Reshaping retail banking for the next normal

Retail banks have a prominent role to play in guiding the world toward economic recovery, while preserving the health of their organizations.

 
The COVID-19 health crisis has reshaped the global economy and society. Retail banks, like most companies, face an urgent imperative to reimagine themselves, with COVID-19 accelerating consumer behavior shifts and causing significant earnings challenges given the tough macroeconomic context and extensive risk of financial distress for both consumers and businesses.

Although overall revenue declines are expected to be in line with those of recent significant downturns (the global financial crisis of 2008- 09 and the European sovereign debt crisis of 2011-12), revenues after risk are expected to experience sharper declines. McKinsey’s modeling of COVID-19’s impact¹ projects a drop of 16 to 44 percent for Western Europe.²

Additionally, consumers’ banking preferences are rapidly evolving. In Italy, Spain, and the US, 15 to 20 percent of customers surveyed expect to increase their use of digital channels once the crisis has passed; in other markets that percentage ranged from 5 to 13 percent.³ Notably, preference for handling everyday transactions digitally is as high as about 60 to 85 percent across Western European markets, even for customers 65 years of age or older.

Many banks have yet to see this mindset shift translate into actual user behavior,⁴ perhaps due to limitations of their digital capabilities. Should these emerging preferences become banking’s post COVID-19 “next normal,” retail banking distribution will experience up to three years of digital preference acceleration in 2020.⁵ In some markets, this may translate to 25 percent fewer branches, with those remaining performing a different set of activities with more flexible job configurations. Call centers may be transformed to remove up to 30 percent of less customer-centric and lower value-added activities. Digital sales and servicing will accelerate markedly and the remote advisory channel should finally come of age, potentially handling 35 percent of complex needs remotely.

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Πηγή: mckinsey