Discuss about the Retail Banking Corporations or Other Banks.
Retail Banking is also known as Consumer Banking, retail banking is the provision from which banks provide services to its individual customers but they did not provide any services to companies, corporations or other banks. Banks offer services to its individual consumers such as transactional accounts, mortgages, personal loans, debit cards, and credit cards.People believe that traditional banking failed, because new banks provide better services and products to its customers. Banks changed their products and services, so that they can meet the customer satisfaction, regulatory requirements, technology, entrance of new competitors and changing economics. Many options are available for banks through which they can respond the change such as framing future strategies, follow the change faster, react defensively to the change, and put off the change. Banks do not have the option to stay the same, it is necessary that they made changes in their model. For future growth it is necessary that banks also focus on the innovations and transformation, if they only rely and execute on today’s development then they are not able to meet future expectations of their customers. It is necessary for future growth that financial institutions open their door, and prepare themselves for adopting the different changes (PWC, n.d.).
From the last few years there are many changes taking place in retail banking industry. In other words, retail banking industry is transforming because of powerful forces. Presently it is difficult to achieve growth for the retail banking industry because it is hard to bear cost and low ROI. For retail banks customer satisfaction, effective management of operations isbecome challenge, and rapid changes in technology become these challenges difficult to achieve. Many new banks are also become challenges for traditional banks because these new banks attracting the customers with new and innovative techniques. Demands of customers are increasing and they are now demanding services of higher level. Bank executives at global level said that for future growth it is important that they prepare strategy and market view to survive. 70% executive thinks it is important to prepare for future, and less than 20% feels that they are prepared for future. It is important to identify the problems and threats that retail banking industry going to face in future, and also prepare plans for that (The financial brand, 2016).
In this paper we discuss and critically analyze the changes appear in retail banking related to service quality, branch infrastructure, and electronic banking services. We also critically evaluate US Bank on the basis of these issues, and how this bank deals with the problems that are building in the banking market. Later we comment the growth of bank in terms of profit and asset size. This paper contains the evaluation of problems faced by retail banking industry in future, and how banks are prepared themselves to deal with these problems in future.At last we conclude the report with the brief conclusion.
Financial services industry experiencing major changes because of changes occurred in customer behavior, increasing expectations, modification of technology, and digitization of society and businesses.Many external forces become the reason of changes in retail banking industry. Global financial crises also effect the regulations which regulate the retail banking industry but there are many other factors which change the banking environment.
Technology plays the most important role in these changes, and it also gives new definition to the relationship of bank and customers. Technology not only becomes the reason of changes but it also gives many new opportunities to this industry. As we all know threats always follow the opportunities, and many new threats are also introduced in this industry. For the traditional banks the biggest threat is nontraditional banks. 55% of the bank executive said that nontraditional banks are threat to traditional banks.
Banks are hungry for growth, and they are adopting various ways to attract the new customers. For next two years the major challenge faced by banks are attracting new customers. However, banks already recognized that customers relation are key to success, and they are focusing on strengthen their customer relation. Service quality provided by banks becomes the top priority for banks at global level. For US and European banks top challenge is to comply with the changing regulations.
According to Grant Thornton,personal current accounts (PCAs) are the source which provides highest interaction with customers as compared to other financial products of the bank. Almost 50% transactions are conducted in branches of bank. Therefore, it is important that while forming strategies for customers, bank does not neglect PCAs and other branches because these two are the platforms which provide growth in sales. He further states that solutions which are used yesterday are not useful for future problems (Thornton, 2013).
In US, comply with the regulatory standards is the priority for retail banks, and they are stabilizing their balance sheets. It becomes difficult and challenging for traditional banks to deal with the microeconomic and geopolitical environment at global level, which are joined by the rapid change in technology and changing in requirements of customers.
In this we evaluate US bank, nationally chartered bank which is regulated by Office of the Comptroller of the Currency, Department of the Treasury. U.S. Bancorp is the parent company of U.S. bank national association. U.S. Bancorp is the holding company engaged in providing American financial services. U.S. bank is the fifth largest bank in United States (US bank, n.d.). In this we evaluate this bank on the following bases:
Service means those actions which create and improve relationship between the organization and customers. Service is the benefit that was offered by one party to another party.Service is intangible and does not pass any ownership. Service is the activity which is economic in nature, and this process is conduct to provide satisfaction to the customers. Therefore, services provided by retail banks are considered important because itcreates and strengthen the relationship between bank and its customers. There is awell known fact related to customer satisfaction that it is hard to satisfy the customer but it is very easy to lose their satisfaction. Customer satisfactions not only retain the customer but also help the banks in attracting new customers and increase their market share and profitability (Zungu, 2012).
