New data from Kearney strikes balance between digitalization and essential in-person banking

Analysis of the world leader in management consulting Kearney found that 21% of Europeans in 2022 never visit a bank branch and do their banking remotely – a figure that nearly doubled during the pandemic, from 12% in 2019.

Now in her 13e year Kearney’s European Retail Banking Radar is an annual analysis of the pan-European banking market, drawing on surveys and proprietary data from 89 banks in 21 countries across Europe.

The growth of digital channels is clear: 55% of Europeans prefer to search for their next bank account or card online; 49% for savings and consumer credit; and 46% when looking for a mortgage.

This has a noticeable effect on physical interactions, as 21% of Europeans in 2022 say they never go to a bank branch and 26% say they only go to a branch once a year. However, the study also found that a small core of consumers (21%) still visit a physical branch at least once a month, showing that European banks need to maintain a delicate balance between investing in digital and physical channels, particularly leveraging the role of their advisors.

The financial products that consumers most often prefer to buy through digital channels are transactional products (48%), savings products (45%) and consumer loans (43%). However, 61% of consumers would choose to purchase mortgage products in person, showing that face-to-face advice is still important for many consumers, especially for larger or more complex products. Indeed, mortgages saw the largest drop in digital preferences between 2021 and 2022, dropping from 47% to 39%.

Despite the importance of personal interaction, the continued growth of price comparison websites and integrated finance challenges the traditional role of banks in the ecosystem, threatening both the ownership of their customer relationships and their sources of income.

The data shows that this disintermediation can be seen for the first time in middle-aged consumers. The number of 35-54 year olds who never go to the bank has nearly doubled during the pandemic, with 25% now doing all of their banking through digital channels.

Other findings include:

  • The products that consumers most prefer to buy on digital channels are transactional products (48%), followed by savings (45%) and consumer loans (43%).
  • Across all European markets, 37% of all respondents who used Buy Now, Pay Later (BNPL) used it from a non-bank provider, while 47% took advantage of this option from a bank traditional.
  • UK and Germany are paving the way for BNPL outside the banking sector, with 80% supplied by alternative providers, which now pose a growing threat to retail banks

Simon Kent, Global and Europe, Financial Services at Kearney, comments:

“Banks have already made a strong commitment to going digital first, both in terms of customer interactions and day-to-day operations. However, given continued cost pressures, they need to carefully prioritize their digital investments, understanding which part of the customer journey needs to be fully digital across all channels.

The bank’s professional role as an advisor is important to many consumers and therefore offers a major advantage over digital native neobanks. Here, retail banks have the advantage of experience, so they can offer the best of hybrid digital-physical channels”

Daniela Chikova, Partner at Kearney, comments:

“The data we have compiled in this year’s Radar clearly shows that an increasing priority for banks must be to develop an end-to-end digital capability for all products, making them intuitive and easy to use while offering new services to compete with digital native neobanks.

Progress needs to be faster and not just for simple journeys like opening a checking account, but considerations of physical presence and consumer preferences cannot be dismissed in the name of progress. A careful balance is needed for the years to come.

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