With the seismic shifts in retail banking due to the pandemic, banks want to understand their place in this uncharted environment. They are looking for advice since prior standings are no longer applicable. To address this, we are pleased to share some highlights from the third Retail Banking Excellence Benchmark (REBEX by BCG) Pulse survey.
The survey was conducted from 12,000 retail banking customers in 16 countries globally during October and November 2020. The findings focus on the latest trends shaping retail banking, indicating how changes over the past year may form the basis of strategic planning for the longer term.
1. White Paper
REBEX Pulse: COVID and the Bionic
Retail Bank
By Thorsten Brackert, Mindy Hauptman, Byron Marshall, Holger Sachse, Bjorn Schwarz, Aldo
Tolentino & Monica Wegner
February 2021
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BOSTON CONSULTING GROUP February 2021
he COVID-19 pandemic has been a gamechanger for retail banking, with customers
around the world moving more of their financial lives online. Digital has surged in
popularity, and online and mobile have become the preferred channels for many
aspects of everyday banking. Still, for a large number of customers, face-to-face interactions
remain important, particularly when it comes to big financial decisions. This evolving
landscape creates an opportunity for banks to create a “bionic” customer proposition,
combining the best of face-to-face, digital, and remote — at a time in which trust in banks is
rising.
These are among the key findings of BCG's third Retail Banking Excellence Benchmark
(REBEX) Pulse survey of 2020; a comprehensive poll of 12,000 retail banking customers in
16 countries globally.1 The survey, conducted in October and November, provides context
around the latest trends shaping retail banking, and shows how changes over the past year
will play a powerful role in shaping the industry’s future.
COVID-related restrictions have been significant catalysts for accelerating shifts in customer
behavior. With crowded environments carrying new risks, a third of respondents say they
do not feel comfortable visiting banks in person. This has increased pressure on branch
networks, many of which were already challenged by declining footfall and high relative
costs. Looking forward, 35% of customers expect to make less use of branches, while 31%
say they will use online and mobile banking channels more — a higher proportion than in
our April survey.
Still, branches remain a vital part of the equation. Despite the pandemic, 73% of consumers
visited a branch at least once in the past six months, and 29% would switch if a convenient
branch were not available. When it comes to complex financial decisions, relating to
mortgages and investments for example, only around a half of respondents would be
comfortable with remote only or hybrid face-to-face/remote interactions.
Given these contrasting dynamics, retail banking decision makers must tread a fine line —
continuing to ramp up digital but leveraging the best of branches to meet customers’ needs.
In the wake of the pandemic, we see four strategies to keep pace with current and future
trends:
1 Selected findings from this survey have been included in the BCG report “Global Retail Banking 2021: The Front-to-Back
Digital Retail Bank” although the geographies covered vary between the two documents, so numbers are not always
exchangeable.
T
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• Continue to build the “mobile first” experience. Capitalize on COVID-related
behavior shifts, boosting functionality and adding human elements to guide
customers on their end-to-end journeys.
• Revisit the role of branches. Focus on brand presence, customer acquisition, and
advisory for complex needs — potentially with a reduced footprint.
• Invest in remote advisory. Elevate remote channels so they become a viable
alternative to, or supplement to, face-to-face interactions.
• Reinforce efforts around data and cyber security. Invest in capabilities to foster
more trust in digital and remote channels.
Through initiatives in these areas, retail banks can align themselves more closely with
evolutions in customer behavior. Thereafter, qualities that will divide the best from the rest
include fast, fact-based decision making and effective execution front-to-back.
The Accelerating Shift to Digital and the Role of Branches
It is a given that a seamless digital experience and digitized back office are table stakes in
most retail banking markets. For many incumbents, therefore, the key strategic uncertainty
relates to the size and role of physical networks. The non-negotiable facts are that branch
footfall and ATM use are declining in many countries — albeit faster in some than others. At
one end of the spectrum are China and Brazil, where almost half of customers expect to visit
branches less after COVID, BCG research shows. At the other extreme are the US and Italy,
where customers expect their usage to remain relatively high. Even so, nearly one in five
customers in these markets says that they will visit branches less often in future.
