McKinsey Global Institute. This becomes a matter of finding new ways to help, rather than taking unnecessary risks—no one is served by losing access to financially stable banks. Branches will increasingly feature self-service (including intelligent ATMs While it’s understandable to be wary of new and untested territories, “there are a number of areas where [blockchain] could create value for retail banks,” according to major consulting firm McKinsey and Company.. The Future of Retail Banking 2020’s survey-based report on the future of the retail banking market has arrived. Digital channels are gaining ground in the distribution of retail-banking products and services, but recent McKinsey research shows that banks are adapting at very different paces. Ademar Bandeira, Bruno Batista, Adelmo Felipe, Matt Higginson, Frédéric Jacques, Frederico Sant’Anna, and Alexandre Sawaya, “Addressing the needs of customers in delinquency impacted by the coronavirus,” March 2020, McKinsey.com. 1“Retail Banking Growth Solutions: Serving the Banking Customer of Tomorrow.” Deloitte Consulting LLP, Summer 2014. In a truly omnichannel banking experience, customers can switch from one channel to another without fear of the bank losing track of their journey. Before scheduling a customer interaction, leading banks proactively reach out based on analytical engine output highlighting relevant customer needs (e.g., impacts from wage decreases, heightened financial risk, spending patterns, migration opportunities to better suited products). Retail banking: evolutions, disruptions and solutions in a hyper-connected digital age. Results as of 27 May 2020. 1 The report concludes that by 2020, the global payments industry will likely generate $400 billion more in annual revenue than in 2016. According to a McKinsey survey, trust in banks has declined compared to pre-COVID-19 levels in several markets. 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). Once roles have been rationalized there is a further opportunity to rethink the location of work, benefiting from remote options (Exhibit 4). Use minimal essential Financial advice has never been more important. 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. We strive to provide individuals with disabilities equal access to our website. COVID-19 has accelerated longstanding consumer and business shifts away from the branch and toward digital channels. Please try again later. To position for success in this new environment, speed is of the essence. The Future of Retail Banking 2020’s survey-based report on the future of the retail banking market has arrived. Successful banks typically apply advanced analytics to identify niches of prudent growth, accurately predicting the best loan offer recipients, whose credit lines to increase, and who needs asset allocation assistance, thereby building stronger relationships while simultaneously helping customers optimize their finances. 7 As banks navigate the crisis they can consider taking on a broader role in guiding customers as well. In a truly omnichannel banking experience, customers can switch from one channel to another without fear of the bank losing track of their journey. Globally, only half of banks can block or freeze credit cards digitally, and less than a third permit the initiation of financial transaction disputes via digital channels, according to Finalta benchmarks. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. 2 Kevin Sneader and Shubham Singhal, “Beyond coronavirus: The path to the next normal,” March 2020, McKinsey.com. Chandana Asif and Alia Parpia are partners and Stephanie Hauser and Zubin Taraporevala are senior partners, all in McKinsey’s London office. Learn more. We estimate that 80 percent of simple servicing transactions and two-thirds of simple product sales could be digitally fulfilled, particularly in countries where significant digital inroads have already been made. COVID-19’s financial impact on consumers and SMEs is profound—35 to 50 percent of consumers in key Western European markets state they will run out of savings by August 2020 if unemployed, according to our Financial Decision Maker Pulse Survey, and one in three small businesses in the UK believe they will be out of business by the same date absent improvement in conditions, according to our SME Pulse Survey. We work with retail banks and consumer finance firms to navigate a dynamic environment of evolving regulation, consumer behavior and digital innovation. In recent weeks banks have proven themselves able to move faster than imagined. None of these elements are entirely new; instead they reflect accelerations of existing trends, punctuated with some additional factors prompted by unexpected shifts in the operating environment, especially for actions related to credit risk and opportunities to rejuvenate trust-based relationships. They want seamless digital banking solutions embedded in their daily lives. Most transformations fail. 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. The next normal arrives: Trends that will define 2021—and beyond, Based on the A1 scenario explained in: Sven Smit, Martin Hirt, Kevin Buehler, Susan Lund, Ezra Greenberg, and Arvind Govindarajan, “. Charting retail banking revenues by generation. Pre-COVID-19 Finalta research indicates that 48 percent of incoming US contact center calls could be re-routed for digital resolution (e.g., transaction, balance and billing inquiries and peer-to-peer fund transfers). 13. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. McKinsey & Co stands accused of being late to the blockchain party, after releasing a report about retail banks’ cautious approach to the technology.. McKinsey Global Banking Pools; Bank of England, Office of National Statistics; annual reports (Western European countries include Germany, UK, France, Italy and Spain). The challenge is not only to improve digital service journeys but also to minimize agent time spent on low-value activities suitable for “human-like” interactive voice response (IVR) resolution. This is already the reality for some banking leaders—in 2019, the top 10 banks in developed markets had 80 percent of their customers digitally active (60 percent on mobile apps). In 2019, banks in developed markets generated only 28 percent of their sales from digital channels. Something went wrong. 8. 3. cookies. 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 Wed, Jan 8 2020 7:15 AM EST Hugh Son @hugh_son Digital channels are gaining ground in the distribution of retail-banking products and services, but recent McKinsey research shows that banks are adapting at very different paces. Please use UP and DOWN arrow keys to review autocomplete results. Please click "Accept" to help us improve its usefulness with additional cookies. New offerings should incorporate emerging customer needs, some of which have shifted due to the COVID-19 crisis. Our flagship business publication has been defining and informing the senior-management agenda since 1964. ... Coleads McKinsey’s global banking and securities practice and leads high-impact digital transformations, helping companies improve performance, drive innovation, and create value Link to node. We see four primary areas of focus. Exceptions exist in the UK and US, where a net positive perception may stem from banks’ proactive outreach and speedy delivery of relief. Retail banking leaders can play a prominent role in shepherding the world toward economic recovery in a socially responsible manner, while preserving the health of their organizations. African retail banking's next growth frontier: McKinsey & Company (Infographic) March 5, 2018 By Staff Writer 3 Africa’s banking market is the second … 15. Learn more about cookies, Opens in new May 16, 2019 When it is done right, customer experience in retail banking leads to more satisfied customers, happier team members, increased efficiency, accelerated growth, and reduced operational risk.. Customer preferences spur retail banking channel evolution. If you would like information about this content we will be happy to work with you. Range of 30-75 percent. Numbers updated as of April 23, 2020. Retail and corporate customers are switching to fintech companies for banking services – if this trend and the rate of the switch continues, the anticipated ROE gains could fall from 9.3% to 5.2% in 2025. Since the global financial crisis, the US banking industry returned to stable ground and greater liquidity. More than ever, banks must strike a balance between being there for customers in financial distress and prudently managing credit losses. Includes more than 120 banks, corresponding to more than 400 million active customers across more than 40 countries. Learn more about cookies, Opens in new As a result, in most retail-banking markets, a few large institutions, operating at similar efficiency ratios, dominate market share. Ashwin Adarkar Senior Partner and Leader of Global Retail Banking Practice at McKinsey & Company Greater Los Angeles Area 500+ connections Given declines in global fintech funding in excess of 50 percent since December 2019, banks should remain alert for acquisition candidates capable of generating new revenue streams at reasonable valuations. Mitigating credit impairments requires data-driven triage to differentiate between borrowers likely to grow, those facing temporary liquidity or business model challenges, and those truly structurally impaired. The global banking industry is facing a long winter, and in the coming months and perhaps years, the COVID-19 pandemic’s impact will present banks with many challenges. Through these actions, banks can also anticipate peaks in monitoring and collections activity projected for the second half of 2020. Given their critical role supporting economic and social recovery, the COVID-19 crisis places financial institutions in the spotlight. The COVID-19 health crisis has reshaped the global economy and society. This creates a rare, mutually beneficial opportunity for banks to rejuvenate their trust-based relationship with society. As a result, in most retail banking markets, a few large 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. In this piece, based on detailed research from McKinsey Panorama that was begun prior to the crisis, we look at how retail banking revenues related to customers of different generations vary across the world. 12 In the next normal, the percentage of basic banking needs handled in-branch could be as low as 5 percent. 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