Post-pandemic digital adoption in banking is continuing to accelerate across Europe. Many banks are using this growth to provide a more complete mobile service compared to other industries, such as teaching and healthcare, which have reverted to a pre-lockdown approach.
This is one of the key findings of the third annual Digital Sentiment Survey from management consultancy firm McKinsey, which shows banking – along with entertainment – is leading the way in mobile adoption and fully digital interactions.
McKinsey’s 2022 Digital Sentiment survey report highlights:
- Banking is a leading industry in Europe for digital adoption, with around 80% of digital users interacting with the industry fully digitally.
- Banking is the most resilient industry when it comes to digital adoption.
- Significant opportunities exist for banks to create more revenue-generating interactions.
However, banks are struggling to profit from the digital channel, with less than 30% of online transactions such as funds transfers or direct debits generating revenue. The cross-industry survey of 19 European countries found that the banking and insurance sectors garner significant growth by digitising more complex transactions that users still mainly do in person or via paper, such as insurance claims.
Spain’s third-largest lender, CaixaBank, sees greatest profitability from users of both branches and the digital app. CEO Gonzalo Gortázar says: “When we look at branches, the omnichannel customers are on average three times as profitable as customers that are not omnichannel.”
The user experience
Meanwhile user experience/user interface (UX/UI) is bank customers’ biggest bugbear, according to the McKinsey survey. Customer satisfaction with digital experiences fell by 4 percentage points (pp) over 2021; and across Europe, the biggest concern on digital is UX/UI at 28%, compared with just 5% of users who expressed concern over fraud.
Some 60% of European users surveyed said they would consider a fully digital solution for all their banking needs. “Users are asking for more functionality, for more capabilities, for more digitised end-to-end processes, for a full banking experience,” explains Benjamim Vieira, survey report co-author and McKinsey partner. “It was quite striking for us to find out that there is an inflection point where people are now saying, ‘Look, this is great. But if you want this engagement to continue, you need to reinvent the customer interface’.”
German challenger bank N26 expects to see further shifts in market share as the adoption of digital banking accelerates. “Not all will succeed,” says N26’s chief growth officer Alex Weber, who supports the finding. “Those with a strong product and sound business model will have an edge, but in the end, a customer experience that relies on a simple, easy user interface will win.”
The McKinsey survey found consumers’ trust in digital channels to be down by 2pp compared with 2021. The main sources of distrust are the handling of personal data and cyber attacks. However, this is down to a combination of an inevitable growth in errors, wide publicity over cyber attacks across Europe and a resumption of hacking attacks, which fell at the start of the pandemic, according to Mr Vieira. When hacking resumed, this inevitably resulted in year-on-year growth in attacks, he says.
The survey also uncovered significant regional differences across Europe. Austria and Germany, for example, saw digital adoption in their banking sectors rise by 17pp and 14pp, respectively. Yet the two countries came only 10th and 13th out of 19 in terms of digital adoption. Italy came in first and Spain was seventh in terms of post-Covid-19 digital activity.
The pandemic has helped to accelerate growth in digitisation throughout Europe, according to N26. “European banks closed thousands of branches and consumers needed a solution that enabled them to do their banking completely remotely,” says Mr Weber.
Banks across Europe seem satisfied to receive firm evidence that they are leading the way with digital engagement. However, there is still some way to go before the end-to-end digital banking app demanded by a growing number of survey respondents can be made available, not least because of regulations demanding the customer’s presence at points such as mortgage applications.
