We are seeing a generational level of change. The transformation of the whole sector is going to look different in a couple of years' time. Now is the time banks really need to face up to legacy technology issues that are constraining their propositions
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Retail banking experts Claire Tracey and Suzy Torta share insights into the latest banking trends, drawing parallels between the focus of European and Australian banks on artificial intelligence (AI), technology transformation, and customer experience innovation. They highlight the need for incumbent banks to modernize their legacy technology systems in order to compete with neobanks and retail challengers.
- About This Video
- Transcript
Retail banking experts Claire Tracey and Suzy Torta share insights into the latest banking trends, drawing parallels between the focus of European and Australian banks on artificial intelligence (AI), technology transformation, and customer experience innovation. They highlight the need for incumbent banks to modernize their legacy technology systems in order to compete with neobanks and retail challengers.
Suzy Torta
Hi, I'm Suzy Torta, a principal in the Oliver Wyman Sydney office, and I'm joined by Claire Tracey, a leader in our European retail banking space. Claire, it's great to have you here in Sydney.
Claire Tracey
It's wonderful to be here.
Suzy
One of the things that we've brought you to Sydney to do is talk to some of our clients about what the biggest market shifts you're seeing in European retail banking are. Can you share with us some of those big themes?
Claire
Some of the big themes we're doing a lot of work on at the moment in Europe are balance sheet management. We're doing a lot of thinking about technology — not only radical simplification, but also thinking about ways to deploy new technologies, new ways of working in technology, and new relationships between technology and the rest of the business. The perennial topic of cost and efficiency is obviously huge, covering many different aspects, including artificial intelligence (AI), and to what extent AI will enable people to reduce costs, and to what extent the cost reductions will fall into the purview of the incumbent banks or somewhere else.
And then, interestingly, the distribution strategy. I think banks are really having to think through the multiplicity of channels when you start to think about embedded services facing many different types of ecosystems, platforms, and external providers. Then, you still have your telephony service, your branch network. What is the future of all of that? That's a very big theme.
And then finally, and really interestingly for me, I think we're going to see quite a lot of propositional change over the next year or so. I think many banks are really starting to think about what value they offer to customers. What do the products look like, and what are different ways that they could deliver the products in a more innovative way that would allow them to compete with neobanks and, frankly, with all of the other different kinds of retail propositions available?
Suzy
It's really interesting to see the parallels between what you're seeing in European banking and what we're seeing here. Definitely, that theme around capital efficiency and capital culture. It is coming through quite strongly, but also around how banks are serving customers in a more personalized way. I don't know if you want to share any perspectives around that kind of shift towards more customer-centric or personalization around product offering.
Claire
I guess there's a sort of ‘here and now’ piece, and then there's a future piece. I think the future piece has come in some areas and is coming rapidly in others. The concept of agentic AI, the concept of actually being able to deliver to the mass market the kind of customized service that you can usually only get at the top end of the affluent. Previously, [the customization] was done by people; now you can really start to try to deliver a much more responsive approach through AI. I think there's going to be a lot coming there.
Suzy
It feels like all roads lead back to AI and technology transformation. Is there any advice that you have for our local banks around what you've seen be successful in deploying AI at scale across retail banks?
Claire
I think we've gone through the phase where everyone is wildly making lists of use cases. We're now really making sure that you have the infrastructure to deploy AI effectively, and we're seeing some very interesting conversations with boards around the base layer of technology that you can use and the data availability that you can actually use to build your AI applications on. Frankly, if you are building on sand, that's problematic. We are seeing a sort of resurgence in replatforming — getting off legacy tech, rationalizing legacy tech in order to facilitate some of those kinds of applications.
The real thing about AI, I think in many ways, is to find genuine business problems where they are amenable to an AI solution as opposed to, okay, well, we need to be doing something on AI, so let's just invent a use case. I think that's really where you get the impact, and I think that's going to be a fascinating next 12 to 18 months.
Suzy
What is your top takeaway for banking executives watching this?
Claire
I do think we are seeing a generational level of change. The transformation of the whole sector, the services, and the propositions delivered to customers is going to look very different in a couple of years' time. Where there are legacy technology issues that are constraining the incumbent banks, I think now is the time that they really need to face these.
There are a couple of European countries where the neobanks were nowhere two or three years ago, and they have just absolutely taken share. Their ability to offer very slick propositions can really be a threat in an economy or in a country where the incumbent banks are struggling to provide the sorts of services that customers demand because they're held back by their legacy technology. So, really thinking about whether your legacy tech is constraining the sorts of propositions that you can offer, now is the time to face into that.
We are seeing new technologies that make transformation and technology easier. We are seeing new ways of working in technology and new ways of collaborating between tech and the business that have made the sorts of changes that were a huge effort in the past, a somewhat smaller effort, but I think the time to face into that is now.
Suzy
What does that mean in terms of the kind of talent value proposition banks need to be offering to attract and retain strong technologists?
Claire
Yeah, I mean, it's a huge challenge. We see banks trying to face it in many different ways. Obviously, there's the kind of great hope that some of the transformations in technology itself will enable people who don't have a huge amount of coding experience to at least do some of the basic work. There's a lot of focus on how we can train up our people, et cetera. Ultimately, it is about providing the environment, providing the tools, providing the culture, and providing the operating model that is going to attract both technology talent and talent in general.
