# Digital Disruption Is The New Face Of Banking
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-06-02
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Adapt or Die: The Digital Revolution in Retail Banking
Meta Description: Adapt or die! Learn how the retail banking sector must evolve to survive in the age of digital disruption and the changing demands of customers.
URL: https://financedigest.com/digital-disruption-is-the-new-face-of-bankinghtml

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By **Christopher Baldwin,** Head of Marketing, Northern Europe, Selligent Marketing Cloud

**Change is the only constant**

The writing is on the wall for the retail banking sector. And it reads: Adapt or die! After digital [disruption has brought land­mark changes to industries such as retail](https://www.financedigest.com/how-effective-talent-management-could-disrupt-the-retail-banking-sector.html "HOW EFFECTIVE TALENT MANAGEMENT COULD DISRUPT THE RETAIL BANKING SECTOR") (courtesy of Ama­zon), travel (Expedia), transportation (Uber) and hospitality (Airbnb), the time-honoured institution of banks is next in line to feel the heat. And the temperature is rising.

![Christopher Baldwin](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/christopher-baldwin-450x450-1736842672435-compressed.jpg)

Christopher Baldwin

According to a [recent McKinsey and Compa­ny study](https://www.financedigest.com/silicon-capacitors-market-to-garner-us-3100-million-by-2027-at-8-cagr-recent-study-by-tmr.html "Silicon Capacitors Market to Garner US$ 3,100 million by 2027 at 8% CAGR – Recent study by TMR"), the banking segment is currently experiencing an un­precedented paradigm shift – posing an urgent need to get with the (digital) programme. “Banks have three to five years at most to [become digitally](https://www.financedigest.com/smart-becomes-the-first-ssp-to-collaborate-with-white-bullet-to-safeguard-quality-in-the-digital-media-landscape.html "Smart becomes the first SSP to collaborate with White Bullet to safeguard quality in the digital media landscape") profi­cient. If they fail to take action, they risk ente­ring a spiral of decline similar to laggards in other industries,” the McKinsey [report](https://www.financedigest.com/automotive-exterior-trim-parts-market-size-industry-report-analysis-growth-future-trends-top-manufacturers-and-technology-toyota-boshoku-corporation-plastic-omnium-cie-automotive.html "Automotive Exterior Trim Parts Market Size, Industry Report Analysis, Growth, Future Trends, Top Manufacturers And Technology| TOYOTA BOSHOKU CORPORATION, Plastic Omnium, CIE Automotive") concludes.

It’s safe to say that [banks](https://www.financedigest.com/how-is-green-finance-reshaping-the-banking-industry.html "How is green finance reshaping the banking industry?") have seen their fair share of “laggards in other industries”; yesterday’s “too big to fail” companies that proved too slow to respond to change and have gone the way of extinction. And banks, out of all service providers, are well aware of the financial implications of being a laggard in the face of [digital disruption](https://www.financedigest.com/the-road-to-digital-disruption-in-motor-insurance.html "The road to digital disruption in Motor Insurance"). As the McKinsey report suggests, “digital laggards could see up to 35 percent of net [profit eroded” over the next five years](https://www.financedigest.com/uber-rival-bolt-seeks-to-turn-profitable-next-year-ipo-in-2025.html "Uber rival Bolt seeks to turn profitable next year, IPO in 2025").

Meanwhile, there’s plenty of incentive for staying ahead of the curve, because McKinsey sees “winners” of [digital disruption in the banking industry](https://www.financedigest.com/will-central-bank-digital-currencies-deliver-a-more-democratic-payment-industry.html "Will Central Bank Digital Currencies deliver a more democratic payment industry?") “realise a profit upside of 40 percent.” Contributing to this stunning number, a 10% profit increase is expected to come from new digital banking products, and the capacity for “using data to cross-sell” to increasingly demanding bank customers.

**A changing playing field**

The changing demands of [today’s bank](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") customers are adding fuel to the flames. Over the past three years, the number of people going into bank branches to do their banking has fallen by 30% in the UK according to a British Bankers’ Association (BBA) report.

Fortunately, these banking transactions aren’t disappearing – but going digital. And that’s good news, as [banks can provide 24/7 service through their online](https://www.financedigest.com/online-banking-benefits-and-risks-of-managing-your-finances-online.html "Online banking: benefits and risks of managing your finances online") presence,while building long-term relationships and harvesting data for profitable analytics and decision making.

Accordingly, the playing field is [changing rapidly](https://www.financedigest.com/rapidly-changing-fashion-lifestyle-is-expected-to-spur-demand-for-clothes-closets-market.html "Rapidly Changing Fashion Lifestyle Is Expected To Spur Demand For Clothes Closets Market"). Today, only about [10%](https://www.financedigest.com/soccer-european-revenues-rise-10-in-2020-21-despite-covid.html "Soccer-European revenues rise 10% in 2020-21 despite COVID") of retail-banking revenue is considered “digitally disrupted,” meaning revenue captured via online or mobile channels. But by the end of 2018, disrupted revenue is forecast to be around 50% or more for banks in many [major markets](https://www.financedigest.com/the-stir-to-be-different-a-major-factor-of-growth-of-the-flax-seeds-market.html "The Stir To Be Different A Major Factor Of Growth Of The Flax Seeds Market"), including the UK, Scandinavia, and Western Europe, according to the McKinsey and Company study.

