Global Banking & Securities

Reshaping retail banking

for the next normal
Retail banks have a prominent role to play in guiding the world toward
economic recovery, while preserving the health of their organizations.

by Chandana Asif, Klaus Dallerup, Stephanie Hauser, Alia Parpia, and Zubin Taraporevala

© Getty Images

June 2020
 The COVID-19 health crisis has reshaped the configurations. Call centers may be transformed to
global economy and society. Retail banks, like remove up to 30 percent of less customer-centric
most companies, face an urgent imperative and lower value-added activities. Digital sales
to reimagine themselves, with COVID-19 and servicing will accelerate markedly and the
accelerating consumer behavior shifts and remote advisory channel should finally come of age,
causing significant earnings challenges given potentially handling 35 percent of complex needs
the tough macroeconomic context and extensive remotely.
risk of financial distress for both consumers and
businesses. As revenue growth and customer relationships
come under pressure, banks may want to rethink
Although overall revenue declines are expected their revenue drivers, looking for new product
to be in line with those of recent significant launch opportunities, as well as reorienting
downturns (the global financial crisis of 2008- offerings toward an advisory and protection focus.
09 and the European sovereign debt crisis Advanced analytics can help identify relevant
of 2011-12), revenues after risk are expected niches of prudent growth, but should be coupled
to experience sharper declines. McKinsey’s with a transformation of digital sales journeys and
modeling of COVID-19’s impact¹ projects a drop of marketing. M&A can also be an important lever, as
16 to 44 percent for Western Europe.² “programmatic” acquirers have outperformed their
industry peers in prior downturns.⁶ We anticipate
Additionally, consumers’ banking preferences multiple potential plays for inorganic growth,
are rapidly evolving. In Italy, Spain, and the US, including by full-scale retail banks lacking the scale
15 to 20 percent of customers surveyed expect or balance-sheet mix to succeed independently,
to increase their use of digital channels once and by fintechs offering superior customer
the crisis has passed; in other markets that experiences but insufficient scale or funding to
percentage ranged from 5 to 13 percent.³ Notably, survive.
preference for handling everyday transactions
digitally is as high as about 60 to 85 percent Retail banks can also reinvent approaches to risk
across Western European markets, even for and customer assistance solutions, to fulfill their
customers 65 years of age or older. societal purpose and mitigate credit impairments
that could be comparable to those of the global
Many banks have yet to see this mindset shift financial crisis of 2008-09. Forward-looking
translate into actual user behavior,⁴ perhaps due credit models can be re-engineered for increased
to limitations of their digital capabilities. Should accuracy using real-time transaction data, and
these emerging preferences become banking’s also to reflect government actions by customer
post COVID-19 “next normal,” retail banking segment, sector, and geography. Mitigating
distribution will experience up to three years of credit impairments requires data-driven triage
digital preference acceleration in 2020.⁵ In some to differentiate between borrowers likely to grow,
markets, this may translate to 25 percent fewer those facing temporary liquidity or business
branches, with those remaining performing a model challenges, and those truly structurally
different set of activities with more flexible job impaired. These segments will require bespoke

1
Based on the A1 scenario explained in: Sven Smit, Martin Hirt, Kevin Buehler, Susan Lund, Ezra Greenberg, and Arvind Govindarajan,
“Safeguarding our lives and our livelihoods: The imperative of our time,” March 2020, McKinsey.com. Numbers updated as of April 23, 2020.
2
McKinsey Global Banking Pools; Bank of England, Office of National Statistics; annual reports (Western European countries include Germany,
UK, France, Italy and Spain).
3
McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany, Sweden,
China and USA (1,000 representative consumers each).
4
Finalta Remote Banking Pulse Check Benchmark 2020. Includes more than 120 banks, corresponding to more than 400 million active
customers across more than 40 countries. Results as of 27 May 2020.
5
The expected increase in digital banking adoption corresponds to a leapfrog of three years for the US and one to two years for countries like
the UK and Spain when compared to historical data from the McKinsey Consumer Financial Pulse survey, Eurostat, and the FDIC National
Survey.