In retail banking industry the most important factor for customers is service. For growth in banking industry it is necessary that bankfocus on giving high quality services to their customers because service quality meets various objectives such as customer satisfaction, trust of customers, help in attracting new customers, and increase the share in market and profitability. Service quality can be evaluated by calculating the difference between customer expectations and actual services provided to customer.
For future growth it is important for banks that they attract new customers, and service quality is the weapon which is used by banks to attract and retain customers. It is necessary for the banks to identify the expectations of customers, and after that meet these expectations by making changes in service process and strategy. The most important factors for meeting the expectations of customer is identify the service expectations of customers (VasanthaKumari
& Rani, n.d.).
In US, big banks improve their services to satisfy their customers, while midsize banks are still fighting to reach that level, and regional banks still not showing any progress in this field. Big banks take various steps to meet their customers’ expectations such as new digital and innovative techniques; they strengthen their personal interactions with their customers, and establishing connection with that segment of population which shows growth. Banks are trying to satisfy their customers in following six areas that are information related to account, facilities providing to customers, fees, how effectively problems are resolved, and by offering different products to customers. They are also providing number of other facilities that is ATM, braches, IVR,mobile, website, and call centers to resolve problems (J.D. Power, 2016).
Customer satisfaction is the challenge faced by both public and private sector banks, and it is handled on priority by both the sectors. A study shows that expectation of customer varied as per the service nature. Measurement of customer satisfaction through surveys helps the banks in improving their services. The most important expectation of customers from banks is keeping their investments safe and keep confidentiality of their account and transactions. It is also important that banks work on those areas also which are weak in meeting customer expectations. This service is the most important service that banks are providing their customers, because if customer is satisfied then this will help banks in making profit and reputation (Muyeed, 2011).
US bank are the first one who provides banking services in villages, small towns and growing cities across the nation in the 19th century. Now US bank is focusing on the future of the company by developing a business model which is well diversified, arisk management policy, and strategies to achieve results of the company.
U.S. Bank National Association is the fifth largest commercial bank in the united nation, and the assets of bank almost cost $354billion on 31st December 2012. U.S. Bancorp which is the parent company of U.S. Bank National Association is the admired superregional bank in the nation. This bank is recognized for its strong performance in financial aspects, risk management, capital generation,for the quality of its products and services to its customers. This bank provides large number of services to its customers, businesses, government and other financial institutions. The primary businesses of US bank are its regional consumers, business banking and management services related to wealth.
At the end of 2012, 3084 banking offices were operated by companies and almost 5065 ATM’s in 25 states, US banks is one of the oldest bank of nation which is operating under its original charter, and this bank has almost 66000 employees (US Bancorp, 2013).
US bank provide number of services to its clients such as private client group. In this approach customer get support from team of professionals who provide number of strategies and valuable advice to the customers. In this approach customer gets easy access to professionals, efficiency of work and confidence. This team of professionals is directed by relationship manager, and this team provides:
Comprehensive Wealth Management Services: These groups also focus on providing Comprehensive Wealth Management Services, and design such financial plans that relates with the financial life of customers. There are a large number of services which are offered by these groups such as online banking, investment management, trust and financial planning from the management of US Bank, U.S. Bancorp investments provide services related to insurance services and financial planning. They provide every possible service to their clients, and tried to fulfill financial goals of the customer and simplify their financial life (US Bank, n.d.). Following are the services provided by the US bank:
Investment strategy- investment strategy is based on the process that is advisory and basically depends on understanding the goals of clients, assessment of risk and tolerance of risk, and time frame. After considering all these factors experts frame the strategy for their client. The main goal of expert behind framing the strategy is to achieve the long term results and minimizing the risk of client. Options are provided by US bank for investment are Individual stocks, Managed portfolios, Mutual Funds provided by other fund companies, and other investments related to fixed income or Bonds (US Bancorp, n.d.).
Trust Administration- from many generations US bank is creating and providing trust to its customers. The Private client group offers many trust services to its customers, and the professionals of these groups handling trust issues of their clients related to financial and emotional matters very well.Professionals of these groups always try to create and maintain that trust, and they provide best services by trust administration. The services provided by the trust administration of US bank are Revocable and irrevocable trust administration, Estate administration, strategies related to Charity, planning regarding business succession, and management of risk.
The trust professionals also serve to their clients as agent, co. trustee and corporate trustee, and they also take responsibility for carrying out the terms related to trust. If professional are working as trustee or agent then they work in the best interest of client by managing the portfolio of investment. They work as a professional portfolio manager who designs best asset allocation strategy according to the investment objectives of customer (US bank, n.d.).
