Written by 17:15 Member, FinTech

How Digital Done Right Pays Off for Retail Banks

Bain & Company: Benchmarking European retail banks quantifies the benefits of digital for customers, employees and shareholders.

Banks have gradually infused digital tools and channels into their operations for two decades. But the effects on cost, productivity and customer lifetime value were hard to measure, which complicates the task of ranking investment priorities. Now, however, Bain & Company has quantified how well-orchestrated digitalization pays off with customers, employees and shareholders.

Bain and Company’s latest benchmarking of 50 leading banks in Europe and the Middle East shows that some have made great strides in achieving a robust digital offering and are reaping the benefits on three fronts. Other banks trail far behind in their bid to get value from digital. This brief explores what sets the leaders apart, and how others can catch up.

The three benefits of digital banking

  1. Digitalization clearly links to higher customer loyalty, by allowing customers to access products and services faster, cheaper and more easily, leading to a better experience dealing with a bank. This has become critical as customer expectations for a simple, convenient, personalized experience keep rising. Digital insurgents have a higher Net Promoter Score℠ (a key metric of loyalty) than traditional banks, with the biggest factor in the gap being rates and fees. Among traditional banks, the top 20% in digitalization outperformed the rest of the pack in NPS® by 11 points.
  2. Employees benefit as well. Those employees of the digital leaders consider their company as a better place to work, giving a higher NPS on Glassdoor than the bottom fifth of the benchmarked group. Top banks are also rated higher for a promising future outlook and attractive compensation on Glassdoor and indicate higher leadership and employee alignment.
  3. The third benefit flows to shareholders. The top fifth of traditional banks show a return on average equity of 8.7%, significantly higher than the 6.2% for other banks. The leaders also operate with a considerably lower cost-to-income ratio of 58%, vs. 70% for the rest.

As banks pour more capital and staff time into digitalization, the experiences of the leading benchmarked banks holds several lessons for using resources wisely.

Find out more about the lessons for investment in digital banking and the seven dimensions of bank performance that are crucial to digital success, in order to create a Digitalization Index on the website of Bain & Company.

Text: Dirk Vater, Jens Engelhardt and Patrick Blaser; © 1996-2020 Bain & Company, Inc.

Image: Ahmad Ardity/Pixabay

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