2 Reshaping retail banking for the next normal

treatment across a broader palette of options, trends, punctuated with some additional
including engagement through a pre-collections factors prompted by unexpected shifts in the
multichannel offering. operating environment, especially for actions
related to credit risk and opportunities to
To position for success in this new environment, rejuvenate trust-based relationships.
speed is of the essence. In recent weeks banks
have proven themselves able to move faster
than imagined. Those responding to these 1. Is your distribution strategy
trends with the same agility they adopted during configured for up to three years of
the crisis will emerge better prepared for the digital preference acceleration?
future. COVID-19 has accelerated longstanding
consumer and business shifts away from the
In this context, Western European and US branch and toward digital channels. Assuming
retail banking leaders can reflect on four main that digital channels become the default
questions: sooner than previously expected, the role of
the branch will necessarily evolve, although
1. Is your distribution strategy configured human-centered support will remain essential
for up to three years of digital preference especially in transitioning to new models.
acceleration?
Interestingly, McKinsey research reveals
2. Can you rethink revenue drivers to deliver the digital preferences of older Western
above-market growth, both organically and European consumer cohorts (ages 51-64
inorganically? and 65+) aligning for the first time with those
of younger demographics for most banking
3. Have you transformed your approach to services (Exhibit 1).⁷
credit risk and customer assistance
adequately for the new environment? In addition to an uptick in digital intent,
there has been a decline across markets
4. Can you maintain and reinforce the rapid in consumers’ desire to visit branches for
pace of decision-making established transactions—shifts that may stick for the
during the crisis to continue making the right long-term. As a result, distribution channels
decisions faster? will look very different in the next normal.

To enable their success in the next normal, If banks are successful in converting these
banks can also consider how to rejuvenate stated customer preferences into actual
their trust-based relationship with society, behavior, digital is expected to become the
pioneering a new social contract in the face of default channel for most customers and the
COVID-19. sole sales and service channel for many. We
estimate that 80 percent of simple servicing
None of these elements are entirely new; transactions and two-thirds of simple product
instead they reflect accelerations of existing sales could be digitally fulfilled, particularly in

6
In the December 2007 to December 2011 downturn, programmatic acquirers (> 2 small/midsized deals/year, with meaningful total market cap
acquired [median of 15 percent]) generated a median excess TRS of 1.19 percent vs. 0.89 percent for selective acquirers (≤2 deals/year, where
cumulative value of deals is >2 percent of acquirer market cap), -0.04 percent for organic growers (≤ 1 deal every 3 years, where cumulative
value of deals is <2 percent of acquirer market cap), and -4.55 percent for large deal acquirers (≥1 deal where target market cap was ≥ 30
percent of acquirer market cap). n=1,645, including North American and European companies that were publicly traded between 2006 and
2011, and that had revenue >$1 billion in both 2007 and 2009. Source: Capital IQ.
7
McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany and
Sweden (1,000 representative consumers each).

Reshaping retail banking for the next normal 3

 Exhibit 1
Age
Age isisno
nolonger
longer a differentiator
a differentiator for retail
for retail banking
banking digitaldigital preferences.
preferences.

Internet/mobile banking preference by activity across age groups,¹ % of respondents by market²

Highest observed, % XX Average across 6 markets,² % Lowest observed, %

100%
85 82
82
75 77
74
72
70 59
57 57
70 67 50
62 64
50%

37 27 26
35 32 29 19 23
20 22
23 23 21 17 16
18 12
0% 11 16 10

Age
18–34 35–50 51–64 65+ 18–34 35–50 51–64 65+ 18–34 35–50 51–64 65+
Groups

Everyday transactions³ Simple needs⁴ Complex or ad-hoc activities⁵

1
Q. Please indicate which channel you prefer for each of the following banking activities: […] Internet banking (eg, via tablet application or bank's website), mobile
banking (via smartphone application or mobile website).
²Sweden, France, Italy, UK, Germany, and Spain.
3
Credit/money transfer transactions and balance inquiry.
4
General information on products and open account.
5
Advice on complex products, questions, complaints, other services, and getting help.

