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Driving Revenue Growth in Retail Banking


Retail banking which is also referred to the client’s banking, is the provision of facilities by a bank to individual clients, rather than to companies, corporations or other banks. Facilities offered include savings & transactional accounts, mortgages, personal loans, debit cards & credit cards. Retail banks, alike to other financial organizations, which need to reconsideration their approaches for revenue growth following the economic crisis in the first decade of the 21st century. Growing traditional sources of revenue from mass-market products such as loans, credit cards, and mortgages have proved difficult in view of consumer caution and a tightening regulatory environment. As an alternative, retail banks are directing client groups with the utmost growth potential, emerging new products & services for those groups & improving standards of customer service. Retail banks achieve scale by capturing market share, merging with or acquiring other banks, and pursuing fast-growing markets. Increasing revenues is essential to this process & strategically significant because it allows banks to compete effectively over the long term. However, challenged with tighter regulatory restrictions & low-interest rates, numerous banks have shifted their focus away from revenue growth, hoping that more favorable regulations & rates will eventually return. Digital channels will be at the heart of this activity, particularly as the improving economy has meant reducing costs and headcount is no longer a priority.

The driving revenue growth in retail banking today is due to mergers and acquisitions, a major innovation and organic growth. These are the best ways to attain rapid revenue growth, but closer analysis shows that they rarely meet expectations and are a poor fit with the growing needs of most banks. M&A and significant innovation are both difficult and demand substantial upfront investments, approval from regulators, high tolerance for risk, and the capacity to take on major new ventures while maintaining and growing the core business. Therefore, a health plan for organic revenue growth is vital. To grow organically, banks must stay current with evolving consumer behavior, a task that presents a unique challenge today, given the fast pace of change. However, there are also more data, tools, and techniques available to banks for developing consumer insights and acting on them.

Banks hold huge amounts of data on their clients, but don’t use the data effectively to recognize new revenue opportunities & by using data to gain a better understanding of individual customers’ needs as a basis for customizing products and levels of service to meet those requirements. That signifies a stronger foundation for raising revenue than general product marketing campaigns. Such banks can hire the database technology to create client profiles that sales & customer-service staff can use to increase revenue & strengthen customer relationships. The client’s profile must comprise a comprehensive record of client’s contacts and inquiries, a list of the products the client already uses & suggestions of additional products that would be of interest to the client, based on the profile.

In the current financial climate, customers remain cautious about taking financial risks, preferring to protect their assets. Retail banks are taking advantage of that caution by offering their wealthier customers a growing range of asset management services to guard investments. To make accessible that facility & maximize revenue potential, banks are gaining investment companies or expanding their own investment activities. Retail banks aim to grow revenue by expanding their customer base, particularly in the younger age group. The requirements of younger consumers will deliver the next major revenue opportunity for retail banking. Due to which, banks are developing technology-based services that are aligned to the lifestyles of their younger consumers. Amongst preliminary initiatives are mobile banking services for smartphones, real-time text alerts on account status, and video links to financial advisers. Training and motivating branch staff to sell products and services to customers is a significant factor in growing revenue. Branch operator has a present association with clients, but that relationship has traditionally been based on service rather than sales. By providing branch staff with product information, profiles that identify customers’ product needs, and incentive programs to encourage selling, banks can use existing relationships to increase revenue per customer.

How to Increase the Revenue Growth in Retail Banking?

One of the preferred approaches for increasing revenues is by increasing loans to borrowers such as home buyers, real estate developers & credit card users, because loan growth is a key metric used by investors to examine banks. The increasing loan balances, banks are careful that loans encounter the bank’s internal credit requirements & aren’t too risky so that the default rate of the banks’ loan portfolios doesn’t increase. This can be problematic, as the lending market is highly competitive. Competition creates from together small, local banks with deep roots in the local economy & from much larger national banks with greater access to capital.

Banks thus require reflecting intensely on their present capabilities, culture & recent performance before they aggressively pursue revenue growth. To successfully build revenues over the long term, managers will also require to closely align strategic planning & growth agendas with their institution’s core beliefs & capabilities. For banks, regardless of the revenue paths, they choose, driving organic growth will be vital for long-term success.

Banks often invest a share of their earning assets in Treasury bills, which are considered to be high-quality, liquid investments, usually healthy economy & reputation within the capital markets. Treasury bills are another form of loans, but instead of lending to companies or individuals, the bank is lending to the federal government and receives interest income in return. Banks can move their Treasury bill holdings to longer-term Treasury bills, which pay advanced interest rates. An additional aggressive method is to change assets typically invested in Treasury bills to higher-yielding loans destined for companies and individuals.

The banking industry has extended recognized the necessity to sell more services to existing customers. Banks usage a variety of tactics to upsurge revenues by providing other banking services in excess of the traditional servicing of loans. Instances include ATM fees, applying new service fees on checking & savings accounts & trust management services. Thus bigger banks that archaeologically worked wholly as retail banks are increasingly earnings larger portions of operating earnings from investment banking divisions.

Banks can upsurge growing through external measures such as by opening new branches & expanding into new markets. The additional common process includes obtaining other banks in order to gain market share, which also results in higher revenues. The advanced banks are that turn new regulatory necessities into opportunities to increase revenues by passing regulatory costs plus associated fees onto customers.

Banks thus require reflecting intensely on their present capabilities, culture & recent performance before they aggressively pursue revenue growth. To successfully build revenues over the long term, managers will also require to closely align strategic planning & growth agendas with their institution’s core beliefs & capabilities. For banks, regardless of the revenue paths, they choose, driving organic growth will be vital for long-term success.

Also Read: Foreign Exchange Regulations

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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