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White Paper
Seismic Shifts: Retail Banking in the Wake
of COVID-19
Thorsten Brackert, Mindy Hauptman, Byron Marshall, Holger Sachse, Bjorn
Schwarz, Aldo Tolentino & Monica Wegner
September 2020

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BOSTON CONSULTING GROUP SEPTEMBER 2020
he COVID-19 pandemic has accelerated the migration of retail banking
customers throughout the world towards digital channels. Worryingly for less
digitally adept banks, they will very soon wake up to find that a significant
proportion of both first-time and more experienced users of online banking are turning
to this channel much more than they even do today, while also frequenting branches a
lot less. It now seems clear that the crisis has already brought about fundamental
changes in customer behavior that have reshaped retail banking for good. Retail banks
should urgently reassess their distribution strategy to see how best to capture the
customer zeitgeist.
These are among the key findings of BCG's Retail Banking Excellence Benchmark
(REBEX) survey, a comprehensive and unique study of 17,600 retail banking customers
in 30 countries conducted between mid-May and mid-June 2020.1
The survey offers
much food for thought for bank leaders, and lays bare very considerable risks and
opportunities for their organizations. In this paper, we will set out the most eye-catching
and significant results from the survey, and explore the critical implications for banks.
As the current crisis drives customers to move in even greater numbers from traditional
to digital channels, established incumbent banks need to make appropriate investments
in response, and improve the digital customer experience they offer. If they do not do
so, there is the danger that many of their now more digitally aware customers will
defect to nimble and innovative digital challenger banks. With footfall in branches
greatly reduced, banks will also need to think carefully about how much physical space
they really need and how to put it to best use. This will be a complex decision, based on
a nuanced picture. Our survey also shows that a smaller group of customers will use
branches more than they did previously, possibly because they believe they will need
more financial advice in turbulent economic times.
1
BCG conducted online interviews with 17,600 respondents in 30 major retail banking markets throughout
the world between 18th
May and 19th
June 2020.
T

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BOSTON CONSULTING GROUP SEPTEMBER 2020
During this period of uncertainty, many consumers have postponed purchasing
decisions, including for financial products such as insurance, investments and pensions.
At the same time, our survey reveals that a significant proportion of customers, younger
ones in particular, are open to switching banks in the next few months. Market shares
are therefore up for grabs if banks are able and prepared to meet the increased demand
for financial advice and to provide the digital service and experience that customers
seek.
There is no time for hesitation for banks - the window of opportunity is now. Customers
were willing to put up with merely adequate service as they hunkered down during the
crisis. Now, as things gradually settle down, their expectations are likely to rise
commensurately. Banks have to anticipate these rapidly developing customer needs,
getting ahead of demand with a revamped distribution model and relevant products and
sales strategy.
The pandemic and customer response
The use of digital banking, especially mobile banking, has increased substantially during
the COVID-19 crisis. Indeed, almost one in three of all customers, and one in two
customers aged between 18 and 34, say they have used mobile banking more than they
did before the crisis. (See Exhibit 1).

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BOSTON CONSULTING GROUP SEPTEMBER 2020
A large cohort of first-time users is partially responsible for this trend. Around one in six
respondents to the survey said they had never used online banking or mobile apps until
the crisis hit. Younger customers were more likely than older generations to say they
had registered for online banking for the first time.
The trend towards digital banking is set to continue after the crisis. Around a quarter of
respondents say they are likely to use online banking even more as time progresses.(See
Exhibit 2). What is more, those who signed up for online banking for the first time
during the crisis, primarily out of necessity due to branch restrictions, are equally likely
to say this as more long-time users. (See Exhibit 3).
Customers’ increasing comfort with digital channels comes across repeatedly in our
survey. Indeed, 50% of those customers who prefer branches are now willing to manage
an account digitally if branches were unavailable, instead of delaying a purchase or
opting for another provider.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
Cashless payments represent another area to have received a major boost during the
crisis. More than 20% of respondents told us that they have increased their usage of
digital payment solutions, such as internet banking or third-party apps, and more than
10% say the same about credit and debit cards. In terms of the willingness to use digital