countries where significant digital inroads have a four-fold higher global rate of inbound calls
already been made. This is already the reality for per active customer (1.6 vs. 6.4) for banks with
some banking leaders—in 2019, the top 10 banks immature digital journeys. The challenge is
in developed markets had 80 percent of their not only to improve digital service journeys but
customers digitally active (60 percent on mobile also to minimize agent time spent on low-value
apps).⁸ activities suitable for “human-like” interactive
voice response (IVR) resolution. For complex
Human-centered remote channels will evolve service needs, we expect banks to adopt flexible
significantly, but remain essential. In the wake approaches to deploy distributed talent pools.
of COVID-19, branch closures led to call volumes Remote access, including advisors working
spiking by one-third and wait times more than from branches, call centers, and home offices,
tripling between December 2019 and April will become a key component of supporting
2020.⁹ This pattern likely reflects lagging digital customer needs not easily migrated to digital.
capabilities, as poorly designed or missing With a handful of leading retail banks being able
digital features force customers to call their to handle 50 percent of all complex needs via
bank; pre-COVID-19 Finalta research indicates remote, we believe 35 percent can serve as a

8
Finalta Digital and Multichannel Benchmark 2019.
9
Finalta Remote Banking Pulse Check Benchmark 2020. Includes more than 120 banks, corresponding to more than 400 million active
customers across more than 40 countries. Results as of 27 May 2020.

4 Reshaping retail banking for the next normal

 fair mid-term target, with wide variances across more flexible job configurations. Interestingly,
markets. given many banks have successfully redirected
front-line staff into urgently needed support
Branches’ focus will evolve to assisting customers’ roles—often working from the same location—
complex needs. Although COVID-19 has this may change the equation on branch closures,
accelerated the decline in branch preference (10 enabling banks to keep more marginal branches
to 25 percent of customers in Western European open than previously considered, assuming
markets intend to visit less frequently going advisors can be productively deployed on critical
forward), 30 to 50 percent still prefer this channel customer-related tasks.
for assistance with complex products and issues,
according to our Financial Decision Maker Pulse Banks in different countries entered the COVID-
Survey. Branches will increasingly feature self- 19 crisis from varying branch and digital starting
service (including intelligent ATMs10 and in-branch points; naturally, not all will proceed to the
kiosks), with limited cash availability at counters next normal at the same pace (Exhibit 2). For
given dramatic recent usage declines. In the instance, while banks in Spain, Italy, and the US
next normal, the percentage of basic banking face greater shifts in digital servicing, those in
needs handled in-branch could be as low as 5 Sweden are already more digitally advanced and
percent. This will have significant implications can focus on digital sales tool development.
for the required mix of branch staff, with much

10
Intelligent ATMs are kiosks with functionalities beyond basic services; e.g., video-banking/remote teller technology, rapid dispensing
capabilities, contactless, card-less withdrawal with mobile advice, interaction between ATM and online systems and ecosystems, e.g. payout
from an app at ATMs etc.

Sidebar

Fast-tracking digital adoption

Retail banks can accelerate the digital migration of simple customer service interactions by addressing the root causes limiting
digital banking usage, including security concerns, inertia, lack of user confidence, and low perceived value. Simultaneously, banks
can remove friction from digital onboarding and authentication journeys, and continue to enhance functionality to achieve parity
between digital and physical services.

Globally, only half of banks can block or freeze credit cards digitally, and less than a third permit the initiation of financial
transaction disputes via digital channels, according to Finalta benchmarks. Pre-COVID-19 Finalta research indicates that 48
percent of incoming US contact center calls could be re-routed for digital resolution (e.g., transaction, balance and billing inquiries
and peer-to-peer fund transfers).

By fast-tracking the transformation of sales journeys, banks can realize digital’s potential as the primary sales channel for new
and existing customers. This will involve accelerating the automation of credit decisioning, digitizing end-to-end customer lending
processes, leveraging advanced analytics and automation to speed decision making, and time to cash (the latter being especially
critical for SMEs).

Reshaping retail banking for the next normal 5

 Markets will advance towards the next normal at different paces depending on
Exhibit 2
their starting points.
Markets will advance towards the next normal at different paces depending on their starting
points.
Key metrics³ 2018 preferences

Digital servicing
Digital
for simple needs,¹ 43% 45% 50% 61% 74%
servicing
% respondents
Italy Spain US UK Sweden

Digital sales for

Digital
simple products,² 29% 36% 44% 49% 55%
sales
% respondents
Italy US Sweden Spain UK

Human-
Contact centers for
centered
simple needs (agent), 8% 7% 6% 6% 5%
virtual
% respondents
channels US Sweden Italy UK Spain

Willingness to use
remote advisory for
15% 17% 18% 21% 22%
complex needs
% respondents US UK Spain Italy Sweden

