How to win the digitalization race in banking

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How to win the digitalization race in banking

Digital Banking Maturity 2020: what makes a digital champion?

More and more, banks are responding to the digital (r)evolution. COVID-19 is speeding up this process. It has been fast-tracking the development of digital channels all around the world. So, what makes a bank a “digital champion” and how do these champions stand out, as compared to smart followers, adopters, and digital latecomers? What trends do we see in the field of Digital Banking Maturity?

Digital Banking Maturity

All around the world, digitalization and advancements in new technologies such as AI, blockchain and cloud have been changing all kinds of industries, including banking. Deloitte has been investigating the level of digital maturity of the retail banking sector for a while. Recently, the 4th edition of our Digital Banking Maturity 2020 report was published, which is the largest global benchmarking of digital retail banking channels. This publication provides a profound insight into what banking leaders are doing to win the race towards digital transformation. For instance, it provides a comprehensive outside-in “mystery shopper” assessment of the digital channels that 318 retail banks, across 39 countries, are using. Which results in over 1.1k functionalities having being benchmarked. Also, it encourages discussion about future developments.

Digital Banking Maturity 2020

What makes a bank a digital champion?

What banks are winning the digitalization race? Typically, banks that provide a broad variety of digital functionalities that are relevant to their customers and that are leading in the field of user experience (UX). These banks are called “digital champions”, as opposed to smart followers, adopters, and digital latecomers. They score in the top 10% of banks globally, have leading market practices and are setting key digital trends for the industry. Digital champions know that UX is a key differentiator driving customer satisfaction. Compared to their peers, they don’t only lead in number of digital functionalities along the customer journey – e.g. incumbents who are doing well in digitalization actually outperform other incumbents in their country on average on both C/I (-4.0 p.p.) and ROE (+1.9 p.p.). Also, digital champions are investing in E2E digital sales processes and have enhanced their lead on latecomers for key products, e.g. 51% vs. 23% for current accounts, 85% vs. 34% for credit cards, and 84% vs. 30% for cash loans.

Other key takeaways in Digital Banking Maturity

  • We have found that 60% of banks have closed or shortened opening hours of branches, but many have also implemented new digital features such as fully digital processes, e.g. account opening (34%), remote identification & verification (23%) and contactless payments (18%).
  • Along the customer journey, champions lead the way especially in expanding the relationship, which together with products and personal finance management was their key investment priority over the last 2 years
  • New functionalities typically gain traction faster with challenger banks than with incumbents, e.g. bill split 27% vs. 2%, virtual debit card 26% vs. 2%, chatbots with advanced use cases 15% vs. 4%, chatbots allowing transactionality 12% vs. 2%. Typically, most challenger bank champions remain retail focused, small, and digital-only.
  • Ecosystems are widespread among champions but the introduction of services visible to customers has been relatively slow
  • The largest gaps between champions and latecomers are in opening an account 71% vs 23%, buying an insurance product 44% vs 7% and beyond banking service 48% vs 11%.
  • Customer prefer digital channels for transactions and savings, with champions also taking a lead on digitising end-to-end opening of credit products
  • In a low interest rate environment, champions are better prepared to offer customers fee generation investment products
  • End-to-end sales of non-life insurance is relatively well developed whereas life insurance still requires human interaction
  • Value added services do not yet play a critical role in the customer value proposition but they differentiate banks from traditional banking services and can thus be leveraged as acquisition hooks

About the study:

Digital Banking Maturity analyses digital retail banking channels of 318 banks from 39 countries. In order to compare digital maturity between banks we have assessed three components:

  • Functionalities benchmarking. Analysis of 1108 digital functionalities through “mystery shopper” approach on real retail current accounts in each bank.
  • Assessment of 6 customer journey steps.
  • Analysis of digitalization of 13 core banking products.
  • Functionalities library with world’s leading practices.
  • Customer needs research. Survey-based research (4.9k customers surveyed) focused on identifying 26 most important banking activities and preferred channels (branch, internet, mobile).
  • Customer preferences between channels in terms of most common banking activities.
  • User Experience Study. Supplementing analysis of customers perception of user experience.
  • 19 UX scenarios reflecting 10 areas of customer activity form all of the stages of relationship with a bank.
  • UEQ survey covering a comprehensive impression of UX of mobile apps.

If you are interested in learning more about the study or the detailed results in relation to your financial institution – please contact our experts. Please find more detailed information in the Digital Banking Maturity 2020 report.

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