The future of financial services is not what it used to be: How can incumbent banks compete?

A relentlessly quickening pace of change in both technology and consumer preferences requires that incumbent retail banks demonstrate mastery of transformative technologies and business models. Two aspects of the future of retail financial services deserve particular attention, in our opinion, for their certain ability to catalyse step changes in banks value delivery to customers: one of them is engagement banking, which is an emerging operating model that leverages artificial intelligence/machine learning (AI/ML) technology and customer behavioural, transactional and third-party data to deliver innovative and intensely personal value propositions to customers in real time. The other is leveraging the open ecosystem: skilfully choosing third-party products and services to integrate with a bank’s existing retail delivery mechanisms and selectively participating in third-party-curated experiences by enabling access to data and offering their products and capabilities via third parties. This paper describes the promise and risk of leveraging engagement banking and the open ecosystem. The benefits for enterprising banks are great, and yet so are the risks, if these aspects are not executed extremely well. They deserve banks’ full attention.