Private Banking: The private banking relationship manager of private client group will provide personalized services to their clients. US bank provide number of variety in customer services and products to manage the money of their customers. Such service includes:
Insurance services- the private clients group offer number of strategies for fulfilling personal and professional needs of person. These insurance strategies includeplans that provide protection to the personal and business assets of client. These offers provide life insurance, disability insurance, and long term care insurance that helps to the clients during their life changing events. For businesses it includes protection related to person, insurance for business continuation, and executive benefits (US Bancorp, n.d.).
After considering all above facts, it is clear that quality services for customers are the key to success and growth of business.
In 1970, some basic cores facilities were provided by the banks to their customers, but in last few years there is ahuge change in the infrastructure of retail banks. Now banking industry provides platform that will provide multichannel facilities to their customers. Due to digitalization, the banking sector face number of changes and after 2012 many new changes have introduced such as online banking, social networking, online payments, and mobile banking. These changes are necessary for the growth and success of retail banks, because now customers are demanding more facilities and convenience related to banking products, services and banking infrastructure. For developing the platform which provides better services to customers it is necessary that banks simplify their current structure, ensures data consistency, and also ensures integrity of various processes. The banking industry face number of changes because of these new elements, and number of organizations which are not related to banking sector are integrated in retail banking chains (Capgemini, n.d.).
Retail banking industry already converted from traditional business into digital business because of accessibility of broadband and affordable devices such as smart phones. 50% customers at global level are doing their banking transactions through online banking or mobile banking especially in countries like Australia and Nordic countries, and 85% in case of ATM’s because ATM’s are also connected through internet. In this world of digitalization, there are number of banks which are still running their banks in traditional manner and far away from digitalization. In this era, there are five essential traits which are required by the banks for success and growth in the future:
Branch infrastructure of US bank: according to Jason Witty, CISO of U.S. Bancorp, government took the right decision under Barack Obama’s leadership that almost $3.1 was proposed on plan of retire, replace and modernize the legacy information technology within government. MR. Witty Tells CIO Journal says that outdated software is insecure, and further said that criminals always try to find new software’s to exploit the technology. Outdated software’s are of no use now and they did not serve the purpose to their vendors. Outdated software also played important role in high profile breaches by government that happens last year.
It is necessary that government update their IT systems because out dated IT systems are insecure. In case when computer is secure but it switched off and start after 30 days then it will be no longer secure becausesoftware is not static now. This happen because of new viruses, every day almost 70000 new viruses are hitting the internet, and there are number of new holes developed by criminals. Therefore, it is necessary that banks update their infrastructure and technology to avoid such things (King, 2016; US Bancorp, 2011).
For large number of people electronic banking stands for access to cash for 24 hours either through ATM or through direct deposit of paychecks into current or saving account, but there is lot more in electronic banking. Now electronic banking involves many different transactions, rights and responsibilities. Electronic banking also known as electronic fund transfer, and funds are transferred by use of computer and other technology instead of paper or checks. EFTs can use by cards or codes that authorize the person to access the account (Pacific, 2015). There are number of financial institutions which use these ATM, debit cards, and personal identification number while some other institutions use signature or scan.
Now banks convert the simple purse into electronic purse. In the era of using plastic card, electronic purse is the next landmark or development.Electronic purse is basically based onsmart card which stores information on its microchip. A person can upload cash on this smart card either through ATM or telephone terminal which is specially adapted only for this purpose. Smart card represents the sale point and its value automatically gets decreased by the amount of transaction.Following are the EFT services provided by financial institutions:
ATM- these are the terminals which can be accessed electronically at any time, and these terminals can be used for the purpose of withdraws of cash, depositing the cash, and transfer funds to another bank account. A person can access these services by insert his ATM card and enter pin. Some banks charge fees for that, especially when person don’t have account with them (Federal Trade Commission, n.d.; Standard chartered, n.d.).
Direct deposit- these deposits authorize the person for specific deposit such as paychecks, and other benefits on regular basis in account. Through this person can authorize direct payment of bills such as mortgage amount, gym, insurance amount are paid automatically through account.
Pay-by-phone- this system authorize aperson to instruct the bank to pay some specific bills or transfer funds to another account, but it is necessary that person must have agreement to make these transfers with the banks.
Personal computer banking- this type of banking lets you help in handle number of business transactions by using the personal computer. For example person can transfer the funds between accounts by using his personal computer.
Debit card- this card help in making payments through account at the purchase place, and this card can be the ATM card also. Transaction can be placed through online, person or mobile phone. It is necessary that person has sufficient funds in his account while making purchases (Edgewater bank, n.d.).
