retail banking industry
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DESCRIPTIONCapgemini Consulting Digital Transformation in the Banking Industry Retail banking is currently experiencing significant transformations. The relationship between banks and customers is undergoing a change, shifting from the traditional model focused on physical branches to a new, customer-centric and multi-channel approach.
- 1. Digital Transformation Benchmark - 2012 Insights for the Retail Banking Industry
2. Page 1 Digital Transformation in the Banking Industry Retail banking is currently experiencing significant transformations. The relationship between banks and customers is undergoing a change, shifting from the traditional model focused on physical branches to a new, customer-centric and multi-channel approach. At the same time, banks are questioning their business models in reaction to systemic threats such as debt, economic crisis and new forms of competition, to name a few.1 Digital technologies play a key role in these fundamental shifts that are progressively reshaping the banking industry; they enable new customer experiences, create opportunities to improve operational processes or change business models. Our survey data helps better understand where retail banking stands today in this transformation and what challenges await the industry on the road ahead. Figure 1: firms positioning in the Digital Maturity Matrix Interpreting the Digital Maturity Matrix The vertical axis measures Digital Intensity, i.e. firms digital practices The horizontal axis measures Transformation Management Intensity, i.e. the management practices implemented by the firms around digital transformation For more information, read the MIT Center for Digital Business and Capgemini Consulting Research Report Digital Transformation: a Roadmap for Billion-Dollar Organizations (2011) Learning 1: The importance of Digital Transformation for the industry is largely acknowledged An overwhelming majority of companies state that their competitive position will suffer if they do not engage in Digital Transformation. Most firms have a positive perception of this phenomenon: 94% perceive Digital Transformation as an opportunity, where only 29% see it as a threat to their companys status in the industry. Over two-thirds of the companies also anticipate internal disruptions. Learning 2: Banks are strong in customer service and analytics, which fits the data-driven mindset of the banking industry Our data show that banks are more mature than companies in other industries in their use of analytics on the customer front: targeting marketing more effectively, optimizing pricing, qualifying sales prospects (see Asia & Oceania North America Northern Europe Southern Europe Average 3. Page 2 Figure 2). Banks also often leverage mobile for customer service more than the average. However, data and technology platforms are not always integrated or unified at the enterprise level, which could be an obstacle in reaching the next level of customer service and data analysis. Figure 2: customer analytics Legend: Red bars represent the percentage of companies disagreeing with each statement (answers 1, 2 and 3 on a scale from 1 = strongly disagree to 7 = strongly agree) in the industry; green bars represent the percentage of companies agreeing with each statement (answers 5, 6, or 7). Grey marks represent disagreement (answers 1, 2 or 3) or agreement (answers 5, 6 or 7) across all companies in our study. Learning 3: Bankers do not consider mobile to be the primary contact point with customers despite the transformative potential2 of this technology in the industry Banks are generally more advanced than companies in other industries in providing customer service through mobile channels. They are also slightly above- average in leveraging mobile to promote products and services. However, most banks have not yet realized the transformative potential2 of mobile in selling products and services. Learning 4: banks demonstrate a mostly passive use of social media Social media can be an important tool for banks, especially given the image concerns associated with the current financial crises. Social tools allow firms to engage with customers more directly, providing banks greater opportunities to manage their public image, market products, or provide service. A majority of banks surveyed use social media to monitor reputation. However, only a minority uses it proactively to build communities, to promote or sell products and services, or to provide customer service. -----BAN-Figure9----- Copyright2012CapgeminiConsultingandMIT-CDB.AllRightsReserved 57% 44% 44% 40% 79% 55% 70% 50% We use analytics to target marketing more effectively We use analytics to personalize marketing communication We use analytics to qualify potential sales prospects We use analytics to optimize pricing 31% 37% 40% 41% 12% 27% 21% 34% 4. Page 3 Learning 5: banks do not fully harness the potential of digital technologies to transform their operational processes Most banks leverage digital technologies to improve their operational