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BOSTON CONSULTING GROUP SEPTEMBER 2020
payments in the future, there was very little difference (less than two percentage points)
between first-time users and those who were already using them before the crisis.
The use of remote channels, such as a contact center and remote advisors, has also gone
up during the pandemic and is expected to continue to grow. The proven willingness of
customers to use such channels will be an important consideration for banks as they
revamp their distribution strategy in the wake of the crisis.
Perhaps inevitably, given widespread restrictions on access, there have been fewer visits
to branches in the vast majority of markets surveyed. We saw significant variations
between those markets, however, with already digitally mature markets unsurprisingly
registering a more moderate decline in branch usage.2
Indeed, Denmark, the
Netherlands and Hong Kong even experienced a slight uptick in branch usage during the
crisis, while around a quarter of customers in countries such as South Africa, Russia and
Greece say they have been using branches less than they did previously. (See Exhibit 4).
2
Digital maturity equates with digital competitiveness, as defined in the Institute for Management
Development (IMD)’s World Digital Competitiveness Ranking 2019

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BOSTON CONSULTING GROUP SEPTEMBER 2020
The exodus from branches seems unlikely to be temporary. In almost all countries,
respondents are more likely to believe they will use branches even less after the COVID-
19 crisis is deemed to be over. Indeed, more than one quarter of customers are planning
to either use branches less or stop visiting them altogether. That said, there is again
some variation by country, with increases in branch uses expected in Hong Kong and
Sweden. (See Exhibit 5) Younger customers are more likely than their older
counterparts to say they will visit branches more in the future, perhaps to seek financial
advisory services after such an unsettling period.
The general move away from branches to digital is reflected in the respective levels of
customer satisfaction with the various channels. Customers are most satisfied with
online and mobile banking channels, and significantly less so with branches, although of
course restricted access to the latter may partially explain this finding. (See Exhibit 6).
Given the anticipated increase in usage revealed by our survey, banks should view with
some concern that current customer satisfaction levels with remote advisors, and
especially with contact centers, leave considerable room for improvement.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
First-time users from the crisis period are less satisfied with digital channels than their
more seasoned counterparts. However, as we have seen, this relatively lukewarm initial
response may still not stop them using the channels more in the future.
Our comprehensive bank-by-bank analysis also reveals a significant variation in
customer satisfaction. Customers of challenger banks are more satisfied with their
experiences in both online and mobile channels than are customers of incumbent
banks.3
A flight to safety versus an itch to switch
Despite this greater satisfaction with the digital channels provided by the challenger
banks, traditional banks gained more trust among customers during the COVID-19 crisis
than their newer rivals. Overall, traditional banks enjoyed a net increase in trust of 12%,
compared to a net increase of 8% for challenger banks.
3
Across all markets in the study, 124 challenger banks and 414 traditional banks were identified. Challenger
banks include both digital newcomers and smaller non-incumbent banks.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
These figures may indicate some early signs of what has been a recurrent historical
trend in times of economic uncertainty and recession, in which customers tend to
gravitate towards more established financial institutions that are generally perceived to
be more secure.
However, banks need to ensure that they maintain the requisite quality of service
within all their channels. Customers’ trust in their bank was much more likely to go up
during the crisis if they were extremely satisfied with its channels. Indeed, the increase
in trust was 50 percentage points higher among the extremely satisfied cohort than
among those that are extremely dissatisfied; 25 percentage points more than among
those that are dissatisfied; and 22 percentage points higher than among those that are
neither satisfied nor dissatisfied. This trend is most pronounced for clients using contact
centers and least for those using online banking, once again demonstrating the
importance of perfecting the provision of remote human assistance.
Younger customers were more likely than their older counterparts to say that they had
become more trustful of incumbent banks since the start of the crisis. To complicate
matters, however, younger customers are more disposed to switching banks in the next
six months, and they are also more likely to feel happy depositing their money in a
digital bank. (See Exhibit 7).

