Key Market Forces Driving Change in Retail Banking


Retail banking is in the throes of the most significant transformation since its creation in the 17th century.

We believe there are 10 key market forces driving change in retail banking.

Download this interactive ebook to discover the key market forces and how they will impact the UK financial services ecosystem.

To Digitise or To Digitalise?

Digital Transformation

5 key considerations for retail banks as they transform

To digitise or to digitalise? That’s the big question for 2021 and beyond.

Retail banking is in the throes of the most significant transformation since its creation in the 17th century. Technology is the main driving force behind the change, influencing consumer behaviours and expectations, as well as shaping a new regulatory agenda.

Technology is enabling the most sophisticated use of data ever seen, automating processes, replacing human capital and dramatically enhancing speed and customer experience. The digital revolution challenges the core of traditional banking models and demands all incumbent banks reconsider their strategies to ensure a sustainable future.

How will market forces influence the future of retail banking?

Consumers will be at the heart of the transformation in retail banking, resulting in a polarisation of the current market into platforms versus non-platforms. Competition will continue to intensify. We see the biggest threat to incumbent banks as the emergence of the platform business model. If incumbents are unable to digitalise, we expect their future growth to be under pressure.

What is the difference between Digitisation and Digitalisation?

To digitise

Taking an existing process and enabling some or all of it to be completed online. For example, instead of a document being sent by post, it’s emailed to the recipient.

To digitalise

A complete rethink of all processes. Starting again to ensure it’s built digitally native, with the customer at its centre. For example, instead of a request for a change to an account being made by emailing a customer service address, the customer can make that change themselves on a customer portal.

How can retail banks prosper?

Following a decade of historically low interest rates and in a post-pandemic world where rate increases will be few and far between, the retail banking business model is under threat. Net interest income continues to be suppressed, requiring banks to deliver major transformation in order to reduce the cost to income ratio and enhance return on equity. Arguably of greater concern is the imminent threat to the traditional banking model from the digital revolution.

Most traditional organisations assume their journey is complete when they’ve replaced legacy and manual paper-based processes with digital functionality.

However, that is only ‘digitisation’ and not true ‘digitalisation’. Digitalisation involves an outside in approach as well as an inside out approach. Only then can lenders and retail banks achieve straight through processing for smooth and speedy customer journeys.

The bank should identify the customer/user journeys involved and develop responsive user interfaces that deliver superior omni-channel customer experiences.

Why banks need to evolve

Sustainability and survival requires a rethink of the core business model and an even greater wave of transformation to reshape the business accordingly. Whilst digitising legacy processes will help with the short-term agenda, it will not be enough to secure long-term success. To thrive in the future, banks will require a shift in mindset and focus towards digitalisation.

Retail banks need to consider these five issues when they plan out their transformation:

  • Consumer centricity

As customer service has evolved in recent times, we’ve arrived at a point where customers are the ones building their own journeys. Gone are the days of pre-determined journeys that look the same for all consumers. The customer decides what happens, when, and where.

When planning out digital transformation, only true digitalisation will enable such personalisation and self-service.

  • Facilitating remote working

While many people will undoubtedly be returning to their offices in the coming months, many won’t. Employers may choose to adopt a more flexible approach, but we can safely say that the 2020 pandemic has shifted attitudes to the office.

To fully support the remote working model, employees need to be given the right tools and technology to be able to carry out their tasks as they did before, or even better.

Think about conveyancers and local authorities who are critical for the smooth running of the house move process. These are traditionally labour intensive, paper-based and slow processes compared to other industries. The shift to home working in these fields can only be successfully achieved if the customer journey is fully digitalised. Otherwise home movers face delays and poor experience.

  • Zero-based approach

Digital banks are reimagining the banking business model, developing new digital processes that facilitate speed and improve customer experience. This is the start of digitalisation and is set to change the way banking works in the future. In particular, digitalisation of bank processes end-to-end and front-to-back will maximise impact.

Many incumbent banks are more focused on digitising existing processes. Taking a zero-based approach to deliver great customer experiences is more challenging when starting from a position of entrenched legacy. Such an approach enables the testing of new ideas in the real world, without disrupting the heritage organisation, which serves to further accelerate digital change in the sector.

