especially critical as the success of a retail bank’s digital transformation often depends on their mobile and web platforms winning over new and existing customers.

To do this effectively, institutions need to be able to readapt the playbooks used by successful fintechs and e-commerce companies into the context of retail banking. This allows banks that are in the process of digital transformation to do away with the guesswork in finding out what retail banking clients want in terms of service, personalization, and overall online banking experiences.

Look into open banking

In most cases, retail lenders will find their growth in digital banking severely limited if they maintain closed application programming interfaces (APIs). Even the largest banks with the biggest and best-funded teams are hard-pressed to consistently deliver the personalization and experiences demanded by today’s banking clients if they have to do all the platform and app development internally.

Using open APIs is possible for most current digital banking solutions and retail banks should seriously consider exploring the possibilities offered by these frameworks. Open APIs permit third parties to develop apps that seamlessly integrate with a banking platform, allowing the bank to offer users a wider range of personalization options than would otherwise be possible. Importantly, it also motivates banks to continuously improve their digital services or team up with fintech competitors.

Also, when customers use a variety of apps connected to the bank’s platform, banks are offered a wider variety of customer data points. This gives banks a more thorough overview of customer trends and behaviors. This better understanding of customer needs could then be leveraged into creating more competitive retail banking products and services.

Consider launching a greenfield digital banking unit

Banking is a complicated business and transitioning to a completely new platform that enables personalized digital retail banking is not always possible. However, that does not mean that a retail bank is left with no options for modernization. The best banking books reveal that one trend in banks that are unable to make a complete transition to a fully digital model is to spin off a new digital business unit that does have such capabilities.

Launching a greenfield digital banking unit that distinguishes itself from its parent with its convenience and speed may be an option for traditional institutions that find it difficult to make the leap in one go. The new all-digital bank can benefit from the branding and stability offered by the parent institution and also allow decision-makers to test and validate different digitalization approaches. This may serve to limit the risks as well as the opportunity costs for the parent bank. If successful, these spin-offs may serve to bolster a case for transitioning the entire business to an all-digital business model.

While technology acquisitions are key when moving to a more customer-focused digital retail banking model, retail banks should also consider leveraging the capabilities of third-party developers through open banking APIs and employing the right strategies to make full use of current digital banking technologies.

Fortunately, some existing banking platforms by market-leading developers already offer retail banks the capabilities they need to pivot to leading-edge personalized banking. What’s more, as a result of years of refinement, these technologies are already mature and accessible to most institutions.

With retail banks set to continue consolidating there will be immense pressure for smaller financial institutions to update their capabilities and way of doing business. By supporting technology acquisitions with corresponding investments in employee capabilities and management, any retail bank can ensure that they can maintain relevance in today’s highly-personalized banking landscape.