RESEARCH INSTITUTE

RETAIL BANKING
TOP TRENDS
2023
CAPGEMINI RESEARCH INSTITUTE FOR FINANCIAL SERVICES DELIVERS A
BROAD RANGE OF SECTOR-SPECIFIC WORLD REPORTS AND TREND BOOKS
World Reports Trends Books

Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 2
TREND 10 TRENDS IN BANKING BY SUB-DOMAINS
Changes in Creating and enabling
Customer Centricity Business resilience New horizons
industry dynamics new values
WEALTH MANAGEMENT RETAIL BANKING PAYMENTS
ESG regulatory standards aim to curb corporate Smart branches feature experiential banking and Composable architecture creates competitive
investment greenwashing convenience to spark customer connection advantage efficiencies

Demand for outsourced chief investment officer Incumbents scout for mature FinTechs to complement Real-time cross-border payment rails will boost the
services is on the rise capabilities, boost bank profitability speed and volume of regional trade

Investor appetite for digital assets drives wealth More banks commit to driving circular An end-to-end ecosystem approach simplifies payment
industry capabilities beyond cryptocurrencies economy sustainability hub modernization

Amid volatility, investors seek new portfolio strategies, Banks step-up and own customer experience with Global adoption of ISO 20022 opens doors to data
such as direct indexing embedded finance monetization

Wealth management firms refocus on the Financial wellness advice can help customers navigate
Central banks gear up to pilot and implement CBDCs
mass-affluent segment the cost-of-living challenges

Women increasingly control more wealth, yet many

CMOs leverage actionable data insights to guide B2B Buy-Now-Pay-Later (BNPL) picks up momentum
firms falter at winning their mindshare and share of
customer-centricity amid post-pandemic Macroeconomics
wallet

Embedded finance providers leverage customer data

Evaluating cybersecurity for future readiness Digital identity to unlock efficiency gains for banks
and actionable insights to unlock new use cases

A digitalized core can bridge the gap between

Banks unlock value at scale by migrating workload to PayTech innovation and ecosystem partnerships focus
relationship managers’ expectations and WM firms’
the cloud on revamping SMB payments
automation capabilities

The wealth management industry is consolidating to A boom in synthetic data will catalyze data Tokenization – a multi-pronged approach for scalable
achieve scale ecosystem growth and secure card payments infrastructure

Family offices showcase bespoke services while facing As banks explore decentralized finance, they Eco-friendly cards, digital payments, and cloud-based
regulatory dynamics remain cautious payments hubs will boost sustainability

Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 3
TOP RETAIL BANKING TRENDS 2023 – PRIORITY MATRIX
Trend #
Changes in industry dynamics

1 Smart branches feature experiential banking and convenience to spark customer connection

Significant
2 Incumbents scout for mature FinTechs to complement capabilities, boost bank profitability
6 7 9
3 More banks commit to driving circular economy sustainability

Adoption priority (2023)

Creating and enabling new values

4 Banks step up and own customer experience with embedded finance

High
5 Financial wellness advice can help customers navigate the cost-of-living challenges
5 3 1 4 8
Customer centricity

6 CMOs leverage actionable data insights to guide customer centricity

7 Digital identity to unlock efficiency gains for banks

Medium
Business resilience
10 2
8 Banks unlock value at scale by migrating workload to the cloud

9 A boom in synthetic data will catalyze data ecosystem growth

New horizons Medium High Significant

10 As banks explore decentralized finance, they remain cautious Business impact (2023)
Source: Capgemini Research Institute for Financial Services, 2023.

The matrix above presents Capgemini’s view of 2023 trend prioritization in an operating environment that includes:
• Rising inflation and interest rates coupled with slowing growth • High customer adoption of digital payments
• Operational disruption due to geopolitical instability • Increasing digital transformation initiatives of FIs
• Dynamic regulation and compliance mandates • Brisk competition and increased focus on customer centricity to hedge against advances from new-age players
▪ Adoption priority refers to the urgency of adopting a 2023 trend to maximize value creation because of its sector importance.
▪ Business impact represents a trend’s 2023 effect on the payments industry regarding customer experience (CX), operational excellence, regulatory compliance, or profitability.
Circumstances will vary for each firm depending on its business priorities, geographical location, and several other factors. For more information, don’t hesitate to contact us at [email protected].
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 4
FROM 2022 TO 2023 WHAT CHANGED AND WHAT NOT?

