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Retail banking is rapidly heading to a crossroads. With the Millennial population projected to hit 78 million by 2030, 4% larger than the Baby Boomer generation at its peak, banks must be ready for the shift that’s coming. While most banks have adopted basic digital capabilities like websites and mobile apps, the level of digitization required to reach and keep the Millennial generation must be far more integrated and ubiquitous. Consider the following statistics from the Fair Isaac Corporation (FICO);

  • 52% aged 18-34 are already using or very likely to use non-traditional payment companies in the next 12 months compared to 27% of those over 50.
  • 32% aged 18-34 are already using or very likely to use mobile payment providers like PayPal, Apple Pay, and others in the next 12 months compared to only 8% of those aged 50+
  • 23% of those aged 18-34 are already using or very likely to use peer-to-peer lending in the next 12 months compared to 2% of those over 50.

The picture these statistics paint is one of shifting expectations of an increasingly digitized consumer base. For banks and other retail banking institutions, this represents both a threat and an opportunity. On a threat level, there are Silicon Valley startups that are rising to fill in the gaps left by traditional banking, as will be covered later in this article. On the opportunity front, this shift represents an unprecedented opportunity to not only offer services to Millennials but to occupy the figurative home screen of their lives, something big tech companies like Google, Amazon, and Apple have managed to do. To delve into the shifts retail banks can expect and how they can capitalize on these shifts, we cover three broad areas we believe hold the biggest promise for radical digital transformation and growth: personalization, digital ecosystems, and automation.


Upstart is a FinTech startup based in Silicon Valley that is rethinking how credit is assessed. Founded by ex-Google employees, the company uses machine learning and analytics to create credit personas based on credit score, years of credit, employment history, education background and area of study. In contrast, traditional credit assessments cover only the first two areas; credit score and years of credit. The Upstart approach to credit assessment is in line with what Millennials expect from banks, which is deeper and more meaningful insights into their lives to determine what financial products they need and qualify for. Traditional banks will do well to consider such unconventional ways of assessing credit to better align with customer expectations.

Going deeper into personalization, increasingly digitized consumers are looking for bespoke products and services that fit their lifestyle and future financial needs. Another FICO survey found that Millennials are five times more likely than those over 50 to close all accounts with their primary bank. The primary reason cited for switching was high costs, a sticking point that banks can address by leveraging technology to lower costs. Another area banks must experiment in to bolster personalization is offering service access via voice ID, an important area as Voice-as-a-Channel gains momentum through the proliferation of smart devices like Amazon Alexa and Google Home.

Digital Ecosystems

An EFMA and Capgemini report found that 32.3% of retail banking customers might consider big tech companies like Google and Amazon for financial services. This is in line with the previously cited FICO survey that found that 68% of millennials gravitate towards big banks. This affinity to big players is traceable to the ecosystems these big players tend to build, which makes it easy to switch from one service to another. Consider Lending Club, another Silicon Valley tech company that provides Credit-as-a-Service. Users of the platform can borrow from any lender, whether that lender is another bank or another individual, without having to create an exclusive relationship with either. This sort of mobility, by a generation that has grown up in a sharing economy, provides insights into the direction retail banking must head in order to stay apace with a digital-first consumer base.

Another reason why Millennials would consider big tech companies as a viable option for financial services is the digital experiences such entities offer. While mobile apps and text messages have a high adoption rate in this age set, a large proportion of this cohort expects digital experiences to be more meaningful than this. For instance, the ability to seamlessly access banking services via social, mobile and web without having to log in each time, or repeat questions is an important driver in this area. Consider the seamless nature with which a user can move from one service to another within the Google ecosystem. This is the level of omnichannel access retail banking needs to adopt to build walled gardens of their own that result in exceptional digital experiences for a digitally omnivorous customer base.


An AVOKA State of Digital Banking Report found that only 1 in 4 banking products can be applied for online while less than 10% of small business accounts can be opened online. The challenge here is that most retail banking processes are still manual. Mortgage lending, for instance, is still firmly rooted in manual processes, resulting in a 40-day approval time. Roostify, a FinTech startup based in San Francisco, California, is using technology to automate this process and shave off days from the loan approval process. By doing this, the startup is helping lenders meet the expectations of customers, who expect automated digital services wherever they transact.

Further to this, artificial intelligence (AI) assistants are poised to play an increasingly pivotal role in how customers access retail banking services. For instance, if a customer asks a bank AI assistant what is required to get a loan, the AI must be able to analyze the customer’s financial records and provide them with a tailored answer. Voice controlled actions like balance requests, bill payments, internal and external transfers are also an area banks must focus on to meet retail customers’ expectations. Combining this with deep consumer analytics will help banks automate credit approval processes, increase speed-of-service (a key factor in retail banking) and provide deep analytics to customers that help them make better financial decisions based on their unique contexts.

The Next Frontier: From Digital Banks to Smart Banks

While traditional banks are today focused on becoming digital banks, the next frontier, which is already emerging, is the need to transform into smart banks. While digital banks are nothing more than digitally-enabled traditional banks that offer the same old services, smart banks are the banks of the future that offer products and services based on each customer’s unique needs. Such banks will not have a list of services offered but instead will have a list of questions an AI will ask to provide custom-made products and services for each customer. For traditional banks to attain this metamorphosis, they must create a build, buy, adopt or partner strategy that leverages FinTech advances emerging in Silicon Valley, which will afford them the insights and technical capabilities to become the leaders in this bold new world.

Visit Silicon Valley Fintech Startups

Silicon Valley Innovation Center helps financial sector executives experience and connect with the Silicon Valley fintech startup ecosystem through a Navigating FinTech Disruption executive immersion program. As Silicon Valley is a hotbed of fintech innovation, company executives benefit greatly from visiting the innovation hub and interacting with startups like the ones mentioned in this article. Through this immersive experience, executives also gain deep insights into how partnering with Silicon Valley startups can be a game-changer for their businesses.


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