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BOSTON CONSULTING GROUP SEPTEMBER 2020
This is important market information for banks to appreciate and make sense of. This is
particularly true given another survey finding, namely that a significant proportion of
younger customers are planning to delay a purchase until the crisis recedes further.
Moreover, customer responses suggest that the sales mix is set to change, with a shift
towards off-balance items such as insurance, investments and pensions. (See Exhibit 8).
We can make the case, therefore, that market shares are up for redistribution in the
near future, and that substantial revenue is there for the taking for those banks that
offer the most persuasive overall offering. The digital component is likely to be a very
significant factor when customers with purchasing intentions decide to switch to another
bank. Whereas customers dissatisfied with their experiences in a branch are five
percentage points more likely to delay a product purchase than those who were
satisfied, those dissatisfied with the online channel were 10 percentage points more
likely to do so.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
Implications for banks: Meeting accelerating demand for digital
For a number of years, bank customers have been steadily migrating towards digital
channels. The COVID-19 pandemic has squeezed what might have been several more
years of further progression into the space of two or three months. Such a sudden
acceleration in customer behavior, and the realization that these new habits are set to
become still more ingrained, demand an urgent response from bank leaders.
Let’s take American customers as an example. During the survey period, most of them
(62%) were hybrid customers, using both digital and branch channels. Meanwhile, 26%
used only digital channels and 12% relied on face-to-face communication. However, our
survey suggests that after COVID-19, the percentage using digital only will jump to 39%.
Banks cannot afford to adopt a wait-and-see approach as these developments unfold,
but instead respond with energy and commitment. Despite the high adoption of digital
channels, a large number of customers have still not used relevant features, such as
disputing transactions or managing ATM withdrawal limits online.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
Great opportunities await those banks who can rise to the task. Many customers have
left substantial sums in low-interest current accounts, delaying purchases of financial
products until the crisis settles down. And, as our survey intimates, the good news for
long-standing established banks is that customers may well view them as the safest
option during what is likely to be a prolonged period of instability.
However, incumbent banks have often been left behind in the digital space by the more
innovative challengers that have entered the market in recent years, not to mention by
the many efficient digital operators in other fields to which customers have now become
accustomed. Our survey demonstrates that, when it comes to their experience of digital
channels, banking customers are more satisfied with these challengers. Moreover,
younger customers in particular appear open to depositing money with them.
Incumbents need to expedite their digital progress just to offer what is now generally
expected, and meet the rapidly growing demand for high-class digital channels. During
the lockdown period, customers with more pressing concerns on their mind will have
tolerated merely adequate service. They may not be so forgiving in the future.
The short-term priority for banks must be to retain customers and capture the purchases
that have been delayed by the crisis. Small-scale lighthouse use cases with this dual aim
in mind, based on data analytics, can serve as models for more extensive transformation
of digital banking.
One eye, however, should be kept firmly fixed on anticipating and building for what
customers will be looking for further down the line. We have seen that there are some
customers who plan to use branches more, so banks should not simply resort to the
blunt instrument of cutting their branch network. Banks need to undertake a
fundamental review of their distribution model, in particular their branch network
footprint and the nuances of its new role, and determine how best they can meet client
needs through remote channels, such as video chat.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
It is critical that customers can start their journey in mobile channels and be offered
seamless access to human support while still in that channel. They must always be able
to enjoy such flexibility in their interaction with the bank. Although digital development
should be the priority, banks should aim to provide bionic customer journeys, blending
digital technology and human interaction to offer the right products and services. Those
banks which respond most adroitly to the shifting momentum in customer behavior can
grab significant market shares from their competitors.
The COVID-19 pandemic has had a very considerable impact on the behavior of retail
banking customers. Given the scale of the change revealed in our survey, banks should
embrace the resulting opportunities. In the short term, they should exploit the greater
trust now invested in them to capture delayed purchases and seek to retain clients. In
the medium term, their distribution strategy will require a fundamental overhaul.
Thorsten Brackert
Mindy Hauptmann
Byron Marshall
Holger Sachse
Bjorn Schwarz
Aldo Tolentino
Monica Wegner
Thorsten Brackert is a partner and director in the Frankfurt office of the Boston
Consulting Group. Mindy Hauptman is a partner and associate director in the firm’s
Philadelphia office. Byron Marshall is REBEX director for North America in BCG’s
Chicago office. Holger Sachse is a managing director and senior partner in the firm’s
Dusseldorf office. Bjorn Schwarz is REBEX director for EMEA in BCG’s London office.
Aldo Tolentino is the global director for REBEX in the firm’s Miami office. Monica
Wegner is a managing director and partner in BCG’s Sydney office.
The authors wish to express their gratitude to Ankur Patil, Richard Cummings and
Sebastian Balmaceda for their support.

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BOSTON CONSULTING GROUP SEPTEMBER 2020
You may contact the authors by e-mail at:
brackert.thorsten@bcg.com
hauptman.mindy@bcg.com
marshall.byron@bcg.com
sachse.holger@bcg.com
schwarz.bjorn@bcg.com
tolentino.aldo@bcg.com
wegner.monica@bcg.com
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