Retail Banking Business Models

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Questions and Answers

What is the primary focus of banks adopting a product-centric approach?

Focusing on developing innovative digital banking solutions to attract tech-savvy customers.

Building relationships with customers by offering personalized financial advice.

Offering a wide range of financial products and services to cater to various customer needs. (correct)

Understanding customer needs and tailoring products and services to meet them.

What is the main threat that emerging players like Revolut pose to traditional banks?

They have a more efficient and cost-effective operating model.

They offer a more personalized and customer-centric banking experience.

They focus on providing niche products that can later expand into a wider retail banking offering. (correct)

They offer lower interest rates and fees on financial products.

What is a key driver that forces banks to re-evaluate their existing business models?

Increasing competition from non-traditional financial institutions.

Shifting customer preferences toward digital banking solutions.

The growing demand for personalized financial advice.

All of the above. (correct)

Why is a customer-centric business model considered relevant for the future of retail banking?

It helps banks to build stronger relationships with customers and retain them. (D) Signup and view all the answers

Which of the following is NOT a key feature of a customer-centric business model?

Prioritizing product development over customer satisfaction. (A) Signup and view all the answers

What is the main challenge faced by banks that claim to be customer-centric but operate a product-centric model?

They fail to understand customer needs and preferences. (D) Signup and view all the answers

What is a potential advantage of adopting a customer-centric business model?

Improved customer satisfaction and loyalty. (B) Signup and view all the answers

How can banks rebuild trust with customers after a period of eroded trust?

By providing transparent and ethical financial services. (B) Signup and view all the answers

What is a negative consequence of product-centric business models, according to the provided content?

Reduced cross-sales (D) Signup and view all the answers

According to the content, what percentage of consumers trust their bank to look after their long-term financial well-being?

43% (A) Signup and view all the answers

What is the average score for 'capturing a single customer view' as per the customer objectives?

2.8 (B) Signup and view all the answers

Which business model focuses on the problems that banks solve for customers?

Customer-centric model (D) Signup and view all the answers

What is suggested as a reason for banks choosing a product-centric model in the past?

Control over product features and channel design (D) Signup and view all the answers

Which of the following is NOT a life event mentioned in the content where consumers seek financial advice?

Buying a car (D) Signup and view all the answers

What must a retail bank do to achieve its strategic objectives?

Align its business model with strategic objectives (A) Signup and view all the answers

What key factor does the content highlight as crucial for banks to rebuild trust with customers?

Understanding customer needs and behavior (A) Signup and view all the answers

According to the content, what is the primary driver of distrust in banks among consumers?

Product-centric sales culture focused on short-term profitability (A) Signup and view all the answers

According to the research, how is the customer experience rated?

3.1 (D) Signup and view all the answers

What percentage of consumers seeking financial advice for life events turned to family and friends for help?

56% (A) Signup and view all the answers

What strategy do customer-centric retail banks employ, according to the content?

Understanding each customer's individual life-cycle (D) Signup and view all the answers

Which statement best describes a business model?

It describes how an organization creates, delivers, and captures value. (A) Signup and view all the answers

What is the main implication of customers having negative experiences with a bank?

Erosion of trust and loyalty (D) Signup and view all the answers

What is a major goal of adopting a customer-centric business model for banks?

To enhance customer acquisition, retention, and growth (D) Signup and view all the answers

Who stated, 'The most basic idea of strategy is the application of strength against weakness.'?

Richard Rumelt (D) Signup and view all the answers

What is the primary driver for banks to create innovative solutions?

To satisfy customer needs and wants. (B) Signup and view all the answers

What metric do customer-centric banks use to measure their success?

Customer satisfaction and mutual value. (D) Signup and view all the answers

What strategy do customer-centric banks employ to create a positive customer experience?

Building long-term relationships with customers. (D) Signup and view all the answers

What is a key challenge for banks in a saturated retail banking market?