TRENDS 2023 TRENDS 2022

1 Smart branches feature experiential banking and convenience to spark customer connection 1 The blurring lines between Super FinTechs and banks

2 Incumbents scout for mature FinTechs to complement capabilities, boost bank profitability 2 Banks double down on cost transformation to improve financial health

3 More banks commit to driving circular economy sustainability 3 Banking-as-a-Service can unlock latent market potential

4 Banks step up and own customer experience with embedded finance 4 Banking on the cloud to unlock new value frontiers

5 Financial wellness advice can help customers navigate the cost-of-living challenges 5 The power behind experiential Banking 4.X era: emerging data ecosystems

Frontrunners will build digital-only subsidiaries to remain relevant and resilient in

6 CMOs leverage actionable data insights to guide customer centricity 6 the FinTech era

7 Digital identity to unlock efficiency gains for banks 7 Cybersecurity is becoming a competitive differentiator for banks

8 Banks unlock value at scale by migrating workload to the cloud 8 Banks to step up their transition to become planet-centric enterprises

9 boom in synthetic data will catalyze data ecosystem growth 9 5G projects and exploration to pick up speed

10 As banks explore decentralized finance, they remain cautious 10 DeFi-ning the next banking evolution

New trends Trends evolution Deprioritized trends

▪ Customers want a seamless, omnichannel experiential ▪ Embedded finance and a sustainable business model are ▪ 5G and digital-only subsidiaries may not be among top
journey. Smart branches and CMOs play a pivotal role in critical to retain and expand customers’ mindshare and priorities of banks as banks look to navigate the
enabling this share of wallet ambiguous environment
▪ Leading banks will develop capabilities to expand ▪ Banks remain cautiously interested in DeFi and are ▪ Most banks had initiated their cost-transformation
services and come closer to customers. Providing accelerate data migration to cloud and cybersecurity projects and are continuing with
financial wellness services and acquiring FinTechs are an them. New initiatives were less frequent
easy way to do so

Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 5
 SMART BRANCHES FEATURE EXPERIENTIAL BANKING AND
TREND

01 CONVENIENCE TO SPARK CUSTOMER CONNECTION

Five Cs of a superior smart branch experience

Connected Convenient Content

Synchronization across digital Customer-focused. Personal Seamless delivery of value-added
channels with an emphasis on bankers are augmented with services, such as advisory and
financial inclusion. technologies such as self-service investment planning and quick
kiosks and AI assistants. access to financial knowledge.

Concierge Captivate
Offer products and services Engage customers with events such
beyond banking by leveraging as yoga sessions, concerts,
ecosystem partners. motivational talks, etc. to build
strong personal ralationships.

Source: Capgemini Research Institute for Financial Services, 2023.

By generating opportunities for cross-selling, upselling, and cultivating a tech-savvy customer base such as Gen X,
millennials, and Gen Z smart branches have immense potential to improve customer lifetime value.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 6
 INCUMBENTS SCOUT FOR MATURE FINTECHS TO COMPLEMENT
TREND

02 CAPABILITIES, BOOST BANK PROFITABILITY

Banks contribute to a small but significant percentage of overall FinTech acquisitions

2 1 3

Connected Compete Invest Acquire

Incumbents provide the Agile, digital-first Traditional banks invest in FinTech acquisitions help
underlying infrastructure newcomers are taking a mature FinTechs to banks add digital
for new players bite out of incumbent penetrate new segments capabilities immediately
banks’ share of wallet and gain tech competencies

Source: Capgemini Research Institute for Financial Services, 2023.

FinTechs with a robust customer base and niche market position are potential acquisition targets because they can
help incumbents build new value propositions, develop cross-sell opportunities, and provide active new customers.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 7
TREND MORE BANKS COMMIT TO CIRCULAR ECONOMY SUSTAINABILITY
03

Three ways banks can assess climate impact

For many banks, mounting

pressure from customers,
shareholders, climate STEP 1 STEP 2 STEP 3
activists, and regulators Green business practices Green processes Sustainable digital finance
drives climate initiatives. As
• Granting environmentally • Initiatives to reduce • Adopt cloud computing and
a result, numerous financial friendly mortgages and greenhouse gas emerging technologies
institutions have committed vehicle loans emissions, energy, and to support sustainable
to green initiatives to • Promote energy-efficient paper consumption digital finance
control their business lifestyles by educating and
process carbon footprints influencing customers

Source: Capgemini Research Institute for Financial Services, 2023.

