Retail Banking

The retail banking business is the crown jewel of the financial services industry. It offers attractive returns, low risk, and a source of low-cost liquidity that is more valuable than ever in today’s environment.

However, retail banking faces severe challenges. The deposit business is extremely challenged, with the two pillars of retail bank profitability eroding. First, high spreads on excess savings (in Savings and MMDA) are under pressure due to online banks and liquidity-driven competition. Second, NSF/OD fee growth is slowing and under regulatory pressure. Consumer credit growth, including home equity, has slowed and charge-offs have climbed precipitously. Across all product categories, the new regulatory proposals (and in particular the potential Consumer Financial Protection Agency) have injected a note of uncertainty into the profitability dynamics of the business.

The good news is that the current market disruption offers banks an unprecedented opportunity to take market share from other banks in a rapidly consolidating environment. In addition, Novantas believes that the banking dis-intermediation of the past 20 years will begin to reverse, which offers banks the opportunity to take share back from money market mutual funds, mortgage brokers, and other non-bank providers.

Winning banks will take the opportunity to develop innovative new products and services geared at exploiting the disruption in the marketplace. In addition, there will be opportunities for banks to ‘de-average’ the retail franchise, with more tailored and targeted management of segments and local markets.

Our Retail Banking practice helps drive sustainable, fundamental revenue growth for Consumer and Small Business banking through an analytically-driven understanding of customers and local markets, and through innovation in products and channels to capitalize on the market and regulatory disruption.