US Bank provide number of services which can be availed electronically by their customers. There are number of Electronic services which are provided by US Bank are:
Manage money online- customers can manage their money online, and control their finance through online banking. It’s become easy for customers because they are able to operate their account online. Customers can do many things through online banking such as:Customers can monitor the status of their account, and can access important information about their accounts like check balance and status of recent transactions.Customers of US bank can transfer the money through their US bank account to other bank account.
They can set the alerts of low balance in their account or any payment due.
Customers can view and print their account statement of US bank for last 7 years, and can track their transaction to manage their account (US Bank, n.d.).
Pay bills- US bank provide another service to their customers that is online payment of bills. Customers can pay their bills inminutes through their account in US bank. Following are the services which customers can availed:
US Bank customers can pay their bill on time and in easy manner. They just have to instruct their bank who to pay and how much to pay through online mode.
Bankprovides service of fast payment that is payment of money either on same day or overnight.
While making payments online person can control his account always, and he can cancel or edit the payment when it is in process (US Bank, n.d.).
Deposit check online- now person can deposit his check in the account through online. It is easy and secure way to deposit the check whenever or wherever you want. All just aperson needs camera on mobile phone or scanner on computer. There are two ways to deposit the check online that are:
Customer can deposit their check online with the help of camera on mobile device.
Customer can deposit their check through computer with the help of scanner (US Bank, n.d.).
Send money- a person can send money through his US bank account to any other bank account in United States. It is the free, fast and safest way of sending money (US bank, n.d.).
US Bank provide 24 hour support to their customers through their new online tools, high level of security, and 24/7 phone support and personal service at 3000 branches. US bankprovides number of new services and get online banking on next level.
In this we discuss the challenges faced by retail banking industry in near future, and the five threats faced by banking industry. These five threats plays important role in shaping this industry. Following are the five threats in near future for banking industry:
In US, the portion of house hold assets that was held in currency or deposit will start falling between the periods of 1990-2012. This change result in increasing funding cost for banks at that time when they are trying to make savings.
There are some other challenges also which are very common in today’s era and those changes reflect increased expectations of customers from banks, profitability of banks are not enough, there are number of financial technology companies which entered into this market because of which competition gets tough for existing banks, and pressure from regulatory environment is really high (Schubert, 2015).
Therefore, it is necessary for banks that they act fast in this changing era, and adopt the change as soon as possible. Last few years, we see rapid changes in this industry and this change put pressure on banks to change their process so that banks can adopt these changes more quickly. Those banks which are not adopting the changes quickly will leave behind in the race of success. Adopt changes faster does not mean that banks execute their strategy faster rather it’s about framing the strategy faster. In traditional banks decision making process is slow but it is necessary for future growth that they make their decision making process faster.
Conclusion:
In this report, we discuss the future of retail banking and different aspects of retail banking by evaluating the US Bank. First, we stated the meaning of retail banking which was also known as Consumer Banking, and it is considered provision from which banks provide services to its individual customers, but not serve anything to companies. This report contains three aspects of retail banking that are:
Service quality- this aspect of retail banking is the most important aspect and it helps the organization to create and improve relationship with customers. It is considered as benefit offered by one party to another party. Service is not in tangible form and it does not pass any ownership. In banking industry, the most important factor is service for customers. For success and growth, banks must focus on providing high quality services to their customers.
Branch infrastructure- this industry witnessed many changes from last few years and especially after 2012 many new changes have been introduced such as online banking, social networking, online payments, and mobile banking. For the purpose of success and growth of banking industry these changes are necessary because now customers want more facilities and convenience in their day to day life. Therefore, it is necessary that bank develop platform which provides better services to customers by simplify their current structure, and also ensure data consistency.
Electronic banking- generally, electronic banking is the direct access to cash for 24 hours either through ATM and direct deposit of paychecks into current or saving account. Electronic banking includes more things in its ambit such as ATM, debit cards, electronic purses, Credit cards, etc. different transactions and rights and responsibilities are stated in EFT.
After these aspects we discuss threats faced by banking industry in future and those threats are Expansion of security market, New rules created by new entrants, Technology is reinventing services offered to customers, Google Bank PLC, and there are some common threats also faced by banks that are expectations of customers from banks, profitability of banks are not enough, there are number of financial technology companies enter into this market because of which competition gets tough for existing banks, and regulatory pressure. Therefore, for survival and success of their organization, banks must change their structure and services as per new requirements of customers, and also adopt these changes as soon as possible. Banks which are making changes in their structure as per requirements will leave behind in the race of success.
At last we conclude that if banks are not ready to face these challenges in future then this become restraint in their growth and success.
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