Seven transformative shifts
in US retail banking
McKinsey estimates that digital roles make up on average only seven percent of total bank employees. Our recent survey suggests that many banks may fail to appreciate the digital talent shortfall, suffering from a limited understanding of digital roles; some executives, for example, equate traditional IT or data-related roles to digital roles.
Percent of total head count in digital roles
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A skilled digital talent base is now crucial in banking
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all seven shifts are transforming the US retail
banking landscape.
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1 Only consumer respondents who own wealth and investment products from banks (n = 783).
2 Only consumer respondents who own SMBs (n = 100).
3 Wealth segments are based on investable assets: Lower mass/mass $0–100K; Mass affluent $100–500K; Affluent
$500K–$3M; High net worth (HNW) > $3M.
4 2010 data point not available due to small sample size.
Source: McKinsey 2019 Future of Banking Consumer and Executive Surveys; McKinsey Panorama Global Banking Pools;
McKinsey Banking Digital Talent Index; public job profiles
= 10% of employees
Average at tech companies per analysis of public job profiles
Average at banks per analysis of public job profiles
Overall average
Google
Per 47% of banking executives surveyed
Per 37% of banking executives surveyed
7
10–30
> 30
38
45
All banking customer groups now prefer digital channels
In the past 12 months, the appeal for digital banking, as part of an omnichannel experience, has broadened rapidly. Even consumers aged 50 to 70—not traditionally thought of as the most
tech-savvy customers—are hungry for simple, seamless digital experiences, and represent the largest profit pool for banks.
2016 revenue after
risk costs:
< $25 billion
< $25–50 billion
< $50 billion
2016 digital penetration:
0–24%
35–49%
50–74%
75–100%
Age group/2010–16 change in digital penetration, %
Wealth segment
3
< 30
30–50
50–70
> 70
Lower mass/mass
Mass affluent
Affluent
High net worth
+8
+16
+11
+8
–2
+4
+7
+8
N/A
–4
+3
+4
0
+10
+4
+1
4
Average digital penetration/change, %
N/A
+7
+3
+5
4
78
75
60
32
Total revenues after risk costs, $ billion
23
157
221
73
Only ten years ago, the US retail banking industry was in the depths of the global financial crisis, as many once leading institutions struggled to survive. Since then, after bringing in billions in fresh capital, US banks have made a return to stable ground and greater liquidity. Now, however, several transformative forces are accelerating the evolution of US banking and promising to make the business more challenging in the next ten years.
We have highlighted a few of the shifts in more detail below.
Big Tech is a growing disintermediation threat
Banks are creating and joining ecosystems
All banking customer groups now prefer digital channels
Next generation technologies have arrived and will reduce the cost scale of US banks
Managing an expanding set of risks requires integration across the bank
A skilled digital talent base is now crucial in banking
“Good banks” will
be rewarded for
demonstrating
genuine social
responsibility
Major moves by technology companies like Amazon (accounts), Facebook (Libra), and Apple (Goldman Sachs) have occurred while customer trust has now surpassed more than 50% of consumers
Over the past two years, a majority of bank executives have become convinced to move beyond banking into new ecosystems and develop platforms-as-a-service
Older customers
are now increasingly driving the shift
to end-to-end digital delivery by banks
Actions that consumers consider “good” are now table stakes for banks
Next generation platforms are no longer experiments, but are enabling banks to radically automate and run at fractions of historical costs
Complex risks like cyberattacks and social media incidents now have the potential to rapidly deplete a bank’s profits, capital, or reputation
Accelerating technology change has led to a critical shortage of more complex digital skills
Resilient companies reduced leverage before and during the downturn and used the increased headroom for investments during the recovery.
Despite the economic downturn, resilients increased their share of profits by approximately
two percentage points faster than their peers.
Resilients were prepared earlier and made moves faster to reduce costs during the downturn, and they were also able to keep them low entering the recovery.
Resilients made quicker and more impactful restructuring decisions during the downturn, helping them adjust to the new economic landscape.
Resilients increased their acquisition activity during the recovery when prices were cheaper than at the peak.
Banks are creating and joining ecosystems
While banks are increasingly thinking of ecosystem expansion as the development of platforms-as-a-service, with the aim to be the platform of choice for consumers, consumers do not yet see them as natural leaders of broad-based ecosystems that also provide non-financial products and services.
Bank executives
Consumers
0–24%
25–49%
50–74%
75–100%
Wealth and protection¹
Travel and hospitality
Mobility
Housing
Education
Health
Digital content
B2B marketplace²
B2B services²
B2C marketplace
Average
Percent of bank executives whose banks are likely to enter an ecosystem, n = 100
Overall
< $50 billion
> $1 trillion
$50 billion–
$250 billion
$250 billion–
$1 trillion
63%
58%
66%
52%
72%
Percent of consumers willing to purchase non-financial products from banks, n = 2,036
Overall
< 35
35–55
> 55
25%
34%
28%
13%
Bank executives
Consumers
Age group
Signs of acceleration for the seven shifts
Estimated bank asset size
Inflection point: