The breakneck pace of innovation disrupting the financial sector has ushered in a level of uncertainty which the sector has not faced before. New entrants and a rapidly changing business model have provided customers with a multiplicity of options.

For many, traditional banking faces a bleak and uncertain future. However, banks can thrive in the status quo if they choose to respond to these developments by adapting to them and taking advantage of the new opportunities that they present.

The current climate, with the Covid-19 crisis, is an apt time to be introspective and reprioritize goals. The coronavirus has just accelerated the trends that were already in motion before the pandemic.

The crisis validated the need for robust digital capabilities and consumer demand to manage banking via digital channels. This accelerated demand has identified gaps and weaknesses that banks need to address to meet these demands.

Technology is changing everything, becoming a potent enabler of increased service and reduced cost with innovation being imperative. Demographics are also changing the way banks operate, especially with the middle class and E-generation growth.

Social behavior and customer expectations are changing, with a significant focus on customer experience and trust, and ensuring cyber security being paramount in building this trust.

Retail banks are critically important because they help in the supply of money. Around the world, there is renewed interest in retail banking, especially activities related to products and services catering to individuals and small businesses.

These now account for larger shares of commercial bank balance sheets. In the "return to retail" focus, banks are focusing on broadening services for retail customers.

In Bangladesh, while all banks might not have a dedicated retail or consumer banking division or as such a retail or consumer banking head, they are opening retail or individual banking accounts or delivering banking services to individuals. This includes current, savings or term deposits, NFCD or RFCD accounts, credit of debit cards, auto or mortgage loans, inward or outward remittance, and even investment services for individuals.

Most of the banks historically may be focused on corporate or commercial clients.

However, they are increasingly entering the retail banking space to draw a balance between their institutional and retail deposits, loans, and more importantly, bring down the cost of deposits as well as increase the yield on assets with better risk management.

Any North American or European bank would agree that more money is made from retail banking than commercial or corporate banking.

If not just that, risk-adjusted returns are much higher in retail banking. With an increasing focus on "wealth management" or "privileged banking,'" lenders will make more money from retail offerings to wealthy citizens than synthetic product-driven investment banking.

Retail banking solutions need to respond and respond quickly to consumer changes in demand and new trends. So, what is the "evolution or revolution" needed in retail banking?

PwC recently did a report studying how global megatrends will impact the future of retail banking, using PwC's proprietary Project Blue framework. They studied six priorities for retail banks today to help ensure their future success:

1) Developing a customer-centric business model where you invest in improving overall customer experience and transformation of the operating model.

2) Optimizing distribution offering an anytime, anywhere service, fully utilizing all banking channels in an integrated fashion.

3) Simplifying business and operating models requiring a shift in how retail banks think about their operations – product simplification; integrated distribution; shared service infrastructure; risk management at a customer level; streamlined compliance processes.

4) Obtaining an information advantage. Leading banks gather structured and unstructured information from sources such as credit scores and cross-channel bank customer interaction data etc. Leading players develop advanced analytics capabilities to integrate this vast library of data, analyze it and create actionable insights.

5) Enabling innovation and the capabilities required to foster it. Innovation will be the most critical factor driving sustainable top and bottom-line growth in banking over the years.

6) Proactively manage risk, regulations, and capital with rules being more complex and regulators being less flexible, leading banks need to take an approach that is pragmatic, proactive, and increasingly integrated into "business as usual."

Every bank needs to develop a view of the future landscape and the uncertainties surrounding it. They also need a clear picture of their unique strengths and challenges. And every bank needs to develop its posture against this evolving and uncertain future. Every bank needs a clear strategy.

There are currently 61 scheduled banks operating in Bangladesh. So, none of these banks should forget that their clients now have at least 60 other options, and the one that can serve its clients best will get a more significant share of business.

Banks need to invest in their people and products continuously and, more importantly, in the processing and delivery platform. Many banks are shifting to branchless banking, prioritising digital products and platforms so that they can serve clients without visiting branches.

Now more than ever before, customers are leaning towards alternative service delivery channels. The 32 per cent growth in the number of monthly internet banking customers and 40 per cent growth in the monthly number of internet banking transactions over January 2020 to January 2021 proves that.

Leading banks are now promoting alternate channels to their existing customers through advanced ATM and CDM machines, especially for smaller deposits and withdrawals to ensure contactless services instead of over-the-counter services.

Many local banks are also trying to increase efficiency by using automated token systems at their branches. Instant collateral-free credits at the point of sales and through mobile wallet platforms are also being tested as an alternative to lengthy and manual credit processing.

Moreover, the rise of fintech in the global financial service industry highlights the need for retail banking to redefine as well as repackage their product and service offerings leveraging modern technologies like artificial intelligence, blockchain, and big data analytics or risk falling behind the curve.

The author is a financial service partner with PwC. This piece is an excerpt of a lecture at a workshop on retail banking attended by executives from private sector banks and financial institutions.