  • Audit your processes

Whether to digitise or digitalise depends on individual processes. It needs to be appropriate for each transaction type.

Some customer journeys may favour ‘digital optimisation’ over complete transformation. The choice of approach depends on the consumer profile, the proposition, the potential return on investment, as well as future strategies. While some banks might choose a fully digitalised strategy, many will take a hybrid approach.

  • Don’t forget the Human

When someone’s in a vulnerable situation it’s important that retail banking has the robust controls and governance in place to ably support them in their time of need. Super slick apps and bots go some way to providing great customer experience, but at times only a human will do, to provide empathy and expertise not yet built into the technology.

In our research we found that the youngest generations in the financial lifecycle are craving human-to-human support when it comes to the big financial transactions and decisions. They are often reaching such milestones for the first time, so that reassurance from an experienced human is welcome, and necessary.

Customers want to have completely personalised experiences. There’s no way a retail bank can facilitate such service without digitalisation. As Martin Fleming, Mortgage Transformation Director of Lloyds Banking Group said, “Technology doesn’t provide the Wow Factor. Personalised experiences do.”

All digitalisation is designed and implemented by humans. So, when a service is developed to be digital-first, it’s been made that way by a human. Proper investment in those humans is critical to the success of digitalisation. You can have access to all the latest tools, but if the workforce deploying those tools aren’t motivated, well trained and focused, the outcome is never going to be successful.

In Summary

Finding the right balance of digitalisation to align with their business priorities, strategy and culture is critical to achieving success. There’s no “one size fits all” solution. When working with a digital transformation specialist, they should get to know your business inside out to create a bespoke approach to the banking evolution.

The Future of the UK Financial Services Ecosystem

Digital Transformation Lending Mortgages

There’s no doubt we’re on the cusp of a major shift in financial services in the UK. In Target Group’s latest white paper, Stuart Anderson, Chief Commercial Officer takes a close look at how the UK’s Financial Services are evolving, and what the future might look like for banks, building societies and their customers.

In the white paper you’ll discover:

  • The rise of the ecosystem
  • The propagation of platforms
  • The ecosystem components
  • An analysis of which path to take

Use this quick form to get the white paper and be prepared for change, and lots of it.

Target Group and Perenna team up to transform the mortgage process

Mortgages Press Releases

We’re delighted to announce that our Mortgage Hub has secured its first client, the fintech mortgage lender, Perenna. The partnership, which is set to launch later this year, will see the Mortgage Hub powering Perenna’s mortgage offering; allowing it to provide decisions-in-principle within 20 seconds.

Perenna will soon launch a range of flexible 30-year long-term fixed rate mortgages in the UK, providing consumers with the option to lock in their mortgage interest rate for several decades. This is set to create significant disruption in the market, as borrowers will no longer have to repeatedly refinance to remain on a competitive mortgage deal. They will also benefit from certainty over their mortgage repayments for the lifetime of their loan. Thanks to its integration with the Mortgage Hub, Perenna will also be able to provide prospective borrowers with a decision-in-principle within seconds, ushering in the next phase in the mortgage application journey.

Leveraging Open Banking and API technology, the Mortgage Hub is making the cumbersome mortgage offer process far more efficient, by eliminating the need for repetitive data entry. Its approach means borrowers can benefit from a decision-in-principle in just seconds. The software launched earlier this year and has the aim of providing agility and increasing accuracy to help improve the user experience.

Stuart Anderson, Chief Commercial Officer at Target Group says:

“Moving house is a priority for many following the pandemic, but for most, the mortgage application process is painful, with the requirement to provide the same information multiple times. Slow decisions are dogged by legacy technology – it’s time that changed.”

Anderson continues:

“Our partnership with Perenna will transform the market for the better, providing speed, flexibility and certainty to both intermediaries and consumers – making the process not only more efficient, but more enjoyable too.”

Colin Bell, Chief Operating Officer at Perenna adds:

“Perenna is bringing flexible long-term fixed rate mortgage to the UK to help create a nation of happy homeowners. Our mortgages offer borrowers better terms than short-term alternatives, which leave them exposed to sudden repayment increases and high refinance costs. Our partnership with the Mortgage Hub marks another exciting landmark in our journey to market and will see us providing customers with near-instant decisions about their borrowing options.”

