Today’s retail banking challenges and dynamics call for modern business models, innovation

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As banks leverage new connections with ecosystem players, they can earn revenue by monetizing their APIs

Banks have been facing a new set of challenges over the past decade including increased customer expectations, rapid digitalization, and competitive pressures – first, from nimble FinTech firms, and now, from powerful BigTechs. On top of costs and compliance demands spurred by post-recession regulatory mandates, banks are now up against new-age contenders, and retail giants prepared to lure current and potential customers through innovative operational and business models.

Established banks are being forced to consider new strategies to tackle competitive disruption, and many incumbents are not prepared to innovate. With the growing threat from new technology rivals, banks can no longer afford business-as-usual models. The emerging ecosystem has multiple stakeholders, so it may be difficult for banks to own their product portfolios’ end-to-end value chain and experience. Therefore, banks ought to adopt a clear strategy that supports a successful role within this digital ecosystem.

Additionally, operations also must be reexamined with a focused eye on bank customers’ increasing demand for personalization, 24/7 service, and omnichannel delivery.

The good news is that sectorless digital economies around the world are opening doors for established firms to offer non-banking services, either with in-house development teams or in collaboration with third-party experts.

Banks need to transform their operating and business models

Banks need to transform their operating and business models

Some firms are recognizing the potential of non-banking services when it comes to value to the top line. If BigTechs such as Alibaba can move into banking, what’s to stop banks from moving into e-commerce? That’s the strategy behind SkyShopper, an online mall launched by Emirates NBD in 2017 that aims to tap into the UAE’s booming internet shopping market. SkyShopper offers Emirates’ credit and debit card customers services ranging from travel and event booking to grocery delivery, shopping, and bill paying.[1]

New offerings can come with risks, so financial firms often collaborate with third-party specialists and white label their services with the bank’s brand. As banks leverage new connections with ecosystem players, they can earn revenue by monetizing their application programming interfaces (APIs).

With the success of digital-only challenger banks, traditional players are launching similar strategies. India-based Kotak Mahindra Bank’s Kotak 811 account packages deliver deals on shopping, travel, entertainment, and banking/investment needs with a few clicks on the bank’s mobile app.[2]

Similarly, Singapore’s United Overseas Bank (UOB) is piloting TMRW (pronounced tomorrow), a digital bank brand that will target young, digitally-advanced customers across key markets in the ASEAN region. The goal of mobile-only TMRW is to make banking exciting and fun – with insights to help users spend wisely and a game to encourage saving.[3]

Banks will need to define their roles within the new ecosystem and adjust their operating and business models accordingly to ensure ownership of their customer relationships and product portfolios. While generating vast amounts of customer data, banks can streamline their operations by identifying bottlenecks and enhancing personalized offerings. Banks must upgrade their technology infrastructure to support the changing model and reevaluate their investment strategy to create a forward-looking organization that supports real-time processing.

As banks strategize their product and services portfolio to stave off competition from technology players, their revenue mix may also change. Expect post-disruption collaboration throughout the new ecosystem as incumbents and new players begin to understand each other’s strength and weaknesses.

What does the future hold?

The ecosystem is expected to support the growth of a platform-based API economy in which banks offer their services as well as those from third-party partners. Some banks will aim to be the fulcrum of the ecosystem while others may specialize in niche areas. Finally, banks will need to prioritize a digital culture among their employees to support transformational initiatives.

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[1] Finextra, “Emirates NBD opens online shopping mall,” May 26, 2017,

[2] Kotak 811 website, “Features of the 811 Digital Bank Account,”, accessed February 28, 2019.

[3] Business Insider Singapore, “UOB is going after Asean’s millennials with a digital bank called TMRW – and its biggest draw could be a game that levels-up with savings,” Jessica Lin, February 14, 2019,

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