About Digital Banking: What a Disruptive Future Could Look Like by Pierre Poignant, Associate Principal, McKinsey & Company

1. Digital banking
How to capture the opportunity
Singapore, May 31st, 2012
Conference Presentation
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited

2. McKinsey & Company 1|
Explosion in digital interactions – By 2015, only 5% of
interactions via the branch Network
SOURCE: McKinsey 2012 Digital Banking survey, McKinsey research
Digital interactions are exploding…
2010: 100%, Europe
70
42
30
19
29
28
25
2
Branch
ATM
Digital
2
34
2010
34
5
2015F
Other
Phone
4
5
28
12
2
2005
18
9
2
2000

3. McKinsey & Company 2|
Yet, it isn’t a simple shift to digital channels. Customers are
becoming multichannel users
1 Only most important paths are shown here
2 All arrows to maintenance actvities are directly from Subscription phase (i.e., Transaction and Service phases are not sequential)
SOURCE: Asia PFS CDJ/multichannel booster survey 2011
Maintenance
Transaction Service
Research SubscriptionAwareness
Non-
channel
Call center
ATM
Branch/personal
DM
Website/online
banking
Email/SMS
3rd party agent
Online media
WOM店舗
Offline media
Past experience
Mobile banking
TraditionalDigital
3rd
party
1
3
2
4
1
25
2
7
2
23
7
2
3
20
3
21
7
41
1 16
8
6
8
7
15
7
11
N/A N/A N/A
2
3
N/A N/A N/A
2 4
15 20
15
7
12 11
24 23 23 24
33 3330
12
6
7 6
9 9
Share of customers using each touchpoint/channel dominantly at each phase1
Percent
Touchpoints/channels
47
21
23
2
3
24 25
4
3
4
4
3
34
4
4
4
6
3
INVESTMENT
PRODUCT EXAMPLE

4. McKinsey & Company 3|
Enormous benefits in terms of customer experience
SOURCE: 2012 McKinsey Digital banking survey
9
Don’t knowDecrease
21
No change
Increase
39
Significantly
increase
31
% of respondents
1 No respondent indicated a ‘significant’ decrease in customer satisfaction
What do you expect will be the effect of mobile banking on customer
satisfaction in the next 5 years?

5. McKinsey & Company 4|
Average
products
per client
Number
Digital servicing provides a better experience to clients
translating into higher loyalty and value…
9
7
6
5
Multi-
channel
3 channels
2 channels
Mono-
channel
Average
revenues
per client
Indexed
210
197
142
100
Multi-
channel
3 channels
2 channels
Mono-
channel
Perceived quality
of multi-channel
clients 10-15%
higher than mono-
channel ones
Average attrition
rate of offline
clients 2x higher
than online ones
SOURCE: 2012 McKinsey Digital banking survey

6. McKinsey & Company 5|
0
5
10
15
0 100 200 300 400 500 600 700 800
Northern Europe
Southern
Europe
Central
Europe
Branches
per million inhabitants
FTEs
per branch
Digitalisation enables radical reduction in costs as is already seen
in Northern Europe – Online banking access need to go up first!
2016
2016
2016
SOURCE: 2012 McKinsey Digital banking survey

7. McKinsey & Company 6|
Digital is considered as a defensive play mostly
SOURCE: 2012 McKinsey Digital banking survey

8. McKinsey & Company 7|
So far Banks see digital mainly as complementary
1 Excludes 7% of blank responses
2 For all customers
SOURCE: 2012 McKinsey Digital banking survey
2
3
3
3
19
… USP to attract new customers
… the primary channel for customer service
… the primary channel for all banking activities2
… the primary channels for transactions 26
… complementing branch networks 38
… the primary channel for sales and advice
Other
% of respondents
What is the vision for your bank's ‘digital proposition’ for the next 5 years?
Digital channels as1 …