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  • october 2012|

    TO BOOST CUSTOMER EXPERIENCE AND ROE

    DIGITAL TRANSFORMATION IN 10 BUILDING BLOCKS

  • 1 | D IGITAL TRANSFORMATION IN 10 BUILDING BLOCKS

    Frequency of visits to branch

    Daily Never

    Payments only

    8%

    3%

    Branch lovers

    47%

    20%

    Self-directed

    41%

    73%

    Multi-channel

    4%

    4%

    Use of digital

    ATM only

    Full Digital

    Size of segment across Europe Size of segment Northern Europe

    Channel usage

    None

    Low

    High

    ATM Branch Tele- phony

    Online

    EXHIBIT 1 DISTRIBUTION INTERACTION ARCHETYPES

    AcrossEurope,customersarerapidlyadoptingdigitalapplicationsfortheirdailyuse.However,bankshavefailedtokeeppaceandmustnowactdecisivelytodevelopmultichannelsolutionsthatreflectnewwaysofliving.

    DITIGAL TRANSFORMATI0N IN 10 BUILDING BLOCKS TO BOOST CUSTOMER EXPERIENCE AND ROE

    October 2012

    McKinsey undertook rigorous primary research in 10 European countries, polling more than 17,000 respondents on their expectations and priorities for retail banking over the coming decade. The results are enlightening and provocative, and we believe to be able to provide retail banking executives with a definitive architecture for managing the digital transformation over the coming decade.

  • DIGITAL TRANSFORMATION IN 10 BUILDING BLOCKS | 2

    summar y

    Enablers 8. Outsource commodity technology and upgrade core systems (e.g., CRM) 9. Build digital marketing and sales skills (Big data, pricing, SEO, etc.) 10. Familiarize and educate employees and clients on digital banking; address security issues

    Transforming to a Digital Bank

    Offering 1. Launch new digital

    services and products 2. Make current product

    offer digital proof (rationalize portfolio, digital pricing)

    3. Seamlessly integrate external applications and products with core offering (i.e., insurance)

    Channel 4. Transform branch

    footprint and performance

    5. Invest in mobile and social media channels and expand functionalities of existing digital channels)

    Process 6. Enable multi-channel

    sales, transactions and services

    7. Enable Remote advise and troubleshooting

    EXHIBIT 2 BUILDING BLOCKS FOR A DIGITAL TRANSFORMATION

    Wehaveidentifiedfourdistinctcustomersegments:self-directed,multichannelusers,branchlovers,andATM/cardusers.(Exhibit1).

    Althoughbranchloversarecurrentlythelargestsegment(47percentofsample),itisexpectedthattheself-directedsegment,whichismostadaptedtotheonlineworld,willaccountfor80percentofcustomersin10years.InNorthernEurope,theyalreadydoso.

    Theriseoftheself-directedcustomersegmentcreatesauniqueopportunity forbankstoimproveeconomics

    (20to40percentlesscostand2to5percentmarketsharegainforfirstmovers),allowingbankstoreducetheircost/incomeratiobyupto20p.p.

    However,adigitaltransformationofcustomerexperiencesandbusinessmodelsisnecessary,requiringbankstooverhaultheirbusinessmodels.Thosethatsucceedwillreaprichrewards.

    Basedonsegmentpreferencesandtheirimpactonbankeconomics,wehaveidentified10journeysthatbanksmustundertaketocapturevalueandboostearnings.(Exhibit2).

    Makingthedigitaltransformationarealityrequiresathree-stepapproach,accompaniedbyactionstoensuresmoothimplementationandsustainedimpact.

    Step1.Setyourmultichannelambition:banksmustbaselinecustomerscurrentbehavior,identifycostreductionpotential,andprioritizetransformationjourneys.

    Step2.Launch10digitaltransformationjourneystoboostcustomerexperienceandretailbankingeconomicsandputenablersinplaceforasuccessfultransformationjourney.

    Step3.Monitordigitalbehaviorsandbepreparedtochangegearsswiftly.

  • Copyright 2012

    NopartofthispublicationmaybecopiedorredistributedinanyformwithoutthepriorwrittenconsentofEFMAand/orMcKinsey&Company.

    Efmawww.efma.com

    McKinsey & Companywww.mckinsey.com

    Please contact the authors for access to more detailed consumer research, case examples for the building blocks, and/or to let us have your comments and feedback

    VitoGiudici,Director,Milan vito_giudici@mckinsey.com

    RadboudVlaar,Principal,Amsterdam radboud_vlaar@mckinsey.com

    RemcoVlemmix,Principal,Amsterdam remco_vlemmix@mckinsey.com

    PhilippSiebelt,AssociatePrincipal,Cologne philipp_siebelt@mckinsey.com

    EwoutvanJarwaarde,EngagementManager,Amsterdam ewout_van_jarwaarde@mckinsey.com