Physical channels⁴
Physical
for simple needs, 37% 35% 34% 26% 13%
channels
% respondents
Spain Italy US UK Sweden

Lower Degree of digitization Higher

1
Simple needs refers to balance enquiry, transactions, general info., account opening; complex refers to account / product questions, complaints, advice on
complex products
2
Simple products refers to current account, savings account, credit card, personal loan; complex products refers to mortgages.
3
Questions asked: i) For digital servicing, physical channels, and contact centers: Indicate which channel you prefer for each of the following banking activities. ii)
For digital sales: Respondents having bought the product in last 2 years have stated “internet banking”, “tablet banking,” or “mobile banking” channel; iii) Remote
advisory: Would you be willing to use remote advisory for complex banking needs? [only respondents answering Yes].
⁴Branch on-site: Face-to-face only.
Source: McKinsey Retail Banking Consumer Survey 2018

2. Can you rethink revenue drivers new customers. New product offerings should be
to deliver above-market growth, both aligned with emergent customer needs, many of
organically and inorganically? which have been reshaped by COVID-19. M&A can
Given a projected large-scale drop in revenues prove an efficient means to deliver such offerings
after risk, banks will be challenged to strengthen rapidly to market. We see four primary areas of focus.
customer relationships. The distribution shifts
detailed above can be leveraged to empower a Double down on digital marketing not only to acquire
more customized, analytics-driven, multichannel new customers, but also to build and strengthen
approach to engagement with both existing and connections with current ones. In 2019, banks in

6 Reshaping retail banking for the next normal

Sidebar

Adapting the talent mix of branch staff

The shift toward digital for simple services and information will likely carry significant implications for the mix of branch staff.
Roles will expand and shift, necessitating the re-skilling of talent. In-branch staff duties will become more varied, evolving to
include aspects of operations and call center work. The “universal banker” role, comprising re-skilled advisors and tellers, will
likely become increasingly critical. We envision relationship managers becoming location agnostic, performing most duties
remotely. Branch managers will assume the role of sales-driving leaders/coaches across distributed teams and branches.

Each of these roles will require digital and data fluency to effectively shift the customer interaction model. This necessitates
front-line colleagues operating on compatible architecture integrating audio, data, and voice channels for both reactive calls and
pre-scheduled meetings.

developed markets generated only 28 percent banks typically apply advanced analytics to
of their sales from digital channels. Top 10 banks identify niches of prudent growth, accurately
in developed markets rapidly grew this channel predicting the best loan offer recipients,
to 65 percent, up from 36 percent in 2016, whose credit lines to increase, and who needs
according to Finalta. Concerted effort is required asset allocation assistance, thereby building
to optimize investment within digital channels stronger relationships while simultaneously
and across the acquisition funnel to align with helping customers optimize their finances.
customers’ shifting preferences and needs.
Those banks able to create digital interactions
Given the analytical nature of digital marketing, approximating a one-on-one dialogue
required skill sets differ vastly from “old- rather than mass communication, offering
fashioned” marketing. Its teams more closely customized advice to achieve customers’
resemble Math Men than Mad Men. Banks’ financial goals, are likely to excel on this
required growth levers include digital traffic front. The same lessons apply to in-person
generation, existing customer engagement, advisory conversations. Before scheduling
and conversion. Leading digital banks leverage a customer interaction, leading banks
multiple marketing channels and customize proactively reach out based on analytical
strategies to customer segments, in combination engine output highlighting relevant customer
with a sharp focus on developing truly exceptional needs (e.g., impacts from wage decreases,
customer journeys. heightened financial risk, spending patterns,
migration opportunities to better suited
Adopt more tailored customer conversations, products). Customers are engaged through
leveraging advanced analytics and a multichannel their preferred channel and offered flexibility
approach. McKinsey research confirms that in future interaction, including via convenient
customers who receive personalized bank offers remote capabilities. Meetings conclude
across multiple channels are more than three with feedback sharing, sharpening future
times as likely to accept, compared to those customer experience.
receiving offers via a single channel. Successful

