Daily banking has always been the glue that cements a customer’s relationship with his or her bank. But a combination of regulatory changes, rising customer expectations, new competition, and technological advancements is weakening that glue and threatening banks’ profitability. We estimate that a retail bank puts 15% to 25% of its revenue at risk if the institution fails to enhance its daily banking proposition by adding innovative new features, improving customer experiences, making better use of data, and commanding higher prices that reflect the added value enabled by the Payments Service Directive 2 (PSD2), also known as open banking.
As daunting as those stakes sound, retail banks can seize the initiative by drawing on best practices established by other B2C service providers during the past two decades. Inspired by data-driven insights and attuned to the power of behavioral science, companies in large, global industries—as varied as telecommunications and media, transportation, and even personal care—have creatively and profitably transformed their approach to pricing and product propositions in response to similarly rapid changes in their markets.
- Their current approach has three elements:
- Replace traditional gut-feel and cost-plus approaches with more lucrative ones anchored in customer value.
- Shift away from one-size-fits-all in favor of more sophisticated solutions that tap into the power of bundling and differentiation.
- Rely on insights mined from transaction histories and consumer research in order to understand customers better and serve them in more creative and flexible ways.