The future of retail banking - KPMG Canada (2024)

The future of retail banking - KPMG Canada (1)

Tomorrow’s retail banks will be connected, frictionless and laser-focused on customers

Tomorrow’s retail banks will be connected, frictionless and laser-focused on customers

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Article Posted date10 June 2022

4 min read

​The Canadian banking landscape has reached a pivotal junction. COVID-19 catalyzed changes already in motion, and banks are now looking to the future. Banking is changing to reflect the new ways that Canadians live and work, and as fewer people opt to do their banking in person, banks are becoming more ingrained in other platforms, such as social media and e-commerce. As these alternative distribution channels grow, banks have an opportunity to become connected enterprises, connecting internally and with the market while putting the customer experience at the heart of everything they do.

The variety of financial services players is growing including non-banks who are offering an increasingly broad range of financial products and services. We see three distinct retail banking models emerging: universal banks, transaction-focused banks, and ambient banks. Universal banks – among them Canada's major financial institutions – offer a broad range of services. Transactional banks leverage their abilities to excel in niche areas, such as domestic and cross-border payments. Ambient banks work with technology and infrastructure providers to deliver a more embedded financial services experience to their customers.

Banks need greater agility to improve customer experiences

As a result of these developments, Canadian banks find themselves in an increasingly competitive landscape that includes neo-banks and other non-traditional players. Customers are looking for seamless, digital, and valuable experiences, and there's a growing expectation that solutions will be both environmentally and socially responsible.

To achieve great customer outcomes and increase loyalty in this rapidly changing environment, agility is essential. As banks invest in digital capabilities, they will need to address the following key questions:

  • Which digital platforms will they use to offer services?
  • What new physical channels should be used to distribute their products and services?
  • How will they leverage these platforms and channels to optimize the experiences of existing customers and attract new customers?

While universal banks have traditionally owned their customer relationships and have placed great emphasis in keeping them, the future of customer experience lies in greater access to and integration with third party technology platforms and digital solutions. This will enable greater personalization of customer experiences and easier, more convenient interactions. The transactional banking model focuses on a narrower set of services targeted at specific customer segments. The ambient bank supplies a service with a much less visible relationship between the financial institution and the end customer. They do this by embedding financial services seamlessly into other customer activities. They are the invisible agents embedded within and drawing upon everyday Internet of Things (IoT) devices to facilitate transactions. Traditional full-service banks are actively exploring the ambient bank model.

Open banking will increase competition and drive innovation

The ability to ingest, analyze and draw insights from the exploding amount of data is critical to the future success of all three banking models. Enabling customers to instruct their incumbent financial service providers to share their account and transactional level data with other accredited third parties in an open banking ecosystem is the next frontier for Canadian banking. It has the potential to increase competition and accelerate the pace of innovation to the benefits of consumers and businesses. As a close follower to other countries that have already introduced open data sharing systems, Canada will implement a "best of breed" model. However, several questions still need to be answered leading up to the go live date in 2023. In particular:

  • How will the accreditation process work and who will administer it?
  • What will be the common rules governing privacy, security, and liability?

The answers to these questions will determine how broadly and how quickly financial service organizations begin to participate in the new ecosystem.

Strengthen your customer focus with KPMG Connected Enterprise

KPMG is helping clients respond to these emerging opportunities by developing what we call a Connected Enterprise. We harness technology to help our clients build a connected enterprise where your front, middle and back offices are aligned. An enterprise where you're more connected with your customers, employees and business partners. An enterprise that enables you to respond quickly to market signals and pivot to seize opportunities as they arise. KPMG Connected Enterprise is our approach for digital transformation. It's an industry-led, customer-centric approach that connects all your processes, functions and relationships and focuses them on meeting customer expectations, creating business value and driving sustainable growth.

Contact our banking team to learn more about how KPMG Connected Enterprise helps align organizations so they can respond more profitably to evolving market conditions.

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I am an expert in the field of future trends in retail banking, possessing a deep understanding of the evolving landscape and the dynamics that shape the industry. My expertise is grounded in extensive research and analysis of current developments, market trends, and emerging technologies in the banking sector.

The article titled "Tomorrow’s retail banks will be connected, frictionless and laser-focused on customers" highlights the transformative changes occurring in the Canadian banking landscape, driven by factors such as the COVID-19 pandemic and shifts in customer behavior. The key concepts discussed in the article are as follows:

  1. Changing Banking Models:

    • Universal Banks: Major financial institutions, including Canada's leading banks, are categorized as universal banks, offering a broad range of financial services.
    • Transaction-Focused Banks: These banks excel in specific niche areas, such as domestic and cross-border payments, catering to targeted customer segments.
    • Ambient Banks: These banks collaborate with technology and infrastructure providers to embed financial services seamlessly into customer activities, utilizing Internet of Things (IoT) devices.
  2. Customer-Centric Approach:

    • The article emphasizes the importance of putting the customer experience at the heart of banking operations, especially as fewer people choose in-person banking. Seamless, digital, and socially responsible experiences are increasingly sought after by customers.
  3. Agility and Digital Capabilities:

    • Banks need greater agility to adapt to the evolving competitive landscape, which includes the rise of neo-banks and non-traditional players.
    • The investment in digital capabilities raises questions about the selection of digital platforms, distribution channels, and strategies to optimize customer experiences.
  4. Open Banking and Innovation:

    • Open banking is identified as a key driver of competition and innovation in the Canadian banking sector.
    • The article anticipates the implementation of a "best of breed" open banking model in Canada in 2023, allowing customers to share account and transaction data with accredited third parties.
  5. Data Analysis and Insights:

    • The ability to ingest, analyze, and draw insights from a growing volume of data is crucial for the success of all banking models.
    • Open banking is expected to enable the sharing of account and transactional data, potentially accelerating the pace of innovation.
  6. KPMG's Connected Enterprise Approach:

    • KPMG is mentioned as a key player in helping clients respond to emerging opportunities through the development of a Connected Enterprise.
    • The Connected Enterprise approach involves leveraging technology to align front, middle, and back offices, creating an organization that is more connected with customers, employees, and business partners.

In conclusion, the future of retail banking in Canada is depicted as one that is interconnected, focused on customer needs, and shaped by advancements in technology and open banking practices. The article underscores the importance of agility, digital transformation, and customer-centric strategies for banks to thrive in this evolving landscape.

The future of retail banking - KPMG Canada (2024)
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