Why modernization is important in retail banking

Some businesses might view investing in modernization and innovation as a risk. But in industries like retail banking, where technology is at the heart of change, staying still is more likely to be one of the biggest risks a financial institution (FI) could take, such is the anticipated pace of change in the next few years.

The theme of change is now particularly true in areas like the ATM channel, which is so established and familiar that some FIs might not even consider how much potential it has for innovation.

Here are a few reasons why banks should view modernization across all parts of their business, but particularly their ATM fleet, as something to be embraced, rather than feared.

Customer expectations

We are living in a digital world, where consumers expect technology to be at the heart of almost everything they do. Constant reinvention and innovation are crucial in sectors like consumer electronics. This has created a culture in which many customers, even if they are happy with the product or service they already receive, are constantly demanding to see what’s coming next.

It’s inevitable that this anticipation and expectation of the next exciting technology will feed through into financial services. When it comes to something often wrongly perceived as familiar and seemingly inflexible as the ATM, financial institutions that are willing to invest in a new approach will ultimately win the attention and possibly the loyalty of modern consumers.  This is particularly important given the ATM is the most common self-service channel consumers have with their bank.

Wanting to be better

To a certain extent, the ATM has been a victim of its own success, as it’s approaches its 50th year.  Today’s machines are so consistent, durable and reliable that sometimes banks are happy to stick with what they’ve got. ‘If it ain’t broke, don’t fix it’, so the saying goes, but this approach could be risky as other banks may be embracing the wider changes in financial technology as they look to innovate and grow.

In many other industries, businesses that want to continue evolving and delivering the best possible service to their customers must be willing to change, even if the established way of doing things has served them well in the past.

Protection through innovation

Security threats are a major consideration for all businesses, of course, but financial services organizations have a bigger obligation than most to guarantee optimum protection for their assets, systems and customer data.  Mitigating against risk and attempted fraudulent attacks is of fundamental importance to financial institution.

The longer a bank relies on the same technologies and processes, the more vulnerable they become, so investing in the latest security measures is crucial.

In the ATM channel, innovative solutions can help banks to protect themselves against threats ranging from card skimming to malware.  Many new ATM designs also have security “designed in” to combat against unauthorized attempts from fraudsters to compromise a consumer’s security at the ATM.

Staying ahead of the competition

The growth of fintechs and challenger banks means established FIs are facing more competition than ever. It is likely that investing in modernization is one of the most effective ways for a bank to show that it is driving and embracing change in its industry, rather than resisting or racing to catch up with it.  Offering an ATM experience that is similar to a tablet or smartphone is a great example of how financial institutions can look to deliver omnichannel banking to consumers be it online, mobile or at the ATM.

Ira Kalb of the University of Southern California’s Marshall School of Business recently illustrated this point in an article for Business Insider. He gave the example of Kodak, which invented the digital camera, but failed to fully capitalize on the success of its invention because it wanted to protect its film business.

“To be innovative, you cannot be afraid to obsolete your own products,” wrote Mr Kalb. “If you are, others will obsolete them for you.”

With so much change forecast in the retail banking sector globally over the next five years, it will be interesting to see how retail banks adapt to deliver the experience that consumers demand. More than four million ATMs are expected to be installed globally by the year 2021, so it’s going to be fascinating to chart how the ATM as a self-service channel evolves also.


Image: iStock/Oko_SwanOmurphy

Written by Colin Gordon

Colin Gordon

Colin Gordon is a Global ATM Marketing Manager based at NCR’s R&D Center in Dundee, Scotland. Colin is responsible for the marketing of NCR’s financial hardware portfolio with a specific focus on activities such as demand generation, sales enablement, market analysis and customer engagements for the ATM business.

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