Creating unique differentiators to attract customers. (A) Signup and view all the answers

How do customer-centric banks achieve a competitive advantage in the market?

By understanding their customers' needs and values. (A) Signup and view all the answers

What aspect of customer-centricity is difficult for competitors to copy quickly?

Customer experience, loyalty, and satisfaction. (A) Signup and view all the answers

How do customer-centric banks balance customisation and complexity?

By leveraging their channel strengths. (C) Signup and view all the answers

What is the key factor that informs customers' decisions to buy from a company again and recommend it to others?

The overall customer experience. (B) Signup and view all the answers

What primary goal do fintechs and neobanks aim to achieve in the financial services market?

Unbundle the financial services market (D) Signup and view all the answers

What was the specific frustration that led Nikolay Storonsky to co-found Revolut?

High fees for sending money abroad (A) Signup and view all the answers

Which model allows new banks or tech giants to generate revenue solely from products they build and own?

Own products model (D) Signup and view all the answers

What challenge do customers face with the transparency of banking fees?

Fees can be unexpected despite 'free banking' promotions (D) Signup and view all the answers

How does Open Banking enhance customer flexibility?

By allowing reconfiguration of individual financial services (B) Signup and view all the answers

What downside is mentioned regarding the proliferation of financial apps for consumers?

Having multiple apps doing the job of a single bank (C) Signup and view all the answers

Which of the following describes the branded marketplace model?

Integrates external products through APIs without manufacturing them (B) Signup and view all the answers

What type of consumer needs does the emergence of fintechs and neobanks aim to address?

Desire for more options and better service transparency (C) Signup and view all the answers

According to the survey, which of the following organizational structures are most commonly used by businesses?

Individual product or brand-centric and Channel-centric (B) Signup and view all the answers

What is the main point of the highlighted text 'It's clear from the above data that there's a mismatch in how senior Marketing managers believe that their department should organise and work, and the reality.'?

There is a significant gap between how marketing departments are structured and how they should be structured. (B) Signup and view all the answers

Which of these is NOT a customer objective mentioned in the text?

Building brand awareness (A) Signup and view all the answers

Based on the survey data, which organizational structure aligns most closely with achieving customer objectives?

Customer-centric (B) Signup and view all the answers

Why is it concerning that most companies claim to be customer-centric in their public statements?

It suggests that these companies are not truly committed to customer-centricity. (B) Signup and view all the answers

What is the significance of the customer objective scores being around 3 out of 5?

It suggests that companies are struggling to effectively achieve customer objectives. (D) Signup and view all the answers

Which organizational structure is most likely to struggle with 'capturing a single customer view'?

Individual products or brand-centric (B) Signup and view all the answers

What does the 'Future Marketing Organisation/MiQ 2018' report suggest about the importance of customer-centricity?

It is essential for achieving long-term marketing success. (C) Signup and view all the answers

Signup and view all the answers

Study Notes

Module 3: Retail Banking Business Models - Introduction to Retail Banking

Candidates will understand the relationship between a retail bank's strategy and business model and how the operational model influences it, as discussed in the Customer Management Module.
Key features, advantages, and disadvantages of different business models used by banks will be identified.
Drivers of change in retail banking that force banks to review their business models will be examined within the context of ensuring survival and growth.
The importance of customer trust in financial services and how business models can enhance or diminish that trust will be explored.
Banks' challenges related to claiming to be customer-centric while operating a different model will be explained, along with the case for adopting a customer-centric model.
This module helps understand different business models for creating, delivering, and capturing value for various stakeholders (investors, customers, employees, community).
The past two decades have seen banks evolve into "financial supermarkets," offering a broader range of products and services.
Recent changes include new players (e.g., Revolut) that threaten traditional models by unbundling services and providing niche products, which can be expanded into wider offerings.

