European and North American retail bank growth expected to be "tepid" in coming years, but "bionic transformation" could be the solution

William Turvill
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Retail banks account for around 45 per cent of banking revenues globally, BCG found (Source: Getty)

Growth in European and North American retail banks is expected to “remain tepid” in the coming years as lenders struggle in their environment.

But the banks can better their performances, and increase operating profits by as much as 30 per cent in the next three years, by better integrating digital and personal interactions with customers, according to a Boston Consulting Group (BCG) report out today.

In general, the report found that lenders are “seeing a return to pre-crisis levels of revenue growth, but economic, demographic, competitive and technological changes will continue to exert downward pressure through the end of the decade. As a result, retail banks will need to get creative to sustain profitability.”

The BCG also predicted that there will be different patterns in different geographical areas.

Retail banks in emerging markets, across Asia, Latin America, the Middle East, Africa and Eastern Europe, will “continue to experience strong growth”.

The report said: “It is a different story in Europe and North America, however. While banks in these markets will still account for half of retail banking revenue globally, growth through 2020 will remain tepid as banks struggle to shake off the constraints posed by historically low interest rates, sluggish GDP gains and cautious spending appetites.”

A “bionic transformation” could hold the key for retail banks, according to the BCG. This consists of blending digital and personal interactions “to create a more responsive and cost-effective distribution model”, combining “human judgement and data power” to good effect and using robotics to improve customer satisfaction.

The authors of the report believe “bionic transformations” can help boost retail banks’ profits by 30 per cent by 2020.

BCG’s Ian Walsh said: “Taking a wait-and-see approach is no longer an option. Retail banks need to act now.”

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