Reshaping retail banking for the next normal 7

 New offerings should incorporate emerging 3. Have you transformed your
customer needs, some of which have shifted due approach to credit risk and collections
to the COVID-19 crisis. Younger consumers in key adequately for the new environment?
Western markets are finding it difficult to obtain More than ever, banks must strike a balance
credit, while almost half of consumers age 55 or between being there for customers in financial
older have unsurprisingly grown more concerned distress and prudently managing credit losses.
about having adequate retirement income.11 COVID-19’s financial impact on consumers and
Among UK SMEs, roughly half express greater SMEs is profound—35 to 50 percent of consumers
urgency to provide online payment options, in key Western European markets state they will
according to a McKinsey SME Pulse Survey run out of savings by August 2020 if unemployed,
conducted in April 2020. according to our Financial Decision Maker Pulse
Survey, and one in three small businesses in the
Although other factors certainly enter the UK believe they will be out of business by the same
equation, retail banks should consider these date absent improvement in conditions, according
emergent needs when designing new products to our SME Pulse Survey. Concurrently, consumers
and services. Examples could include lending in some Western European markets express
products for customers with non-standard increased willingness to walk away from debt and
income profiles or impaired credit histories due loans given their current situation.12 Given the
to the crisis. Banks can also assist customers unprecedented nature of the current crisis, banks’
in securing insurance, as well as providing existing credit risk models and approaches are too
longer-term pension planning guidance. With retrospective and do not sufficiently capture sector
customer shopping behavior increasingly shifting implications and government initiatives to provide
online, helping SMEs scale their online presence, meaningful guidance.
including facilitating digital point-of-sale loans or
leasing, could also prove beneficial. Here we see two sets of suggested actions:

Finally, banks could explore partnerships or Reinvent credit-decisioning frameworks through

strategic M&A with other banks or with fintechs. sector analysis and high-frequency analytics. As
Targeted proactive investments, including plays discussed in our May article,13 banks will have to
that offer scale, talent, and complementary adjust their data and methodologies to reflect the
assets, can strengthen retail banks’ position next normal. COVID-19 credit insight is rapidly
going into the next normal. Given declines in evolving from the “educated guess” approach
global fintech funding in excess of 50 percent deployed at the onset of the crisis based on
since December 2019, banks should remain understanding sector macro-variables, to a data-
alert for acquisition candidates capable of driven and client-level approach, assessing the
generating new revenue streams at reasonable resilience of borrowers using real-time transaction
valuations. Such moves could help fast-track the data. In reinventing their approach to credit risk, it
continuous innovation and data-driven customer is important for banks to adopt a sector-specific
engagement necessary for success or enable view for SMEs in particular, given COVID-19’s
banks to move into adjacent areas as part of a varied impact on specific verticals. For instance,
broader ecosystem play.

11
Range of 30-75 percent. McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy,
Spain, Germany, Sweden and USA (1,000 representative consumers each).
12
McKinsey Financial Decision Maker Pulse Survey run in mid May 2020; countries surveyed include UK, France, Italy, Spain, Germany, Sweden
(1,000 representative consumers each).
13
Marie-Paule Laurent, Olivier Plantefève, Maribel Tejada, and Frédéric van Weyenbergh, “Banking models after COVID-19: Taking model-risk
management to the next level,” May 2020, McKinsey.com.

8 Reshaping retail banking for the next normal

 in Spain the grocery, retail, and pharmaceutical Similarly, it is important that banks differentiate—
industries are expected to experience relatively to the extent possible—temporary impacts
low demand shocks in 2020 and to bounce back from fundamental deterioration in customers’
quickly, whereas industries like leisure, hotels, and underlying financial health, by pressure testing
transportation will undergo high demand shocks individual clients’ financial ratios and indicators
and endure slow recoveries (Exhibit 3).14 under different COVID-19 scenarios. As the

14
ODIN, COVID-19 McKinsey scenario model.

Exhibit 3
Sectoranalysis
Sector analysis reveals
reveals P&LP&L shock,
shock, recovery
recovery paths,
paths, and and
major major differences
differences
between subsectors.
between subsectors.

Estimates of fall in demand in 2020 vs. recovery trajectory scenarios¹

High level estimation Example for Spain Income shock intensity

Low Medium High GVA² contribution
Demand shock 2020, % over 2019
-60 Hotels
-55 Leisure
Transportation
-50
-45
High -40 Food service

-35
Real estate
-30 Automotive
Pharmaceutical Logistics
-25 industry Construction
Energy and Retail and distribution
-20 supplies
Medium -15
-10
Industry—rest Agriculture
-5
Professional
0 services Telecommunications
Low Retail—groceries
5 Industry—consumer goods
10
15
Quick Medium Slow
Recovery timeline—return to pre-crisis levels

A1 scenario of McKinsey Global Institute simulations.

