mckinsey retail banking

Early evidence suggests that companies that were already embarked on an operating model transformation for speed responded more swiftly to COVID-19 and that there is a strong correlation between the level of agile maturity and rapid response in launching COVID-19-relevant products and services. Although other factors certainly enter the equation, retail banks should consider these emergent needs when designing new products and services. for the Chinese retail banking consumer’s wallet has accompanied this fast growth. Results as of 27 May 2020. If you would like information about this content we will be happy to work with you. McKinsey Global Institute. We anticipate multiple potential plays for inorganic growth, including by full-scale retail banks lacking the scale or balance-sheet mix to succeed independently, and by fintechs offering superior customer experiences but insufficient scale or funding to survive. As the crisis evolves, banks can also develop analytics allowing them to monitor customers’ recovery paths in the absence of traditional early-warning indicators, leveraging short-term early-warning systems using real-time transaction data. Market and regulatory challenges are necessitating some major changes to banks’ distribution. A granular, country-by-country analysis of revenue per retail banking customer, for example, reveals significant differences in product opportunities (Exhibit 2). Source: iStock/ultramarine5. and in-branch kiosks), with limited cash availability at counters given dramatic recent usage declines. To better understand Chinese banking customers, McKinsey … Here is where to start. Chubak has held senior strategic roles at the bank since 2013, when he joined Citi from management consultancy McKinsey & Company.. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Scrutiny of retail banking sales practices is at a high pitch—banking leaders should also see this as an opportunity to reset and strengthen relationships with their customers. Given a projected large-scale drop in revenues after risk, banks will be challenged to strengthen customer relationships. Here we see two sets of suggested actions: Reinvent credit-decisioning frameworks through sector analysis and high-frequency analytics. Marie-Paule Laurent, Olivier Plantefève, Maribel Tejada, and Frédéric van Weyenbergh, “Banking models after COVID-19: Taking model-risk management to the next level,” May 2020, McKinsey.com. 8. Customer preferences spur retail banking channel evolution. We'll email you when new articles are published on this topic. According to one of the contributors to the research, Matt Higginson, cryptocurrencies like Bitcoin will face numerous challenges because they are decentralised and self-regulated through Blockchain ledgers. Despite those concerns, a few retail banks are dipping their toes in the blockchain pool. Learn more. More than ever, banks must strike a balance between being there for customers in financial distress and prudently managing credit losses. We use cookies essential for this site to function well. Retail banking: evolutions, disruptions and solutions in a hyper-connected digital age. Ida Kristensen Senior Partner, New York. The latter are moving ahead to streamline back-office systems for processing investment transactions after the trade is made. The “universal banker” role, comprising re-skilled advisors and tellers, will likely become increasingly critical. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Page iv • The picture is different in Asia and developing markets like Mexico, where many banks have developed differ-entiated modes of targeting and serving the affluent, combining primary banking services with wealth management. hereLearn more about cookies, Opens in new The latter are moving ahead to streamline back-office systems for processing investment transactions after the trade is made. Learn more about cookies, Opens in new Retail banks have long competed on distribution, realizing economies of scale through network effects and investments in brand and infrastructure. We see four primary areas of focus. McKinsey Quarterly. Press enter to select and open the results on a new page. tab. 14 Learn about 4. One bank saw an increase of 30 percent in sales when there was an appropriate and timely (24-48 hours) human response compared to a purely digital journey. The cloud-native bank What we refer to as cloud-native retail banks understand that connecting with customers—among other goals— requires tools such as: • The Internet of Things as a door to customers’ value chain • Banking APIs as a way to accelerate to market and integrate with alliances • Social media for business intelligence and In many cases, consumers appear to be ahead of banks in terms of their willingness to use new channels. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Retail banks can also reinvent approaches to risk and customer assistance solutions, to fulfill their societal purpose and mitigate credit impairments that could be comparable to those of the global financial crisis of 2008-09. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Retail Banking. Banks may also consider new organization structures that place digital at the heart of the bank. Range of 30-75 percent. 2018.04.20 The Developments of the Retail Banking Ecosystem and the Evolution of FinTechs - A Global Perspective - CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany and Sweden (1,000 representative consumers each). Branches’ focus will evolve to assisting customers’ complex needs. In the next normal, the percentage of basic banking needs handled in-branch could be as low as 5 percent. As one powerful example, a European bank acted on 104 key decisions in a single week, which would normally have required four months. Advanced analytics can help identify relevant niches of prudent growth, but should be coupled with a transformation of digital sales journeys and marketing. Unleash their potential. An online survey of 100 European retail banks by Efma and McKinsey shows a fast evolution of the retail banking lifecycle across Europe. 6 While the most common reasons German respondents cited for not using digital banking solutions were security and trust concerns, it is also true that online banking has not been seen as a necessity in a market with a bank branch around every other corner. n=1,645, including North American and European companies that were publicly traded between 2006 and 2011, and that had revenue >$1 billion in both 2007 and 2009. 5 Citigroup has named David Chubak as its head of US retail banking. Given their critical role supporting economic and social recovery, the COVID-19 crisis places financial institutions in the spotlight. Juggling a shift to digital and reinforcing client relationships while making major operating model adjustments and rethinking end-to-end credit risk portfolios is no mean feat. 13 For instance, while banks in Spain, Italy, and the US face greater shifts in digital servicing, those in Sweden are already more digitally advanced and can focus on digital sales tool development. 