Across the first half of 2010, retail bankers in North America made the following five observations regarding trends in the industry:

Observation #1:  Customers significantly undervalue the transactional services that banks provide.  A decade of “totally free checking” has taught customers that transactional services are worth $0.  As free checking disappears, executives must train customers to see access to the payments system as a privilege rather than a right.  Most banks are starting to make the transition by ensuring fee waivers for high balances, direct deposit, or bill pay is transparent so customers know why and how they earned their “free” checking account.

Observation #2:  Innovation has been significantly under resourced in most firms.  Retail bank executives believe that innovation will be the key to generating fee income.  However, most executives are facing severe capital constraints that hinder their ability to invest in product, channel, and service innovation.  For new ideas, visit the Council’s library of checking products and resources on innovation.

Observation #3:  To restore growth, the industry must address trust and credibility shortcomings.  Media and political criticism have lowered bank credibility.  Many executives are rebuilding trust with customers by focusing their brand and marketing efforts on transparency, financial responsibility, and financial goal achievement.  Examples include branch savings and spending seminars, home ownership workshops, one-on-one financial reviews, and online financial help resources.

Observation #4:  Low levels of financial literacy among bank staff prevent them from delivering value to customers.  As retail banking executives see branch transaction volumes decline, they are trying to transition staff from a focus on transactional efficiency to higher level skills such as problem resolution and financial management.  However, most branch staff have limited experience managing their own finances, severely limiting their ability to guide customers.  Leading institutions are equipping staff by providing them simple support tools, confidence-building training sessions, and clear advisory processes.

Observation #5:  Customers seek a rapid change in the role of the branch while banks look to gradually evolve it.  Customers’ reliance on the branch network is becoming increasingly varied.  While certain segments still rely on the branch regularly, others hardly ever enter a branch. Banks are having difficulty adapting their fixed-cost, expensive branch networks as quickly as customer demands are changing.  Trends in branch staffing and design include cashless branches, universal reps, sales-only stores, kiosks, in-branch video-conferencing, and retail partnerships.

These observations were developed over the course of the Council’s first half research efforts, which addressed the following topics: