Digitalisation of banking: Will the move to online banking continue after the COVID-19 pandemic?

COVID-19 has given a significant boost to the digitalisation of banking in Switzerland. Even before the pandemic, online banking was an integral part of retail banking, but during the pandemic, customers have been moving online in considerably larger numbers, as our April 2020 survey showed. And this radical transformation continues: online banking is now here to stay, but customers want it to form part of a range of services. Our latest survey, which questioned 2,021 individuals of working age in Switzerland, shows that the number of those using online banking services for the first time during the pandemic continues to rise year on year. However, this increasing digitalisation is not limitless: despite growing customer demand, not everyone wants to bank online, and even those who do would not choose it for every banking service. The findings show how important a persuasive multi-channel strategy, including hybrid solutions, is to satisfying the needs of different groups of customers, particularly where complex banking transactions such as mortgages or more complex investments are concerned.

Digitalised banking – the revolution continues

Our 2020 survey showed that considerable numbers of banking customers were using online banking services for the first time during the pandemic and that most found them satisfactory.

The findings of our 2021 survey show that this was no temporary phenomenon: considerably more customers are now choosing online banking. On every service about which we asked, more respondents had used online banking for the first time than in 2020, and – as Chart 1 shows – the number of first-time users has almost doubled over the past year.

The pandemic has therefore accelerated the shift to online banking, advancing the existing trend by several years. Moreover, this was not just a one-off impact but is continuing. Many of those switching and using online services for the first time intend to continue doing so – and in greater numbers than in the 2020 survey. 59% of respondents now report that they plan to use both online and in-branch services after the pandemic (8 percentage points up on the 2020 survey), while 18% say they will prefer online services (4 percentage points up). The growing number of customers who say they will continue using online services at least some of the time after a lengthy period of use during the pandemic suggests that online banking is likely to become a permanent fixture in the range of services banks offer. Overall, younger people are more open to online solutions, but there has been a significant increase in the proportion of over-50 year-olds who bank online. This group also shows above-average interest in hybrid solutions, with almost two-thirds (65%) reporting that they plan to make use of both online and in-branch services post-pandemic.

Not everyone wants online solutions

Nevertheless, the future world of banking will not be wholly digital – or at least not for all customers. Depending on the service, between 8% and 22% of customers still prefer to bank in-branch. And not all first-time users have been won over: almost a quarter (23%) say they would prefer to return to in-branch banking after the pandemic, a figure that also includes younger people.

A majority still want branches

The split is even more marked when it comes to the importance respondents attach to bank branches. The existence of a branch is a traditional – perhaps the most traditional – part of the services a bank offers. For decades, observers have seen branches as old-fashioned and falling out of favour, yet Switzerland still has a significantly higher density of branches than many other countries, including Germany. Moreover, although the pandemic has prompted many customers to try out online banking for the first time, a branch network remains a mainstay of the banking sector. Just over half of all respondents (52%) say it is important to have a local branch, with just 18% rating this as unimportant; the remaining 30% are neutral. The distribution of responses across age groups reflects expectations, with older people more likely to consider the availability of a local branch important. However, as Chart 2 shows, even among those aged under 30, more than twice as many think it is important to have a local branch compared with those who think it is unimportant (48% and 19% respectively).

In responses to a separate question, 55% report that they plan to visit a branch at least as frequently as before the pandemic, with 8% saying they are likely to do so more frequently. By contrast, just 6% plan to make less use of the branch network than before the pandemic. The remaining 31% report that they did not previously use branches and do not plan to do so in future. There is no significant difference in the pattern of responses across age-groups.

Significant desire for digital signatures for bank transactions

The desire to access in-branch advice may well be one reason why branches continue to be important. Another may, however, be that digital alternatives are still patchy. While major progress has been made in customers’ ability to open an account online, for example, not all banks offer the same service in this respect, and the service is not equally smooth across all customer segments, particularly for special cases. By comparison with leading global retail banks, many Swiss banks lag behind when it comes to offering online services, as our current study of 320 banks in 38 countries shows (interview available in Swiss German only). Nor does Switzerland yet make electronic signatures or e-ID available to banking customers. Yet, as our survey shows, these are exactly the advanced digital options that many customers want. Nearly twice as many respondents think that electronic signatures are important for banking transactions compared with those who think they are unimportant (43% and 23% respectively). There are no major differences between age groups on this question, and across the age spectrum, almost twice as many respondents believe that digital signatures are important compared with those rating them as unimportant.

Opportunities and challenges for retail banks

However, simply offering digital solutions does not truly differentiate a bank from its competitors; after all, every bank is now providing online services. Customers are more concerned about the extent of what they can do using online banking and, in particular, about the user experience. Many banks enable customers to open an account online, for example, but not all provide a consistent online service across the board, and not all services are robust, rapid, straightforward and convenient.

In the area of marketing (including digital marketing), meanwhile, the retail banks urgently need to up their game. Brand promise has a strong influence throughout the customer life cycle and must be underpinned by a tailored customer experience and content strategy if a bank is to achieve the desired loyalty from existing customers and win the business of potential new customers. The marketing function is uniquely placed here to exploit the findings of data surveys and play an active part in acquiring and retaining customers.

Meanwhile, although online banking is increasingly important to a growing number of customers, banks must also continue to perform well face to face. In particular in the case of more complex services and advice, many customers still want personal in-branch service, in the same way as a majority continue to value local branches. Banks can continue to focus on specific customer segments and offer wholly online banking for those customers who want it, but any bank that wants to expand its customer base beyond “digital natives” is well advised to offer a hybrid service – a mix of online and in-branch services. Digitalisation offers a good opportunity to make savings in volume business while also providing hybrid solutions for services that need intensive customer advice. The online and in-branch elements of such hybrid solutions must function seamlessly. And particularly for higher-income customers wishing to conduct more complex or more tailormade transactions, this could enable banks to deliver genuine added value.