processes. A majority of companies reported digitizing processes (automation, real-time monitoring and decision-making see Figure 3). Also, 79% reported offering customer self-service, an efficient model for customers as well as for banks operations. However, as in most industries, only 30% indicate that operational processes can adapt quickly to external changes. This may reflect the common lack of agility across banks legacy systems. Figure 3: process digitization Legend: Red bars represent the percentage of companies disagreeing with each statement (answers 1, 2 and 3 on a scale from 1 = strongly disagree to 7 = strongly agree) in the industry; green bars represent the percentage of companies agreeing with each statement (answers 5, 6, or 7). Grey marks represent disagreement (answers 1, 2 or 3) or agreement (answers 5, 6 or 7) across all companies in our study. Banks have undoubtedly started using digital technologies in many areas and leverage them extensively to increase the value of existing services, reach out to new customers or launch new businesses. Other areas such as customization, as well as advanced use of mobile channels or social media with customers, are less developed. For most companies, much remains to be done to transition from a traditional model to a multi-channel model. 64% of the banks we surveyed indicate that they are already actively transitioning from physical products and services to digital. Moving forward, most banks may have to reinforce transformation practices, including: - Developing a digital vision 41% of the companies surveyed declare having a radical vision of how they can use digital transformation to change their business. This figure is higher than in most other -----BAN-Figure13----- Copyright2012CapgeminiConsultingandMIT-CDB.AllRightsReserved 59% 59% 49% 41% 35% 76% 63% 56% 44% 30% Our core processes are automated We use analytics to make better operational decisions We monitor our operations in real time We design our products and services digitally Our operational processes can adapt quickly to external changes 19% 20% 29% 38% 39% 6% 13% 22% 31% 24% 5. Page 4 industries, but may still be considered low relative to the profound transformations expected in banking (see Learnings 1 and 3). Banks may still have an opportunity to regularly revisit their vision as these transformations manifest themselves. - Reinforcing digital governance Banks lag behind other industries in cross-silo coordination of digital initiatives. Management of digital transformation is fragmented within most banks: initiatives are coordinated across silos, such as functions or regions, in only 30% of the cases. Business cases are often required, but results are rarely assessed. - Promoting change The importance of digital is well communicated in banks. In about two-thirds of the banks we surveyed, the top management of the company is actively promoting a vision of the future that involves digital technologies. However, there remains a wide gap between communicating a vision and engaging employees in a cultural transformation. Only a minority of the respondents report that the company is promoting the necessary cultural changes. - Developing digital skills Banks have higher digital skills than other companies on average. However, only a slight majority of companies report having the necessary digital skills in areas such as digital leadership, mobile or social media. Although figures are higher for analytics, stronger skills may be necessary across the board to advance digital maturity. Sources: 1- See Capgemini and EFMA World Banking Report, 2011 2- See Capgemini and EFMA World Banking Report, 2012 6. Acknowledgments We would like to extend our sincere thanks to the executives who took the time to respond to our survey. We would also like to acknowledge the significant contributions of our colleagues from the Digital Banking Center of Excellence for their support in interpreting these results. Contacts For more information, please contact: Global Xavier BENOIST-LUCY firstname.lastname@example.org Jean COUMAROS email@example.com Belgium China Finland France India Robert VAN DER EIJK firstname.lastname@example.org Julien ASSOULINE email@example.com Anneli SAMUELSSON firstname.lastname@example.org Stanislas De ROYS email@example.com Romain DELAVENNE firstname.lastname@example.org Netherlands Norway Spain Sweden USA Marien VAN RIESSEN email@example.com Jon WAALEN firstname.lastname@example.org Fernando BELLON DE AGUILAR email@example.com Krister RYDMARK firstname.lastname@example.org Seamus McMAHON email@example.com United Kingdom Germany, Switzerland, Austria MENA Italy Phil FALATO firstname.lastname@example.org Klaus-Georg MEYER email@example.com Jawad SHAIKH firstname.lastname@example.org Roberto MANINI email@example.com About the Research on Digital Transformation This analysis is based on data collected during the second year of our joint research program with the MIT Center for Digital Business. For more information about the research, please contact: Didier BONNET Managing Director and Global Head of Practices at Capgemini Con