The evolving role of banks in retail
Financial institutions are moving beyond transactions to create strategic partnerships with retailers
As technology revolutionises industries, it is no surprise that it also plays a role in enhancing collaboration between banks and retailers.
With global retail banking revenues growing 8% to more than $3tn in 2023, banks are no longer just facilitators of transactions.
Retailers, facing the pressures of rising operational costs and fluctuating interest rates, are turning to their banking partners not just for financial support, but also for the digital tools and data-driven insights needed to thrive.
In this new era, retailers require real-time visibility into financial operations, seamless payment reconciliation and customised strategies to optimise performance.
As a result, the role of banks has evolved into that of strategic partners, deeply integrated into retailers’ operations, helping them navigate a rapidly changing market.
Streamlining operations
Automation is one example of this.
Traditionally, tasks such as reconciling payments with invoices and managing cash flow required hours of manual effort, leading to inefficiencies and errors.
With the integration of automated systems, such as enterprise resource planning systems connected to bank feeds and payment gateways, transactions are automatically imported and categorised, helping complete processes in a matter of minutes and improving accuracy and efficiency.
Mashreq Matrix, for instance, offers a fully integrated online platform for corporate clients to manage cash and trade activities.
According to McKinsey, automating cash management processes can reduce operational costs by 20%-30% while improving financial reporting accuracy by up to 25%.
For retailers operating across multiple markets, the ability to manage payments, invoices and reconciliation through a single platform is invaluable.
Several banks are taking steps to provide similar automated solutions that integrate with real-time data from various sources, offering retailers full visibility into their financial operations.
This is critical for retailers looking to maintain an edge. Banks are now providing comprehensive dashboards that offer a 360-degree view of financial operations, enabling retailers to assess liquidity, cash flow and working capital across all their markets.
Moreover, predictive analytics offered by banks enable retailers to track cash flow patterns, make informed financial forecasts and quickly adapt to changing market conditions.
This level of visibility not only helps streamline operations, but also equips retailers with the information needed to optimise marketing and inventory strategies based on concrete, real-time data.
Another key driver of the transformation of the banking-retail partnership is the growing collaboration between banks and financial technology (fintech) companies.
McKinsey’s research shows that revenues in the fintech industry are expected to grow almost three times faster than those in the traditional banking sector between 2023 and 2028.
Partnerships with banks are helping retailers access cutting-edge digital innovations without the need for costly in-house development. By leveraging fintech capabilities, banks can offer a wider range of services, from mobile banking solutions to automated reconciliation and buy now, pay later (BNPL) services.
One such example in the UAE, is Mashreq’s collaboration with Noon Pay, the fintech arm of the Noon e-commerce platform, to facilitate seamless digital payments across the region.
This partnership enables retailers to tap into new customer segments as well as providing them with innovative payment options.
BNPL services, for instance, have seen significant growth in recent years, allowing customers to make purchases and split payments into instalments, often with little or no interest charges. This service has been a boon for retailers, driving a 15%-20% increase in sales as more consumers opt for flexible payment plans.
Tailored solutions
Beyond digital tools, banks are also offering retailers tailored financing solutions to help them grow and expand.
Whether it is flexible loans, credit lines or working-capital financing, financial institutions are supporting retailers in their efforts to open new outlets, enter new markets or acquire competitors.
For retailers aiming to scale quickly, these financing options provide the flexibility needed to pursue both organic and inorganic growth strategies.
Multinational retail conglomerate, Lulu Group, used Mashreq’s flexible loans and working-capital financing to rapidly expand its retail footprint across the region.
These financing options enabled the company to open new stores and acquire smaller competitors, driving both types of expansion simultaneously while maintaining strong liquidity.
Alongside financial support, providing clear strategic guidance is key to ensuring the success of growth initiatives.
Banks also offer advisory services to guide retailers through mergers and acquisitions, helping them navigate the complexities of entering new markets.
In addition to providing innovative solutions for day-to-day operations, banks are playing a crucial role in helping retailers streamline their treasury and financial policies.
In the past, many retailers operated with decentralised policies, which varied from one market to another. However, with the introduction of digital platforms and the provision of tailor-made services, banks are helping retailers centralise their financial governance, ensuring consistent policies across all markets.
Ultimately, banks are enhancing their value proposition through user-friendly interfaces, seamless onboarding processes and a high level of operational transparency, all while maintaining robust security standards.
This shift allows them to create value for both themselves and their clients by leveraging the broader financial ecosystem. Starting with simple, scalable solutions, banks can gradually evolve to offer more sophisticated services, ensuring flexibility and growth as the digital landscape continues to expand.
