Digital transformation of the banking industry: banks underestimate the human success factor

Key insights from the study "As Banks Pursue Digital Transformation, Many Struggle to Profit from It" by Bain & Company:

• At some banks, only one in three customers is activated for online and mobile banking
• Less than half of bank staff in Europe use in-house mobile services
• If customers and employees are mobilized, this leads to urgently needed efficiency gains

In recent years, European banks have invested up to half of their transformation budgets in digital projects. However, the hoped-for success on the income and cost side has been slow to materialize in many places. Depending on the bank, in some cases only a third of customers are activated for online and mobile banking. And of these, only one in two regularly uses the digital access channels.

Banks must act now

"Many banks have so far focused too much on expanding their digital infrastructure and have failed to mobilize their customers and employees with the same level of commitment," states Dirk Vater, Bain Partner and Head of the Banking Practice Group in Germany, Austria and Switzerland. "They have underestimated the human success factor."

Mobile-first customers are now the more loyal and economically attractive clientele in Germany, Switzerland and many other countries. For industry expert Vater, one thing is clear: "Banks must now do everything they can to attract more customers to online and, above all, mobile banking."

This can be achieved in two waves. The first is communication campaigns using traditional media such as print or television to reach account holders with a low affinity for the internet. Banks should address the security concerns of these customers. Some financial institutions convince skeptics, for example, by promising to reimburse losses from digital fraud. Pioneers are also creating financial incentives in the form of at least temporarily free digital accounts or refunds for digital payment transactions.

Creating understanding for change through dialog

"If you want to make digital channels appealing to your customers, you have to plan enough time and financial resources for this," emphasizes Bain Partner and banking expert Jens Engelhardt. "In the past, many institutions were either too impatient or too cautious in this regard." In a second wave, banks could take tougher measures, such as charging additional fees for individual services in branches.

Employees play a decisive role in mobilizing customers. Here, too, there is still great potential. According to Bain estimates, not even every second bank employee in Europe uses their own bank's mobile services. Understanding for the change can only be created through dialog. If acceptance increases, the willingness of the workforce to gain further qualifications and test new ways of working will grow.

Overcoming organizational hurdles

There are organizational hurdles in many institutions. "Banks are promoting mobile banking and prohibiting the use of personal smartphones in the office, for example," explains industry expert Engelhardt. "Nobody understands this and it stands in the way of successful change." Those who remove such obstacles and involve employees in the process motivate them to use their own mobile services.
All banks must act. "If banks do not systematically migrate their customers to digital channels and mobilize their employees, they will never reap the rewards of the digital transformation," warns Vater. "And given the pressure on margins, no bank can afford to do that."