For simple banking activities, the shift to digital is almost complete. While some customers
continue to prefer face-to-face interactions, most are now at ease checking balances, paying
bills, and transferring money online. (See Exhibit 1).
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Virtual channels are becoming more popular, with about half of consumers, mainly in mature
markets, preferring either fully remote or hybrid remote/face-to-face engagement for more
complex needs. The trend is similar across mortgages, small business loans, and investments.
Some 27% would prefer to meet with a mortgage advisor remotely and 21% favor a
combination of in-person and remote channels. Just 6% say they are happy to go fully digital.
Still, satisfaction levels are slightly lower for channels that mix digital with human services
than for digital channels more generally. Some 60% of customers express satisfaction with
video chats, compared with 83% that are satisfied with online banking and 69% that are
satisfied with branches. BCG analysis suggests this may be impeding uptake of remote
channels for more complex needs. (See Exhibit 2).
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Still, branches are set to remain an important channel, with more than 40% of customers
saying in-branch meetings are their preferred option for big financial decisions. (See Exhibit
3). Indeed, some 65% of respondents say they continue to use branches “sporadically” and
8% use them “frequently” or even “daily.” Two thirds of those planning to visit a branch in
the next six months will do so even if social distancing requirements remain in place.
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The survey also reveals a strong association between branch presence and customer loyalty.
In short, customers like to see the brand on the high street. Indeed, around 18% of customers
say they would switch banks based on branch locations.
Continuing demand for branches provides decision makers with food for thought. Factors
cited as intrinsically linked to branch use include deposits and withdrawals, the desire to
speak with a human being, and the perception that digital channels cannot serve a specific
need. Of course, cash is becoming less ubiquitous in general, with 39% of respondents using
less cash since the start of the pandemic. As engagement with online and third-party apps
grows, it is reasonable to expect branch visits for cash-based transactions to diminish. With
that in mind, there is an imperative for banking leaders to find the right balance between
physical and digital channels, and to ensure that the branches they retain are equipped to
service customers’ real needs.
Finally, while branches are important relationship drivers, the most relevant factor when it
comes to switching decisions is pricing — cited by 39% of respondents as the primary
consideration (compared with 18% for branches). New entrants often build market share
by outcompeting on rates, and incumbents should not underestimate these strategies,
particularly given customer’s increasing confidence in the security of digital-only
propositions (and the safety belt of government deposit guarantee schemes). Incumbent
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banks therefore must remain competitive on pricing, ensuring that the deals offered
elsewhere are not a significant cause of attrition.
Rising Trust
The good news is that trust in banks has risen during the pandemic. Banks are seen as honest
brokers that provide excellent digital services, are reliable on data security, and are
transparent in their communications. Notably, trust has risen slightly more for online
players than for incumbents, but probably from a lower base. More than 20% of customers
across countries trust their bank more since the start of the crisis, with respondents in 15 of
16 countries reporting higher levels of trust. The outlier is the Netherlands, where recent
money laundering and tax-related controversies may have played a role. Perhaps
surprisingly, the biggest gains in net trust (gains in trust net of reductions) are reported
among younger customer cohorts, with increases of around 15% in the under-45 age group
since the beginning of the crisis. (See Exhibit 4).
Still, banks should not rest on their laurels — while a significant proportion of customers
trust their banks more since the start of the crisis, a smaller but still material proportion
trust their banks less. In other words, polarization of views has increased.
Despite rising aggregate levels of trust, overall loyalty to banks remains fragile, reflecting the
disrupted state the world finds itself in. Some 23% of customers say they are highly or
somewhat likely to switch providers in the next six months, with customers in southeast Asia
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most likely to jump ship. (See Exhibit 5). The least dynamic market in terms of customer
switching is Hungary, with just 10% of customers eyeing alternative providers. The flightiest
customers tend to be younger (~35% from 18 to 34 years) and have higher incomes (32%).
A similar proportion – around one in three – say they would be comfortable making deposits
in digital banks. Indeed, among the most enthusiastic groups, digital is seen as almost equal
to traditional banks in terms of safety and security.