1

Gross value added (ie, GDP + subsidies – product taxes). Includes 65% of the GVA of the Spanish real estate industry corresponding to "owner-occupied”
2

rentals.
Note: Figures based on a sample of +500k SABI companies; Impacts shown are a summary of more granular calculations and estimates; excludes financial and
insurance activities, defense, health and social security, and education.
Source: SABI (e.g. 500k companies), Eurostat; McKinsey, in association with Oxford Economics

Reshaping retail banking for the next normal 9

 crisis evolves, banks can also develop analytics Banks will need to institutionalize these working
allowing them to monitor customers’ recovery models, maintaining the accelerated pace once
paths in the absence of traditional early-warning the near-term crisis has abated. Early evidence
indicators, leveraging short-term early-warning suggests that companies that were already
systems using real-time transaction data. embarked on an operating model transformation
for speed responded more swiftly to COVID-19
Collections operating models will likely need to and that there is a strong correlation between
be rethought. Consistent with the importance the level of agile maturity and rapid response
of leading the collective recovery effort, banks in launching COVID-19-relevant products and
can approach loan workouts with the mindset of services.
helping customers regain financial health.15 Banks
can update segmentation models for delinquency, In order to build speed, flexibility, and resilience
using data to inform proactive outreach to into their operating model, banks can take action
financially vulnerable customers, and tailoring risk- across three main dimensions:
mitigation actions and client engagement.
As an example, contacting digital-first customers Consider pursuing flatter organizations,
through their preferred channel has been shown leveraging this unique opportunity to measure
to boost installment payment upticks by more than value-added productivity across the workforce
10 percent, according to a 2018 McKinsey survey. and establish organizational baselines centered
A digital approach is also likely to yield positive on roles that truly matter. This baseline can aid
results with customers whose financial troubles the transition to smaller, cross-functional teams
are solely due to the crisis and who are highly comprised of what we characterize as “decision
motivated to avoid going into default. Through makers” and “doers”—a model that has proven
these actions, banks can also anticipate peaks to be effective for banks. Once roles have been
in monitoring and collections activity projected rationalized there is a further opportunity to
for the second half of 2020. Resources can be rethink the location of work, benefiting from
reoriented and upskilled from other areas (e.g., remote options (Exhibit 4).
underwriting and credit monitoring) to manage
these spikes. Explore options to re-architect decisions for
speed by simplifying processes; for example,
shifting from sequential consultations with
4. Can you reinforce the rapid pace of multiple stakeholders to fewer, parallel
decision-making established during consultations involving only required leaders.
the crisis to continue making the right The calculated risk attached to this approach
decisions faster? empowers leaders with judgment and character
In the period since COVID-19’s emergence, banks to make decisions at a sustainable speed.
have executed major initiatives (migration of tens
of thousands of employees to remote settings, Finally, retail banks can reorient toward digital by
disbursement of new stimulus program funds) adjusting resource and investment allocations,
at speeds previously thought impossible for the making pragmatic technology decisions and
sector. As one powerful example, a European rapidly upskilling the workforce to become more
bank acted on 104 key decisions in a single week, digital and data-fluent. Banks may also consider
which would normally have required four months. new organization structures that place digital at
Moreover, as risk/compliance teams audited the the heart of the bank.
actions immediately after, they did not identify a
single error.

15
Ademar Bandeira, Bruno Batista, Adelmo Felipe, Matt Higginson, Frédéric Jacques, Frederico Sant’Anna, and Alexandre Sawaya, “Addressing
the needs of customers in delinquency impacted by the coronavirus,” March 2020, McKinsey.com.

10 Reshaping retail banking for the next normal

Exhibit 4
Retailbanks
Retail banks can
can rethink
rethink the the location
location of work.
of work.

