Retail banks must simplify or die

I'm being lazy this week and just posting other people's reports, but only because they're really interesting.  This is Boston Consulting Group's latest analysis of what's happening in retail banking.  The Financial Brand did a good summary of their report, and BCG summarize their findings as follows:

Despite a tentative financial recovery, the retail-banking industry faces unrelenting, disruptive challenges. Banks that hope to prevail must urgently pursue digital simplicity. That is, they must develop digital and data capabilities that radically simplify their businesses while dramatically improving the customer experience through greater efficiency, quality, and speed.

That mandate for digital simplicity is the central insight emerging from the research behind this sixth edition of BCG’s annual Global Retail Banking report.

For this year's report—Banking on Digital Simplicity—we have widened and deepened the perspective of our past research to provide a comprehensive and data-informed assessment of retail-banking excellence, or REBEX—the abbreviation referring to our report and its underlying benchmarks, surveys, databases, and tools. Our intent is to identify actionable insights into the leading global trends, the best practices of top-performing banks, and the key levers available for improving performance.

This article—one of three publications composing the full report—includes an overview of the industry’s financial performance. BCG Banking Pools data shows that global retail-banking revenues rose 3% in 2015, to nearly $1.6 trillion, with wide disparities among regions. In this article, we discuss those regional results as well as growth trends and outlooks.

The article Customers Steer Digital Trends Driving Retail Bank Transformationreveals how the needs and expectations of consumers are forcing—and supporting—the digital transformation of banks. The article draws on information and insights from BCG’s Consumer Digital Banking Surveys of behavior and preferences in nine countries. In China, for example, the survey found that customers who use both human and digital channels are two to six times as likely as other customers to be affluent but are also more challenging to serve. The ramifications of the industry’s weak record of customer and brand advocacy are also assessed. BCG’s Brand Advocacy Index (BAI) shows that retail-banking brand advocacy lags that of most other industries, sometimes by more than 30 percentage points. The article concludes with a deep dive on financial-technology (fintech) competitors, examining the impact of fintechs and other upstarts that are challenging—and sometimes partnering with—traditional banks.

Another article, Operational and Digital Leaders in Retail Banking Reap Financial Rewards, provides the results of BCG’s annual benchmarking of the operational and digital excellence among leading retail banks. It assesses the trends and capabilities that increasingly separate the top performers among the leading banks from the median. This year, once again, the best operational and digital performers reaped the lion’s share of financial rewards—for example, 50% higher average pretax profit per customer than the median.  As the world’s top-performing retail banks continue to widen their lead over the rest, banks that aspire to join them at the top will need to jump-start their digital transformation. The article also discusses specific steps banks can take to achieve that goal.

You can read the full report here.