Module 3: Retail Banking Business Models - Business Models

Key features of different banking business models, including their advantages/disadvantages, are explained in context of retail banking's future.
The drivers of change forcing banks to re-evaluate their models in the retail banking environment are identified.
This module examines the reality that many organizations purport customer-centric practices yet operate in product-centric ways, emphasizing the challenges in achieving customer objectives (acquisition, growth, retention).

Module 3: Retail Banking Business Models - Business Strategy and Models

The importance of effective business strategies and models for business success.
The concept of aligning business strategy with the business model is fundamental to achieving business objectives; specifically, for retail banks to achieve strategic objectives.
Three common business models for retail banks are: product-centric, channel-centric (delivery-centric), and customer-centric.

Module 3: Retail Banking Business Models - Comparison of Business Models

Key characteristics of product-centric, channel-centric, and customer-centric models are compared and contrasted.
Product-centric models focus on defining the bank through product and service offerings, not customer needs.
The channel-centric (delivery-centric) model prioritizes cost-effectiveness of delivering products/services through various channels.
Customer-centric models focus on understanding customer needs and designing products/services to meet them.

Module 3: Retail Banking Business Models - Product-centric, Channel-centric, or Customer-centric?

The product-centric model is driven by a lack of customer insights and data, focusing on product superiority, sales maximization, and market share.
Financial supermarkets are examples of banks operating with a product-centric model.
Banks may want to offer the best product, but sometimes these products may be complex and expensive, which doesn't solve the customer's problem.
Customer-centric models go "outside in;" they look at the customer's needs and try to solve those needs through their products.

Module 3: Retail Banking Business Models - Drivers of Change and Un-bundling the Bank

Customer expectations are changing, requiring respect and personalized experiences.
Digital technologies are changing customer behaviour, giving them more access to information and product comparisons.
New digital banks/fintechs are offering "unbundled" services, creating more choice and pressure on traditional banks.
Customer centricity is becoming critical for competitive advantage.

Module 3: Retail Banking Business Models - Customers

Customers judge banks on their performance, influencing future purchases.
Positive experiences boost loyalty and business growth.
Customer data is increasingly valuable, and customers expect ethical and transparent use of their data.
Open banking may allow the reconfiguration of individual financial services.

Module 3: Retail Banking Business Models - Banks Have Lost Trust

Customer trust in banks has declined.
Consumers show a preference in seeking financial advice from friends and family rather than banks.
Short-term profitability can decrease trust in products/services and negatively impacts long-run customer relationships.

Module 3: Retail Banking Business Models - Customer-centricity can rebuild trust

Customer centricity is paramount to rebuilding trust by deeply understanding customer needs, desires, and behaviours.
Customer understanding through lifecycle considerations is essential in the customer experience for building trust and positive relationships.

Module 3: Retail Banking Business Models - Making the Case for a Customer-centric Business

Businesses that claim to be customer-centric may not achieve the desired benefits if evidence and demonstrable customer-centric practices are not demonstrated.
Several benchmarks exist for defining success in a customer-centric business experience, showing how different customer experiences bring in significantly more revenue.
Executing a customer-centric model will likely present additional costs in the short term; hence, a strong justification of why or how it will increase revenue and decrease costs over time is critical.

Module 3: Retail Banking Business Models - A Customer-centric Business Model Offers a Solution

Customer behaviour affects revenue & costs; self-service channels, customer advocacy, and retention of existing customers are crucial variables.
Banks need to understand their customers' needs, problems, dreams, and behaviours to effectively craft a customer-centric model.
Understanding and addressing customer experiences at each touchpoint – the customer journey – is essential in developing and maintaining trust.

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Description

This quiz covers the essentials of retail banking business models, focusing on the interplay between strategy and operational models. Participants will explore key features, advantages, and challenges of various models, as well as the impact of customer trust on banking success. Additionally, the drivers of change in the industry will be examined to ensure growth and adaptation.

Retail Banking Business Models - Module 3

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