Banking
Other back-office
Core operations and functions and relationship-
technology roles may based roles can
require continued successfully be
in-office presence performed remotely

Core operations— Finance/treasury

High
Functional role is core payment processing, Risk
to resilience and settlements Other operations
operations in the Critical technology Loan officers/credit
current environment infrastructure support analysts

Moderate
Criticality to Functional role is Relationship
ongoing essential to Other customer managers
operations / competitiveness in the Executive team service eg, telephony/ Strategy and
resilience and current environment contact centers corporate
future but not required for development
sustainability continued operations

Low
Segment is neither Tellers Selective middle
Bill and account
core to resilience nor Branch managers and management rales
collectors
essential for network leadership
competitiveness

Continuous Partial Fully remote

Onsite critical Physical presence Physical presence Only rare or no physical
essential for beneficial to presence needed for
Onsite flexible productivity and productivity and productivity and
effectiveness effectiveness, but effectiveness
Virtual/remote not essential

Re-skill, reduce, or remove Extent of physical presence needed for productivity

Source: McKinsey analysis

Reshaping retail banking for the next normal 11

 Given their critical role supporting economic stem from banks’ proactive outreach and speedy
and social recovery, the COVID-19 crisis places delivery of relief.
financial institutions in the spotlight. This creates
a rare, mutually beneficial opportunity for banks As banks navigate the crisis they can consider
to rejuvenate their trust-based relationship with taking on a broader role in guiding customers as
society. well. Examples of economic and social stewardship
include helping customers understand their
Arguably, they face an urgent imperative to do so. financial situation, rethinking credit strategies to
According to a McKinsey survey, trust in banks ensure appropriate lending, creating dedicated
has declined compared to pre-COVID-19 levels financing lines to help business solvency, and
in several markets. Further, most customers in remaining thoughtful about collections.
Western markets perceive their bank relationships
as merely meeting expectations at best, with banks In the longer term, banks could consider how
in a majority of markets falling short of customer best to extend these societal commitments and
expectations (Exhibit 5). Exceptions exist in the reflect them in their values, business models, and
UK and US, where a net positive perception may offerings. This becomes a matter of finding new

Exhibit 5
MostEuropean
Most European retail
retail banking
banking customers
customers have neutral
have neutral relationships
relationships with their
with their banks.
banks.

Performing below expectations Performing above expectations

Bank performance across markets¹,
percent of respondents Share of neutral
Net perception,³ % respondents,² %

Spain -28 12 -16 60

France -20 5 -15 75

Italy -19 9 -10 72

Sweden -14 6 -8 80

Germany -13 8 -5 80

US -17 20 +3 63

UK -8 18 +10 73

Q: How is your bank meeting your expectations during the COVID-19 crisis in serving your needs?
1

Share of consumers stating that their banks meets their expectations.

2

Net perception calculated as top two box minus bottom two box responses in a 5-point scale.
3

Source: McKinsey Financial Decision Maker Pulse Survey, May 2020, N = ~1,000 per country for UK, Italy, Sweden, France, Germany, Spain and USA

12 Reshaping retail banking for the next normal

ways to help, rather than taking unnecessary A recent McKinsey article16 set forth a five-
risks—no one is served by losing access to stage call to action applicable across industries
financially stable banks. emerging from the COVID-19 battle: Resolve,
Resilience, Return, Reimagine, and Reform.
Juggling a shift to digital and reinforcing client
relationships while making major operating
Retail banking leaders can play a prominent role in model adjustments and rethinking end-to-
shepherding the world toward economic recovery end credit risk portfolios is no mean feat. It is
in a socially responsible manner, while preserving therefore critical that retail banks mobilize their
the health of their organizations. Their role in plan-ahead teams now, prioritizing Reimagine
reacting to immediate needs—as more countries responses as societies enter their Return phase.
emerge from lockdown—makes it more challenging Hopefully our four questions can serve as a
to prepare their organizations to respond and foundation for this essential undertaking.
adapt to the next normal.

Chandana Asif and Alia Parpia are partners and Stephanie Hauser and Zubin Taraporevala are senior partners, all in
McKinsey’s London office. Klaus Dallerup is a partner in the Copenhagen office.

The authors wish to thank Ashwin Adarkar, Eva Beekman, Nuno Ferreira, Vito Guidici, Debasish Patnaik, Marcus Sieberer,
David Tan, and Marco Vettori for their contributions to this article.

Copyright © 2020 McKinsey & Company. All rights reserved.

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Kevin Sneader and Shubham Singhal, “Beyond coronavirus: The path to the next normal,” March 2020, McKinsey.com.

Reshaping retail banking for the next normal 13