Revenue streams and financial transactions are increasingly moving to [digital](https://www.financedigest.com/the-role-embedded-finance-systems-will-play-as-commerce-goes-increasingly-digital.html "The Role Embedded Finance Systems Will Play as Commerce Goes Increasingly Digital") channels. This pushes traditional banks into the same arena as Web-native disrupters such as crowd-funding platforms (Kickstarter), [digital payment](https://www.financedigest.com/eliminating-payment-barriers-the-future-of-supply-chain-payments-is-digitization.html "Eliminating Payment Barriers: The Future of Supply Chain Payments is Digitization") systems (PayPal), and peer-to-peer credit lending (LendingClub). Not to forget alternative peer-to-peer [currencies such as Bitcoin](https://www.financedigest.com/bitcoin-sterling-volumes-spike-to-record-high-as-british-currency-flounders.html "Bitcoin-sterling volumes spike to record high as British currency flounders").

**Digital strategies**

Armed with detailed customer intelligence, banks are already finding [successful strategies](https://www.financedigest.com/how-to-establish-a-successful-technology-strategy.html "How to establish a successful technology strategy") by being more than just a bank for customers (particularly millennials), a lifelong partner who sees them as individuals, not just num­bers. Using customer data as the fuel for a more personalised service offering, leading banks are seeing major success with the following [trending strategies:](https://www.financedigest.com/u-s-lighting-products-market-recent-strategies-trends-technology-innovation-analysis-application-by-tmr.html "U.S. Lighting Products Market: Recent Strategies, Trends, Technology Innovation, Analysis Application by TMR")

**User-centred customer-journey design**

Banks are adapting their data capture and user interface design to learn more about their customers – and roll out individualised customer journeys with full visibility of every step of the journey. This also [builds trust:](https://www.financedigest.com/epi-how-to-build-trust-and-adoption-among-consumers-and-merchants.html "EPI: How to build trust and adoption among consumers and merchants") According to a NewsCred study, 66% of Millennial customers would trust a bank more that offers helpful, useful content.

**Personalised[service offerings based on data](https://www.financedigest.com/accelerating-financial-services-innovation-with-the-promise-of-data-mesh.html "Accelerating financial services innovation with the promise of data mesh ")**

Leveraging real-time customer data collected through digital channels, [banks know at which point in time customers need investment](https://www.financedigest.com/investment-banks-trading-revenue-likely-to-shrink-barclays-boss-says.html "Investment banks’ trading revenue likely to shrink, Barclays boss says") advice, home mortgages, or retirement advice. Whether it’s at the bank branch or through mobile banking, financial institutions can [provide appropriate products and services](https://www.financedigest.com/sleep-service-providers-market-report.html "Sleep Service Providers Market Report") to suit personalised needs.

**Relevant content and guidance**

[Understanding customers through data](https://www.financedigest.com/understanding-the-realities-of-payment-data-monetisation.html "Understanding the realities of payment data monetisation") also allows banks to pepper personalised websites with interesting, relevant content. This is highly appreciated by young customers: According to NewsCred’s study, “The Trust Transaction,” 59% of 18 to 24-year-old customers would spend more [time on their bank’s](https://www.financedigest.com/now-is-the-time-for-banks-to-introduce-intelligent-account-analysis.html "Now Is the Time for Banks to Introduce Intelligent Account Analysis") website if it provided interesting articles.

**Engagement via apps and [social medi](https://www.financedigest.com/top-social-media-growth-companies-in-the-uk.html "Top Social Media Growth Companies in the UK") a**

A mobile-optimised website is the minimum for young customers, a mobile app is even better. Over 56% of 18 to 24-year-old customers in the NewsCred study liked to engage with their bank via apps, 50% via text message. In addition to this 25% of this age group engaged with their banks on Facebook, while 37% would share interesting articles from their bank on social media, [nearly double](https://www.financedigest.com/uks-micro-focus-shares-nearly-double-after-canadas-opentext-agrees-6-billion-takeover.html "UK’s Micro Focus shares nearly double after Canada’s OpenText agrees  billion takeover") the survey’s average response.

**Support beyond banking**

For young customers, relationships with banks go beyond financial services and hard numbers. The 18 to 24-year old respondents in the NewsCred study were 13% more interested in “non-finance-related content from their such as travel, careers, music and technology. Case in point is banking powerhouse ING, which has previously used this [powerful lifestyle connection to win](https://www.financedigest.com/italys-right-wing-parties-seen-winning-power-exit-polls.html "Italy’s right-wing parties seen winning power – exit polls") over young customers at summer music festivals.

**Embracing digital**

The [banking and financial services industries have traditionally been digital](https://www.financedigest.com/how-to-enhance-banking-services-with-digital-performance-intelligence.html "HOW TO ENHANCE BANKING SERVICES WITH DIGITAL PERFORMANCE INTELLIGENCE") laggards, partly as a result of the highly regulated industry in which they operate and partly because senior decision makers have been slow to recognise the potential ROI. We are now entering a critical new phase in which intelligent machines are enabling – indeed, compelling – [banks to fundamentally see](https://www.financedigest.com/europes-banks-brace-for-russia-fallout-while-u-s-banks-see-limited-pain.html "Europe’s banks brace for Russia fallout while U.S. banks see limited pain") and do everything differently. With the [growing threat of FinTech firms increasingly gaining traction](https://www.financedigest.com/carmine-color-market-will-gain-traction-at-7-9-amid-growing-preference-for-natural-food-ingredients-fmi.html "Carmine Color Market Will Gain Traction at 7.9% amid Growing Preference for Natural Food Ingredients: FMI") with consumers due to the accessibility, flexibility and availability of the financial products which they provide, banks now have a significant incentive to accelerate the move into the digital age.


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