In response to rising green consumerism, banks will work to maintain their market
reputation in 2023 and beyond by sponsoring and building effective ESG strategies.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 8
 BANKS STEP UP AND OWN CUSTOMER EXPERIENCE WITH
TREND

04 EMBEDDED FINANCE

Incumbent banks struggle with legacy systems and data silos, forcing them to rely on third-party platforms

38% of banks have an in-house (owned) BaaS platform

28% of banks leverage a third-party BaaS platform Rising cloud maturity and improving data
capabilities are helping banks steadily
build in-house platform capabilities.
16% of banks have a BaaS platform under development
Moreover, Building in-house BaaS capabilities will
help banks embed financial services in customers’
life journeys, including mobility, home purchases,
9% of banks have a BaaS platform strategy ready small business ecosystems, and more

10% of banks have no BaaS adoption plan

Source: Capgemini Research Institute for Financial Services, 2023.

By owning a BaaS platform, banks can directly connect with end clients – leading to
faster and higher revenue recognition and more cross-industry data access.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 9
 FINANCIAL WELLNESS ADVICE CAN HELP CUSTOMERS NAVIGATE
TREND

05 COST-OF-LIVING CHALLENGES

Banks can play a critical advisory role in financial wellness

Leverage Data Generate Insights Offer Advice Take Action

• Use customer • Analyze spending • Find the right loan • Tailor budgeting and
transactional data to patterns • Use credit cards wisely money management tools
segment and • Hedge against • Plan a budget • Create investment
contextualize insufficient balances • Increase savings awareness
• Flag unexpected • Improve spending habits • Automate savings
payments • Support financial goals for
major life events
• Offer hyper-personalized
products and services
• Set up payment alerts

Source: Capgemini Research Institute for Financial Services, 2023.

Firms that personalize customer journeys to focus on monetary well-being will cultivate
meaningful engagements, spark cross-sell and up-sell opportunities, and reduce customer churn.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 10
 CMOS LEVERAGE ACTIONABLE DATA INSIGHTS TO GUIDE
TREND

06 CUSTOMER CENTRICITY

Bank’s CMO role emerges as ecosystem orchestrator

Chief Digital Officer

Chief Data Officer
BUILD Chief Technology Officer
Chief Experience Officer digital and data
Chief Customer Officer capabilities
Chief Growth Officer

CRAFT CHIEF
personalized STRATEGIST
and experiential
customer
(CMO)
NPS® custodian
journeys Chief Ecosystem Officer
Chief Innovation Officer
CATALYZE
collaboration
and innovation

Source: Capgemini Research Institute for Financial Services, 2023.

As banks beef up data strategies in 2023, customer data volume and velocity will increase exponentially.
The CMO persona will be pivotal to leveraging this data through artificial intelligence and analytics tools
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 11
TREND DIGITAL IDENTITY TO UNLOCK EFFICIENCY GAINS FOR BANKS
07

Emphasis will shift to a digital ID framework with strong governance

Bank-driven digital ID models with government
incentives or collaboration to boost traction
1 2 3 4 5
Government-
Standalone private Private collaborative incentivized private Public/private Government-mandated
governance governance governance governance governance

• Every private party • Market-driven • Market-driven • Interoperability • Public body mandated

governs own collaboration where collaboration where between public- to set governance
infrastructure private parties private parties private services is • Governance is
• No common govern together participate together often a central theme enforced and based
agreements and little • Little government • Government creates on a regulatory
interoperability involvement guiding principles framework

Evrotrust iDIN operated Aadhaar in India and

Mastercard in by Dutch banks SingPass in Singapore
North Macedonia FranceConnect is a
BankID in Sweden French government
authorized system

Source: Capgemini Research Institute for Financial Services, 2023.

Digital ID is proving to be critical to building trust in digital infrastructures to enable

interoperable and seamless data exchange.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 12
 BANKS UNLOCK VALUE AT SCALE BY MIGRATING WORKLOADS TO
TREND

08 THE CLOUD

Cloud migration offers banks high-impact agility benefits

A single
source of
enterprise
data
The cloud significantly improves processing Superior Reduced
rates within high-volume operations like customer costs Superior CX
payments and data reconciliations. experience

In addition, it offers faster turnaround time Business

for new customer onboarding and reduced Agility
time to market for new products, which saves
Ability to
cost by optimizing cycle time and boosts Scalable IT
infrastructure tap big
existing business revenues data and
analytics
Emerging
technology
capabilities
Source: Capgemini Research Institute for Financial Services, 2023.

