Nine years after the collapse of Lehman Brothers, two facts are clear to retail banking executives:

  1. Financial results are still bad.
  2. They are still getting worse.

Although the long awaited rise in rates in the United States may eventually restore some of the value of deposits (or drive them to pure-plays offering better terms), executives are increasingly aware that enduring increases to operating costs (e.g., Dodd Frank), decreases in revenue (e.g., card fees), and changes in customer behavior (e.g., anything from avoiding branches to avoiding debt) make it unlikely that the retail business will ever return to historic profitability levels using the historic business model.

The magnitude of internal disruption that will be required to restore earnings is daunting. For example, executives projecting the impact of changing customer behavior and technology on branch volumes conclude that in just five years retail banks will need to make roughly half of all sales using digital capability that does not exist today (Figure 1).


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This digital tipping point came suddenly. As recently as 2013, well over one-third of all customers still preferred to bank on a personal channel. Two years later that had fallen to 19%, while 23% only wanted to access their bank using technology. The remaining 58% wanted a person available for emergencies but also preferred technology.

In spite of that dramatic shift, the most important impact of the digital transformation is not on the bank’s distribution network, but on the customer’s personal network. Today the average consumer is continuously connected to a vast array of resources, which they use to manage their lives and engage in constant goal-seeking behavior (Figure 2).


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The radical transformation in customers’ daily conduct has caught most retail banks flatfooted. Executives rightly worry about the most obvious symptom: a dramatic reduction in the proportion of banking work done in the branch. But in doing so they miss the larger issue: a dramatic reduction in the proportion of consumer financial work done anywhere in the banking system. Today, consumers frequently define financially relevant goals, explore alternatives, select solutions, and stay on track without any value-added help from a bank.

For decades, retail banks have struggled to precisely understand individual customers and connect them to the right bank products through the most effective sales capability. But it’s increasingly evident that the question of how to connect customers to bank capability is the wrong question. Outside of financial services, customers regularly interact with providers that are highly individualized and instantly responsive; starkly demonstrating the difference between customer-and provider-focused services. By offering largely undifferentiated products and services through largely indiscriminate outreach, retail banks increasingly stand out as the only vital provider not demonstrating a rapidly growing understanding of customers’ needs or precision in tailoring solutions to those needs.

This has four troubling implications for sales and for loyalty.

  1. Implication One: A New Reason For Purchase (Click To Read)
  2. Implication Two: A New Reason For Loyalty (Click To Read)
  3. Implication Three: A New-in-Kind Relationship (Click To Read)
  4. Implication Four: A New Call For Leadership (Click To Read)

What’re your thoughts on the digital tipping point?