Retail Banking: Revitalised and diverse with technology and people at its heart
Prior to completing this in-depth, future gazing study of the retail banking sector, my retail bank played a simple, functional role in my life. My bank account was a processing centre with my salary coming in one-end and bill payments and other expenses out the other side.
Following this research, I have a genuine excitement about retail banking and what it has to offer me, both now and in the future. Speaking with my occupier research hat on, I am also excited at the contribution retail banking is, and will continue to make, to occupational markets across the UK.
4 minutes to read
Retail Banking is diverse, requiring a range of office space.
When one says retail banking, household names like HSBC and Lloyds jump front of mind. However, far from being a narrow and established group, the industry is a broad church incorporating the big banks, established challenger banks, younger challengers and FinTech companies who either compete and collaborate with banks or offer services such as compliance software to banks.
There is also the prospect of some of the large technology firms and retailers expanding in the retail banking space. Indeed, since the financial crisis in 2008, more than 50 institutions have been granted a banking license in the UK. Each type of organisation within this broad church has nuanced real estate requirements depending upon their scale, maturity and strategic intent.
Landlords and developers need to understand these differences, while the occupiers themselves must align their real estate strategy to specific strategic objectives, changes in the operational environment and business model, and forecast growth trajectory.
By way of example, in Central London, established challenger banks are acquiring expansion space in prime offices within the City Core, while the established retail banks are consolidating portfolios and reducing total square footage whilst simultaneously investing in start-up space often in emerging tech and creative clusters.
The revitalisation and regulation of retail banking is leading to a rethinking of the workplace and a more footloose approach to portfolios.
Post the global financial crisis retail banking activity centred on cost reduction. This included job cuts, the reduction of branch networks and consolidation of office portfolios.
Whilst cost control is still very much a part of decision-making, driving innovation and responding to regulation is now a top priority, leading to growing requirements from retail banks across the UK office markets.
Office space is supporting this new strategic intent, with retail banks searching out workplaces that foster innovation.
Examples include incubators, centres of excellence, accelerators and lab space. Greater focus is being placed on open innovation, particularly between FinTech and larger banks; this along with Government investment and regulatory frameworks is creating a robust UK retail banking and Fintech scene that extends way beyond London.
Retail Banking has technology and people at its heart.
Competitive advantage will also flow to those organisations who gain the trust of the customer and offer the best and most personalised customer-experience.
Our research has shown that winners in this industry will be those that harness the power of technology, streamlining operations via process automation, analysing customer data via artificial intelligence and delivering services and solutions through seamless technology led channels.
Competitive advantage will also flow to those organisations who gain the trust of the customer and offer the best and most personalised customer-experience.
Relocation and fit-out decisions often have these two strategic objectives at their very heart. For example, the growth of digital transformation teams within the established banks is leading to the occupation of dispersed alternative workspaces in Central London.
Examples include HSBC taking space at Blue Fin, situated in what is a creative cluster on the South Bank. Outside of London, UK regional cities are benefiting from a repositioning and repurposing of what have traditionally been regarded as back offices.
Such facilities are being re-worked into large IT centres of excellence, and are becoming increasingly important in the generation of customer insights and thus the creation of more tailored retail banking products.
Implementing new workplace designs, or taking entirely new space, is a chance to re-set the business and espouse customer-centricity, trust, ethics and technological leadership as well as sourcing and securing the right talent.
Finally, a trend to look for is the office space is opening up to customers. With branches being downsized, the office could become the new window shop, a space for customers to interact with the brand, services and solutions.
There are some fascinating changes reshaping the retail banking landscape and influencing the real estate behaviour of market participants.
Our UK retail banking sector series explores this changing dynamic and its real estate implications in greater detail.