Suzy
It's really great to see the parallels between the work that you're doing and some of the work that we're seeing across the major banks here. Thank you so much, Claire, and enjoy the rest of your time in Sydney.
Claire
Oh, thanks very much. It's lovely to be here and on such a beautiful day.
This transcript has been edited for clarity.
Retail banking experts Claire Tracey and Suzy Torta share insights into the latest banking trends, drawing parallels between the focus of European and Australian banks on artificial intelligence (AI), technology transformation, and customer experience innovation. They highlight the need for incumbent banks to modernize their legacy technology systems in order to compete with neobanks and retail challengers.
Suzy Torta
Hi, I'm Suzy Torta, a principal in the Oliver Wyman Sydney office, and I'm joined by Claire Tracey, a leader in our European retail banking space. Claire, it's great to have you here in Sydney.
Claire Tracey
It's wonderful to be here.
Suzy
One of the things that we've brought you to Sydney to do is talk to some of our clients about what the biggest market shifts you're seeing in European retail banking are. Can you share with us some of those big themes?
Claire
Some of the big themes we're doing a lot of work on at the moment in Europe are balance sheet management. We're doing a lot of thinking about technology — not only radical simplification, but also thinking about ways to deploy new technologies, new ways of working in technology, and new relationships between technology and the rest of the business. The perennial topic of cost and efficiency is obviously huge, covering many different aspects, including artificial intelligence (AI), and to what extent AI will enable people to reduce costs, and to what extent the cost reductions will fall into the purview of the incumbent banks or somewhere else.
And then, interestingly, the distribution strategy. I think banks are really having to think through the multiplicity of channels when you start to think about embedded services facing many different types of ecosystems, platforms, and external providers. Then, you still have your telephony service, your branch network. What is the future of all of that? That's a very big theme.
And then finally, and really interestingly for me, I think we're going to see quite a lot of propositional change over the next year or so. I think many banks are really starting to think about what value they offer to customers. What do the products look like, and what are different ways that they could deliver the products in a more innovative way that would allow them to compete with neobanks and, frankly, with all of the other different kinds of retail propositions available?
Suzy
It's really interesting to see the parallels between what you're seeing in European banking and what we're seeing here. Definitely, that theme around capital efficiency and capital culture. It is coming through quite strongly, but also around how banks are serving customers in a more personalized way. I don't know if you want to share any perspectives around that kind of shift towards more customer-centric or personalization around product offering.
Claire
I guess there's a sort of ‘here and now’ piece, and then there's a future piece. I think the future piece has come in some areas and is coming rapidly in others. The concept of agentic AI, the concept of actually being able to deliver to the mass market the kind of customized service that you can usually only get at the top end of the affluent. Previously, [the customization] was done by people; now you can really start to try to deliver a much more responsive approach through AI. I think there's going to be a lot coming there.
Suzy
It feels like all roads lead back to AI and technology transformation. Is there any advice that you have for our local banks around what you've seen be successful in deploying AI at scale across retail banks?
Claire
I think we've gone through the phase where everyone is wildly making lists of use cases. We're now really making sure that you have the infrastructure to deploy AI effectively, and we're seeing some very interesting conversations with boards around the base layer of technology that you can use and the data availability that you can actually use to build your AI applications on. Frankly, if you are building on sand, that's problematic. We are seeing a sort of resurgence in replatforming — getting off legacy tech, rationalizing legacy tech in order to facilitate some of those kinds of applications.
The real thing about AI, I think in many ways, is to find genuine business problems where they are amenable to an AI solution as opposed to, okay, well, we need to be doing something on AI, so let's just invent a use case. I think that's really where you get the impact, and I think that's going to be a fascinating next 12 to 18 months.
Suzy
What is your top takeaway for banking executives watching this?
Claire
I do think we are seeing a generational level of change. The transformation of the whole sector, the services, and the propositions delivered to customers is going to look very different in a couple of years' time. Where there are legacy technology issues that are constraining the incumbent banks, I think now is the time that they really need to face these.
There are a couple of European countries where the neobanks were nowhere two or three years ago, and they have just absolutely taken share. Their ability to offer very slick propositions can really be a threat in an economy or in a country where the incumbent banks are struggling to provide the sorts of services that customers demand because they're held back by their legacy technology. So, really thinking about whether your legacy tech is constraining the sorts of propositions that you can offer, now is the time to face into that.
We are seeing new technologies that make transformation and technology easier. We are seeing new ways of working in technology and new ways of collaborating between tech and the business that have made the sorts of changes that were a huge effort in the past, a somewhat smaller effort, but I think the time to face into that is now.
Suzy
What does that mean in terms of the kind of talent value proposition banks need to be offering to attract and retain strong technologists?
Claire
Yeah, I mean, it's a huge challenge. We see banks trying to face it in many different ways. Obviously, there's the kind of great hope that some of the transformations in technology itself will enable people who don't have a huge amount of coding experience to at least do some of the basic work. There's a lot of focus on how we can train up our people, et cetera. Ultimately, it is about providing the environment, providing the tools, providing the culture, and providing the operating model that is going to attract both technology talent and talent in general.
Suzy
It's really great to see the parallels between the work that you're doing and some of the work that we're seeing across the major banks here. Thank you so much, Claire, and enjoy the rest of your time in Sydney.
Claire
Oh, thanks very much. It's lovely to be here and on such a beautiful day.
This transcript has been edited for clarity.