Digital banking: existing experience and modern trends.
Covid-19 has changed economic and social life making our dependence on digital technologies even stronger. Of course the trend has had a great impact on the banking sphere which started experimenting with digital technologies even before the virus appeared. Even before Covid-19 retail banking started changing: branch usage was declining while customers preferred using digital channels to manage their money. Adopting digital technologies is quick in the US and the EU countries like Italy and Spain. In other markets the trend is also visible but goes slower. According to McKinsey report dated July 30, 2020 top performers in the banking sphere made a shift to digital technologies before the pandemic and greatly outperformed their competitors in terms of distribution channels.
In terms of digital services the research has shown great customer satisfaction (60-85%) with banking from home in the EU and the US. Even elderly clients got used to transactions via mobile apps. Biometric authentication, quick balance checks, and easy transfers are increasingly table stakes for banking apps. However, leaders take a customer-centric mindset to developing new features that will make users even more attached to digital technologies. Personalized home pages in the apps are already widely used and hailed by clients.
While in many markets the crisis caused a significant drop in monthly unit sales across all channels, it also accelerated the sales mix redistribution as channels recovered at varying speeds. This has made digital sales penetration jump especially with leading banks. Leading banks doubled their digital cross-sell rates (digital sales per digital user) between 2015 and 2019 to 4.2 times that of slow adopters. To achieve this result they regularly tested and launched new capabilities, used customer-relationship-management (CRM) tools to create preapproved offers, streamlined journeys with prefilled applications, and used digital signatures for instant fulfillment. A lot of customer-behavior analysis has also contributed to sales increase.
Research has shown that before Covid-19 outbreak inbound calls to contact centers started giving way to other communication channels. But the first days of self-isolation were characterized by a steep rise of such calls since uncertainty requires contact. At the same time in markets with developed digital communication channels this rise wasn’t that steep. As a result, the pandemic has brightly illustrated demand for digital communication in banking. Practice demonstrates that interactive voice response (IVR) is helpful but modern banks are turning to next-generation tools, data, and analytics to optimize the end-to-end call funnel. Chatbots are used to retain customers in digital, reducing inbound calls. IVRs are evolving to be conversational and enhanced with contextual awareness that leverages historical interaction data to provide personalized query resolution and protect agent capacity. In the research by McKinsey it is mentioned that many banks have also experimented with remote advisory models, such as branch-to-branch, branch-to-hub, or hub-to-home. These capabilities are said to offer convenient access to complex advice and match customers to the right specialists, making conversations more efficient.
The virus and the social distancing caused by it triggered the closure of many branch offices even among leading banks. After the gradual revival from self-isolation the trend remained viable. Some banks boldly cut down the number of branches while others acted in favor of gradual changes. Yet, McKinsey research demonstrates that the bold bankers happen to be more efficient and successful. The reduction was quick but it was also about operational restructuring. To shift the operating model, leaders began to reskill profiles toward universal banker roles to better respond to the lower volume but wider variety of demand coming into branches. Branch formats were changed to create formats tailored to customer needs in specific areas. These ranged from large flagship branches to mini branches with a high degree of self-service, remote advice capabilities, and flexible opening time in low-traffic areas.
Thus, the pandemic has accelerated the process of the banking sector digitalization. The digitalization itself is beneficial for banks as it leads to cost-cutting and to clients who become more satisfied with managing finances from home and using customized digital banking products.
To learn more you can consult the full report: https://www.mckinsey.com/industries/financial-services/our-insights/breaking-away-from-the-pack-in-the-next-normal-of-retail-banking-distribution#