The cloud offers banks opportunities to redirect cost savings to profits from
existing and innovative value propositions.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 13
 A BOOM IN SYNTHETIC DATA WILL CATALYZE DATA
TREND

09 ECOSYSTEM GROWTH

Banks experiencing data quality and usage a significant challenge

Executives’ view of challenges with data management (%)

Data reliability 80%

▪ Regulations restrict how banks can collect, use,

Cannot generate insights 73%
and share data.
Lack resources to process
▪ Synthetic data is an alternative to real 70%
and generate insights
world data that is artificially generated to
precise specifications. Inadequate data
68%
management tool

▪ Artificial intelligence can generate synthetic Cannot manage

67%
unstructured data
datasets without breaching privacy regulations
and data security. Unreliable and
64%
incomplete data

Data in silos 43%

Source: Capgemini Research Institute for Financial Services, 2023.

Data is critical to identifying target customers, personalizing their experience, and nurturing customer relationships.
However, banks wrestle with data quality, structure, availability, etc., to unlock their full potential.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 14
 AS BANKS EXPLORE DECENTRALIZED FINANCE, THEY
TREND

10 REMAIN CAUTIOUS

FS firms are increasing investments in DeFi infrastructure and functionalities

Use case layer in form of applications that are

dApps focused on solving business issues, such as trade
▪ Banks are strategically considering DeFi finance, payments, KYC, etc.

SERVICE
use-case pilots, yet sector instability and 2022
losses cast long shadows A dense and diverse layer of multiple blocks, each
for specific task, such as smart contract

WEB 3.0 STACK

Functionality development tokenization, data analysis,
▪ While volatility might inhibit growth, communication, governance, token exchange, etc.
institutional DeFi is expected attract capital on
account of regulatory clarity.

INFRASTRUCTURE
Enabling layer that helps to overcome speed,
Scalability
scalability, privacy, and cross-chain interoperability
▪ Increased decentralized infrastructure & service and privacy issues related to blockchain architecture
readiness has led to steady growth of
institutional DeFi
Underlying blockchain architecture that records
Protocols transactions and ensures finality of payments

Source: Capgemini Research Institute for Financial Services, 2023.

Before banks can integrate smoothly within the DeFi ecosystem,

they will need institutional DeFi solutions to tackle persistent and inherent risks.
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 15
TOP RETAIL BANKING TRENDS 2023 – PRIORITY MATRIX
Trend #
Changes in industry dynamics

Significant
1 Smart branches feature experiential banking and convenience to spark customer connection

2 Incumbents scout for mature FinTechs to complement capabilities, boost bank profitability
6 7 9

Adoption priority (2023)

3 More banks commit to driving circular economy sustainability

Creating and enabling new values

4 Banks step up and own customer experience with embedded finance

High
5 Financial wellness advice can help customers navigate the cost-of-living challenges 5 3 1 4 8
Customer centricity

6 CMOs leverage actionable data insights to guide customer centricity

Medium
7 Digital identity to unlock efficiency gains for banks

Business resilience 10 2
8 Banks unlock value at scale by migrating workload to the cloud

9 A boom in synthetic data will catalyze data ecosystem growth

New horizons Medium High Significant

10 As banks explore decentralized finance, they remain cautious Business impact (2023)
Source: Capgemini Research Institute for Financial Services, 2023.

The matrix above presents Capgemini’s view of 2023 trend prioritization in an operating environment that includes:
• Rising inflation and interest rates coupled with slowing growth • High customer adoption of digital payments
• Operational disruption due to geopolitical instability • Increasing digital transformation initiatives of FIs
• Dynamic regulation and compliance mandates • Brisk competition and increased focus on customer centricity to hedge against advances from new-age players
▪ Adoption priority refers to the urgency of adopting a 2023 trend to maximize value creation because of its sector importance.
▪ Business impact represents a trend’s 2023 effect on the payments industry regarding customer experience (CX), operational excellence, regulatory compliance, or profitability.
Circumstances will vary for each firm depending on its business priorities, geographical location, and several other factors. For more information, don’t hesitate to contact us at [email protected].
Top Trends in Retail Banking | 2023 © Capgemini 2023 All rights reserved | 16
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