Was 2016 the year that retail banking changed forever?

You can say what you like about 2016 but it’s unlikely to be forgotten. Whereas the memory of most years quickly blur, there’s little doubt that the one just passed will be vividly remembered for a host of different reasons. Politically and culturally more has changed in the past twelve months than has done so in, arguably, the previous decade and no year has been more polarising: for some it’s been a triumph, for others a disaster.

The retail banking world has had its fair share of significant moments in 2016 and has had to move quickly to deal with the initial consequences of the UK’s vote to leave the EU in June. Of course this process has only just begun and banks will be in the vanguard of lobbyists hoping that the government will be able to negotiate a deal that ensures the continuation of passporting rights. Whether this is successful or not remains to be seen and I’ve no doubt that Brexit and its impact will dominate banking discussions for the foreseeable future.

Aside from Brexit, for me the most significant development in retail banking this year has been the reforms announced by Competition and Markets Authority (CMA). There’d been a lot of rumours before the report was published that it was going to instigate the shake-up that had long been wished for by many of the smaller players in the market. It didn’t disappoint. The CMA was clear: the big banks had had it too easy for too long; they’d become complacent and it was customers, both private and small businesses, who were losing out a result. The CMA signalled its intention to break the near-monopoly of the ‘big four’ in the UK by making easier for smaller and newer banks to grow.

There were dozens of articles published at the time in response to the CMA report so I don’t propose to go over old ground but taken together the changes represent a hugely significant shift in the relationship between banks and their customers with, pleasingly, the customer coming out on top. The required implementation of Open Banking by 2018; the increased ease with which customers can shift their accounts between banks; the grace period for overdrafts and the obligation for banks to make public their customer satisfaction data; all of these positive changes mean that 2016 will be remembered as the year in which banks were forced to seriously up their game in terms of customer satisfaction.

If banks needed any reminding of their place in the average customer’s affections, they were given a timely prod in the ribs in July of 2016 when the Institute of Customer Service published their annual index of customer satisfaction. It made for unhappy reading for most in the retail banking sector with banks and building societies dropping down the rankings and only four banks being listed in the top 50 organisations for customer satisfaction. Clearly for the banks, there’s a lot of work to be done in getting their customers onside and, given the CMA changes, this is maybe an opportunity for a challenger brand to steal a march on their larger competitors by excelling at customer happiness?

2016 will not be remembered fondly by customers of Tesco Bank of which a frightening 40,000 were targeted in what the Financial Conduct Authority described as an “unprecedented” cyber-attack. Half of those affected had money taken from their accounts and saw the bank effectively shut down for a day while it investigated, leaving more than 100,000 without banking facilities. Unsurprisingly, many Tesco Bank customers took to social media to express their frustration at what had happened and while not necessarily blaming the bank for the security breach itself, they were highly critical of Tesco’s failure to communicate with them effectively about what was happening. Although we still don’t know who was behind the attack there’s little doubt that it was damaging not just for the Tesco Bank brand but also for the reputation of challengers in the retail banking sector; if the ‘big four’ are seen more secure than their smaller competitors then even poor customer service might not be enough to convince customers to move their accounts.

The theme that unites all these notable happenings in 2016 is of course - the customer. For a couple of years now, the notion of the “empowered customer” has been a regular topic amongst analysts and bloggers but 2016 has been the year when the notion became reality. Everything that’s happened these past twelve months in the retail banking sector, for good and for bad, has been a reminder that successful and effective customer relationships are not just a factor in a bank’s overall success, they are at the absolute centre of it.

As technology continues to evolve, it will undoubtedly help to shape the relationship that banks have with their customers; the right systems will allow banks to have the best possible information about their customers in the right hands at the right moment. If banks get this right, then the effect on customer service could be truly transformative.

Here’s to successful and customer-pleasing 2017. Let’s hope it’s a year to remember – for all the right reasons.