6 Those responding to these trends with the same agility they adopted during the crisis will emerge better prepared for the future. 4 | INNOVATIVE TRENDS IN RETAIL BANKING IN THE CONTEXT OF THE EFMA AWARDS, LET’S LOOK AT EACH OF THESE TRENDS IN MORE DETAIL. 9 Learn about Die Kunden suchen Beratung in unsicheren Wirtschaftszeiten, wenden sich aber auch vermehrt digitalen und mobilen Zugangswegen zu. 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. Includes more than 120 banks, corresponding to more than 400 million active customers across more than 40 countries. Over the past 10 years, we’ve seen the industry take banking into the digital landscape, develop use cases for an explosion of new data, ensure compliance with PSD2 and GDPR, innovate payments and take on technological forces such as AI. In reinventing their approach to credit risk, it is important for banks to adopt a sector-specific view for SMEs in particular, given COVID-19’s varied impact on specific verticals. M&A can prove an efficient means to deliver such offerings rapidly to market. 9. 9 “What do consumers really want?” McKinsey Digital Banking in Asia, (March 2015) 10 Digital Europe: Pushing the Frontier, Capturing the Benefits, McKinsey (2016) Citigroup names David Chubak, 39 year old ex-McKinsey partner, as head of US retail banking Published Tue, Jan 7 2020 3:05 PM EST Updated … Banks’ required growth levers include digital traffic generation, existing customer engagement, and conversion. African retail banking's next growth frontier: McKinsey & Company (Infographic) March 5, 2018 By Staff Writer 3 Africa’s banking market is the second … It is therefore critical that retail banks mobilize their plan-ahead teams now, prioritizing Reimagine responses as societies enter their Return phase. “Until a few year ago, U.S. regional banks enjoyed a comfortable incumbency in their regional markets,” McKinsey noted in a report. McKinsey & Co published an article analyzing retail banking’s cautious approach to blockchain, especially in comparison to investment banks. North America. Here, the affl uent tend to give higher loyalty scores. M&A can also be an important lever, as “programmatic” acquirers have outperformed their industry peers in prior downturns. The need to find new revenue´s sources, the progressive digitalization of the sector and the changes in consumer´s behaviors will be key to reshape its business model and future strategy. set forth a five-stage call to action applicable across industries emerging from the COVID-19 battle: Resolve, Resilience, Return, Reimagine, and Reform. 12. hereLearn more about cookies, Opens in new McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany, Sweden and USA (1,000 representative consumers each). banks will have to adjust their data and methodologies to reflect the next normal. With a handful of leading retail banks being able to handle 50 percent of all complex needs via remote, we believe 35 percent can serve as a fair mid-term target, with wide variances across markets. OPEN BANKING. Ashwin Adarkar Senior Partner and Leader of Global Retail Banking Practice at McKinsey & Company Greater Los Angeles Area 500+ connections Concerted effort is required to optimize investment within digital channels and across the acquisition funnel to align with customers’ shifting preferences and needs. The experience of banks most exposed to the dynamics of change provides crucial insights, and from the findings, banks across Europe are using branch transformation to improve cost-income ratios by 10-15% over the next three to five years. McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany, Sweden, China and USA (1,000 representative consumers each). However, the Interestingly, given many banks have successfully redirected front-line staff into urgently needed support roles—often working from the same location—this may change the equation on branch closures, enabling banks to keep more marginal branches open than previously considered, assuming advisors can be productively deployed on critical customer-related tasks. Something went wrong. 6 While the most common reasons German respondents cited for not using digital banking solutions were security and trust concerns, it is also true that online banking has not been seen as a necessity in a market with a bank branch around every other corner. Retail banks have been slower to embrace blockchain technology and face greater challenges in reaping its potential benefits than their more … The report concludes that by 2020, the global payments industry will likely generate $400 billion more in annual revenue than in 2016. Similarly, it is important that banks differentiate—to the extent possible—temporary impacts from fundamental deterioration in customers’ underlying financial health, by pressure testing individual clients’ financial ratios and indicators under different COVID-19 scenarios. Meetings conclude with feedback sharing, sharpening future customer experience. The expected increase in digital banking adoption corresponds to a leapfrog of three years for the US and one to two years for countries like the UK and Spain when compared to historical data from the McKinsey Consumer Financial Pulse survey, Eurostat, and the FDIC National Survey. This will have significant implications for the required mix of branch staff, with much more flexible job configurations. In the role, Chubak will head retail banking channels, including branches, wealth management, mortgage and small business, and risk management. Sorry, we couldn't find any results. Breaking it down further by different customer segments or sub-segments highlights even starker differences that can inform a business strategy. McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany, Sweden, China and USA (1,000 representative consumers each). our use of cookies, and Adopt more tailored customer conversations, leveraging advanced analytics and a multichannel approach. The COVID-19 health crisis has reshaped the global economy and society. October 1, 2019 – Only ten years ago, the US retail banking industry was in the depths of the global financial crisis, as many once leading institutions ... McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Further, most customers in Western markets perceive their bank relationships as merely meeting expectations at best, with banks in a majority of markets falling short of … 12 7 Das Coronavirus verändert die Anforderungen der Privatkunden an ihre Bank. The financial services industry is going through dramatic changes as a consequence of changing customer behavior, increasing expectations, channel proliferation, disruption, innovative use and adoption of new technologies and the digitization of business and society in general. Bank will need to institutionalize these working models, maintaining the accelerated pace once the near-term crisis has abated. In new ways these segments will require bespoke treatment across a broader palette of options, via. Nor digital upstarts are likely to wait for retail banks to adopt flexible approaches deploy! Return phase according to Finalta very different in the next normal, well. 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