The future of retail banking in Spain

Deloitte´s report on the future of retail banking in Spain, understood as the banking activity which provides services to individuals and SMEs, analyzing more than 120 emerging trends categorized according to the degree of impact and uncertainty they generate in the sector. The report identifies some trends common to all scenarios that will determine the evolution of banking towards a greater focus on the customer, with greater personalization and high digitization, and more sustainable business models, as well as a greater focus on efficiency, incorporating new technologies as accelerators of change. The uncertain evolution of these trends and how institutions face the challenges that arise will define future profitability levels in the sector depending on the different scenarios described in the report.

Main findings of the report:

• 7 general trends that will influence retail banking strategy and model going forward: 
  
  
  • Increasing ageing of the population: this will imply a greater demand of services related to annuities and monetization of physical assets due to the growth of the older segment.
    
    
  • Customers with higher service and relationship expectations: Focus on customer experience and better understanding of customer needs.
    
    
  • Digitization of payments: Decrease in the use of cash in favor of digital channels and means of payment and new technological solutions.
    
    
  • Elimination of boundaries in the fight for talent: Talent is scarce and is a key accelerator of transformation. Increased competition in the labour market between sectors for the same technology profiles.
    
    
  • Risk management in ecosystem environments: The growing collaboration between market players, and the entities themselves, to offer a higher value proposition to the consumer will imply mitigating new risks inherent to this ecosystem.
    
    
  • Ambition and commitment to ESG criteria: Banks have already embarked on the path of applying environmental, social and governance criteria in their strategies. They need to make progress in integrating them into their business model and decision-making.
    
    
• Key uncertainties that can lead to different profitability scenarios in the future. Uncertainties that have to do with different variables such as the evolution of the relationship with customers and their behavior, depending on whether they continue to value the brand and human contact in their relationship with the bank despite increasing digitalization or whether, at the other extreme, new entrants take over the customer relationship and distribution, and banks end up becoming purely financial product factories. Other relevant factors will have to do with the evolution of the regulatory and competitive environment, or the reputation and brand loyalty of customers.