About Perenna

Perenna is building a mortgage lender with a customer-first mindset. Our ambition is to provide fair and flexible mortgages that meet the needs of borrowers across the UK.

Whether they are first-time buyers, homemovers, want to remortgage or want to borrow in retirement, our mission is to create a nation of happy homeowners by making mortgages more accessible through innovation. Where everyone who can afford a home can get one and where borrowers never have to worry about refinancing or interest rates rising ever again.

The Mortgage Hub Highly Commended in Mortgage Finance Gazette Awards

Mortgages Press Releases

We are proud to announce that Target’s Mortgage Hub has been given the accolade of Highly Commended in the Innovation Award for Technology Providers in the 2021 Mortgage Finance Gazette Awards!

These annual awards celebrate the best of the industry, and are a showcase for all the latest technological innovations shaping mortgages today.

In a virtual awards ceremony held on 18th November 2020, the winners and runners up were announced, highlighting the real breadth and depth of innovation in the marketplace, and giving a glimpse into the future of mortgages.

About the Mortgage Hub

The Mortgage Hub is a fundamental rethink of a process that has remained pretty much unchanged since the 1930s. This is the first mortgage platform to have been designed around the people, not the process. It’s centrally focused on customer experience, with technology as an enabler.

Simply put, The Mortgage Hub is unique. Its combination of broker CRM integration, customer portal and broker management system, all driven by Open Banking integrations, makes it the must-have tool. While other platforms have treated old processes with “digital lipstick”, The Mortgage Hub is truly accelerating much needed change in a complex and outdated environment. It’s customer-centric, designed by behavioural scientists and driven by UX and CX, making it intuitive to use.

We haven’t developed The Hub alone. We’ve brought consumers, brokers and lenders with us throughout design, development and testing, rather than making assumptions based on what’s happened in the past.

And you can see the rest of the award winners Mortgage Finance Gazette.

Target Group hires mortgage expert Katie Pender to drive disruption in mortgage market CX

Mortgages Press Releases

Target Group, the financial services outsourcing and software provider, has today announced the appointment of Katie Pender as its new Senior Solutions Lead. Reporting into Chief Commercial Officer, Stuart Anderson, Pender will be responsible for applying her experience and Target’s technical, operational and digital capabilities to drive disruption and innovation in the mortgage market, focusing primarily on enhancing customer experience.

Previously Head of Mortgage Operations at Capita and responsible for service and product development at Computershare, Pender has a wealth of mortgage market and outsourcing experience. A great deal of her work over the past decade has focused on establishing new entrants in the mortgage market, and she hopes to bring this unique perspective to Target Group.

Katie Pender, Senior Solutions Lead at Target Group says:

“I’ve worked in the industry for 15 years and have followed the developments at Target Group. Even from a distance it has been clear the company is growing and diversifying its client base in a period when other providers are doing the opposite. The appointments of my former colleagues Marcella Rich and Stuart Anderson to senior roles also signified to me the strength of the leadership team at Target Group and so now the opportunity has arisen to join the company, I’m pleased to say I’ve jumped at the chance.”

Pender continues:

“I am a firm believer that disruption will occur in every industry and my new role at Target provides me with an excellent opportunity to drive that disruption in the mortgage industry. Target has ambitious plans to introduce a new offering to the market by leveraging its technical, digital and operational capabilities and I want to be at the forefront of that.

Pender concludes:

“For too long the mortgage transaction has remained unchanged and behind the times. Whilst technology has enabled some parts of the process to become slightly more efficient the experience for both the broker and customer remains largely the same as it has been for decades. Our challenge is to take the mortgage customer experience into the future and Target is the right place for me to address that challenge. I’m looking forward to getting started.”

Stuart Anderson, Chief Commercial Leader at Target Group says:

“We are delighted to welcome Katie on board at Target Group as she brings a huge amount of knowledge and expertise that will help enhance the experience we offer to clients. We have ambitious plans for the mortgage market and the business will benefit greatly from having someone of Katie’s calibre spearheading activity. I look forward to working closely with Katie again to drive innovation in the market and deliver new solutions for our clients.”

Katie Pender, Senior Solutions Lead