The retail banks’ organisational model is undergoing continual change. The last two decades have seen ongoing evolution from a simple product focus to segmented distribution by customer type through multiple channels, central design of products and determination of credit, and efficient operations serving a range of frontline businesses. Globalisation and internationalisation continue to reduce the number of separate banks. Middle-ranking banks, in particular, lacking economies of scale, are likely to be squeezed by the large multinationals on one side and by small niche providers on the other.

As with several other sectors, regulation is a major factor in driving both innovation priorities and market trends. Varied national bodies and international agreements impose a range of onerous requirements, from treating customers fairly to effective business controls and prudent balance sheet management. The regulators are themselves scrutinised by consumer bodies, the government and by an often hostile media. In the major banking centres of the world, regulators are pursuing parallel agendas aimed at improving transparency in financial reporting, preventing money laundering and improving consumer protection.

Alongside such market change, the growth in the dependence of banks on IT systems is constant and relentless. Compliance and core processing have taken priority, since without these the bank cannot survive. However, going forward the challenge will increasingly be to maintain and develop, alongside these core systems, applications which can add real commercial benefit: systems which provide better information and are faster to allow smarter business decisions to be taken, systems which facilitate interaction with the customer and the creation of products for which there is unmet need.

Lastly, customers, as in many other consumer sectors, are becoming increasingly discriminating. The internet gives them access to vast amounts of comparative information, helpfully consolidated for them by price comparison websites. Customer attitudes are fragmenting, with individual references generating scores of niche interest markets. The ease of price comparison and simple transfer processes between suppliers, reinforced by intense competition, means both that brand loyalty is declining rapidly and that inertia is becoming a much less significant factor in customer retention.