Beyond Finance: How Technology Is Shaping The Future Of Retail Banking

Forbes

6 days ago

Barney is a seasoned Data Executive at UniCredit with expertise in financial services, digital banking, AI and data modernization platforms.
In today's economy, success isn't defined by asset ownership—it's shaped by connectivity, convenience and experience.
Uber owns no vehicles, yet serves 161 million customers worldwide. Airbnb operates no hotels, yet has 275 million users as part of its travel platform. What sets these companies apart is their ability to seamlessly bridge the gap between supply and demand, delivering unparalleled value compared to their traditional counterparts.
But their impact goes beyond competition; these platforms generate economic activity that wouldn't exist otherwise. In 2023, Airbnb contributed $85 billion to consumer spending and supported over 1 million new jobs. By reinventing how consumers and suppliers interact, digital marketplaces continue to drive industry transformation, economic growth and consumer empowerment.
This same shift is reshaping financial services. Enabled by cloud computing, APIs and AI, a new wave of fintechs and platform banks is challenging legacy institutions—not with lower fees alone, but with faster innovation cycles, composable architectures and embedded distribution models.
Despite fintech's decade-long presence, financial services remain resilient due to strict regulations and risk aversion, evolving gradually rather than undergoing rapid disruption. In 2023, nearly 5.5 million new businesses launched in the U.S.—a significant majority being tech-driven. By contrast, fewer than 10 new banks are chartered annually.
It's not a matter of capital. The cost of launching a tech startup and a new bank can be similar, with a bank often starting around $5 million and tech startups ranging well beyond that figure. The real difference lies in trust and regulation. While tech companies scale rapidly through user acquisition and agile iteration, banks face high regulatory barriers and must earn consumer trust before they can handle deposits—essential for lending.
That said, the definition of trust is shifting. Deposit insurance now provides a baseline, and digital-first banks are increasingly competing based on service offerings, quality and efficiency.
For over a century, global systemically important banks (G-SIBs) have been pillars of economic stability, built on trust, regulation and risk management. However, over the past few decades, retail banking has undergone significant changes. Neo-banks, with their digital-first models and low overhead, offer improved rates and seamless experiences, challenging legacy institutions that are burdened by aging infrastructure and high costs.
To stay relevant, more traditional banks are realizing the need to modernize, going beyond essential duties and embracing digital innovation to compete in an era of financial disruption.
Today's banking customers expect more than static products. They want experiences that are predictive, personalized and seamlessly integrated into their lives.
In lending, expectations are evolving just as quickly. Rather than one-off credit issuance, consumers increasingly value solutions that reward long-term financial behavior. This creates opportunities for banks to deploy adaptive credit models that assess real-time cash flow, offer flexible limits and respond proactively to changes in financial health. Loyalty programs—built through airline partnerships, premium tiers and behavioral incentives—can further deepen trust and retention.
To stay competitive in this way, there's a push to move beyond transactional models and embrace seamless integration, hyper-personalization and AI-driven financial journeys that adapt to the user—rather than the other way around.
As a result of these rising expectations, modern banks are no longer just financial service providers. Many have expanded into value-added ecosystems, offering vendor marketplaces, travel perks and premium product bundles. Through embedded finance, banks are weaving themselves into adjacent sectors—retail, utilities, healthcare—delivering financial solutions at the point of need, often invisibly.
This shift marks a broader evolution: banking is moving from transactional utility to experience orchestration. For SMEs, while access to financial infrastructure has improved, they now face challenges in areas like customer retention, inventory optimization, employee management and cash flow forecasting. These pain points—once considered outside the scope of banking—are now opportunities for platform banks to add value through partnerships, APIs and intelligent tools.
Financial institutions can play a critical role in their long-term success by working to redefine engagement beyond transactions—something I'll address in more detail shortly.
To stay relevant, both legacy institutions and fintechs must reimagine their value proposition—not as isolated service providers, but as enablers of broader outcomes.
Banks have established strong ties with SMEs, largely through the support of dedicated portfolio managers. While financial services remain core offerings, there's value in understanding the broader business challenges SMEs face.
While everyday needs like campaign execution to recruitment, training and inventory management may fall outside traditional banking, they're integral to the client's ecosystem. By taking a more holistic interest, financial institutions can deepen relationships and position themselves as strategic partners.
Forming partnerships that transcend traditional financial offerings can further help users manage everything from SME operations and workforce planning to personal learning and life goals. While legacy institutions may grapple with this complexity due to rigid infrastructures, adopting modular platforms with flexible interface layers can further help banks connect with outside partners, integrate new tools and offer AI-powered services without overhauling everything at once.
To foster meaningful transformation, banks should consider adopting new operating models that foster speed, autonomy and innovation. One approach is to establish independent, cross-functional teams that operate outside traditional constraints—such as risk, finance, compliance and legal—while still aligning with enterprise standards. These agile units act as internal startups, championing the development of forward-facing platforms and services.
Another involves establishing a neo-bank as a sub-entity under the existing umbrella, enabling experimentation and iterative progress within a safe regulatory and operational framework. Others may opt to acquire a nimble neo-bank with advanced technology infrastructure that complements or replaces their legacy systems, unlocking new market opportunities and product lines.
By embracing these models, institutions can remain competitive and redefine engagement in a rapidly evolving financial landscape without disrupting their foundational stability.
In Conclusion
As AI, open banking and data monetization evolve, more banks are shifting their revenue models by monetizing insights and AI-driven solutions instead of relying on transaction fees. A successful retail banking strategy now relies on three key pillars: a strong spending ecosystem, superior customer service and core banking services. While new entrants may not yet match legacy banks in size, their rapid growth demands swift adaptation to keep up with the pace of innovation.
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