This from IBM.  Quite high level but good thought provoking stuff.  Its good in the early stages, but weaker in terms of conclusions.

Conclusions are four strategic imperatives:

Focus on core strengths and partner for everything else

Optimize the potential of each customer relationship

Harness the potential of the workforce through effective performance management

Recognize that technology will be a critical element of success.

Here is the Executive Summary, with pdf for full doc embedded.

Any serious discussion of the future of the retail banking industry eventually raises a basic question: will future customers still need banks? The answer, it turns out, depends on banks themselves. With technology and nonbank businesses providing new options for safeguarding and managing their finances, customers will continue to depend on banks only as long as banks can provide service and value that cannot be found anywhere else.

There are already signs that customers are questioning the ability of banks to look out for their financial well-being. As a result, banks have begun to rethink what, where and how they serve an increasingly informed and demanding customer base. At the same time, a confluence of industry developments, including consolidation, regulation, industry specialization, changing workforce needs and new technologies are putting additional pressure on banks’ operating models and raising questions about traditional strategies for growth and value creation.

Paradox of Banking (pdf)

So, what will the future look like? How will banks continue to grow revenues and remain profitable? What will it take to create and maintain advantage in this highly competitive industry? The future will require superior efficiency and operational excellence from all banks, while industry leadership will be attained by those institutions most adept at harnessing product, service and process innovation to anticipate and meet customer needs. Ultimately, banks will have to focus on their core strengths—those activities in which they excel—and partner with best-in-class specialists for everything else: achieving more by doing less.

Through market research and interviews with industry executives, the IBM Institute for Business Value identified five major industry trends that will impact the retail banking industry:

• Customers redefine the rules of the game
• Universal banks and ultra-focused niche players thrive
• Changing workforce composition dictates new approaches
• Regulatory burdens intensify
• Technology improves inexorably.

In this emerging environment, innovation will take many forms, including advances in products and services, markets, operational processes, customer intimacy, and new channel and diversification strategies. But innovation will not be possible, nor will it have the desired impact, unless banks create the requisite conditions for innovation development. There are four strategic imperatives banks must follow to cultivate innovation and position themselves for sustainable growth:

• Focus on core strengths and partner for everything else
• Optimize the potential of each customer relationship
• Harness the potential of the workforce through effective performance management
• Recognize that technology will be a critical element of success.

By 2015, the results of two prominent competitive forces will be clearly visible: a “middle squeeze” of traditional banks, and the emergence of far greater numbers of industry specialists and non-bank banks—each with distinct competitive growth strategies (see Figure 1).

tags: banking+strategy, ibm, paradox+of+banking