Implications for Banks
In contemplating the shifting landscape, retail banking leaders need to take multiple factors
into account, not all of which point in the same direction. While COVID has accelerated the
move towards digitization, the branch continues to play an important role in the minds of
customers, both for transactions and on an emotional level. Branches are seen as a
reassuring presence, and customers in some cases are willing to forego convenience to
maintain a branch-based relationship (the “shop-window effect”). Given that banks have
made considerable efforts rebuilding trust since the financial crisis, and that competition
from online-only is increasing, these are advantages they are unlikely to want to give up
easily.
In addition, the current challenging economic environment suggests customers may have a
greater need for financial advice. Banks are well placed to meet these needs if they offer the
right products and channel mix.
We see four strategic priorities:
Continue to build the “mobile first” experience. Digital should be seen as a no-regret
investment and a wave of innovation within and outside the industry means that incumbents
cannot afford to wait. Instead, they should continue to build out a “mobile first” experience.
That means ensuring that customers have access to all their information on their phones and
can execute the same transactions via mobile as online. Banks should also move toward
conducting more sales through their apps. It makes sense, where possible and viable, to
inject digital channels with human characteristics, for example through real-time
connectivity to relationship managers, who can guide customers through the digital journey.
Revisit the role of branches. The dominant trend in recent years has been to cut branch
numbers with a view to creating efficiencies. The next step requires a more strategic
approach, in which remaining branches are transformed into spaces that offer customers
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experiences that go beyond digital. With that in mind, branches need to combine experiential
excitement with the ability to deliver on interaction, education and advice. It may be that
footprints should be recalibrated, remembering the important role that branches play in
marketing, and it makes sense to consider alternative formats. Potential options include
locating branches in high-traffic shopping centers or retail stores, creating pop-ups, or taking
out the cash element — which is expensive due to security requirements. Branches can then
be made more comfortable and accessible, incorporating digital tools and visualizations to
support customers in their more complex needs. These full service “hub” formats can be
complemented with smaller “spokes” to provide access via self-service or other cost-efficient
means.
Invest in remote advisory. Given relatively low levels of satisfaction with remote advisory,
banks may wish to invest in that aspect of the business, helping customers come to terms
with the practicalities of video, and working out how to add value. It may be that new
relationship manager playbooks are required, or that more resources can be made available
to ensure the customer is able to complete the journey, including documentation, seamlessly.
Reinforce efforts around data and cyber security. Trust levels are high, but just one major
cyber incidence (even at another bank) could create uncertainty around digital propositions.
Given the increasingly sophisticated abilities of bad actors, investment in cyber tools and
training are likely to be no-regret moves. They will also serve to reinforce trust and create
competitive differentiation.
***
There is no blueprint for developing a multi-channel customer proposition, and individual
banks will need to tailor their strategies to their individual circumstances. However, these
efforts, and engagement with shifting consumer appetite, are likely to be the keys to success
in a much-changed and uncertain post-COVID landscape.
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Thorsten Brackert
Mindy Hauptmann
Byron Marshall
Holger Sachse
Bjorn Schwarz
Aldo Tolentino
Monica Wegner
Thorsten Brackert is a director and partner in the Frankfurt office of the Boston Consulting
Group. Mindy Hauptman is a partner and associate director in the firm’s Philadelphia office.
Byron Marshall is REBEX director for North America in BCG’s Chicago office. Holger Sachse
is a managing director and senior partner in the firm’s Dusseldorf office. Bjorn Schwarz is
REBEX director for EMEA in BCG’s London office. Aldo Tolentino is the global director for
REBEX in the firm’s Miami office. Monica Wegner is a managing director and partner in
BCG’s Sydney office.
The authors wish to express their gratitude to Ankur Patil, Richard Cummings, Svenya
Mueller, Jorge Martinez de Paz, Alex Walker and Sebastian Balmaceda for their support.
You may contact the authors by e-mail at:
brackert.thorsten@bcg.com
hauptman.mindy@bcg.com
marshall.byron@bcg.com
sachse.holger@bcg.com
schwarz.bjorn@bcg.com
tolentino.aldo@bcg.com
wegner.monica@bcg.com
About BCG
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