Have retail banks received a lasting digital boost from Covid-19?

With much said over the last year about Covid-19’s impact on digital, I see a need to separate customer-driven digital engagement initiatives from bank-driven digital transformation initiatives, to understand if there will be lasting benefits for retail banks.

Digital engagement on the rise and here to stay?

Bank of America’s (BofA) recent results point to a direct correlation between a surge in digital engagement and Covid-19.

CEO Brian Moynihan reported that BofA saw digital engagement surge to 69% across consumer and wealth customers. Online sign-ins doubled to 9 billion in 2020 and people were not just signing in to manage their finances: digital sales increased by 12% year on year, now accounting for 2 in every 5 product sales.

BofA were also able to lower their cost base as a result of the digital surge – virtual assistant Erica’s user base grew by 67%, saving 1.4 million hours of staff-customer interaction.

Banks that invested in digital prior to 2020 have been able to take advantage of this surge in digital engagement. While digital transformation hasn’t come cheap (BofA has invested $35 billion over the past 10 years), these banks are widening the gap with those that haven’t invested in digital.

While the Bank of England argues that UK banks can withstand Covid-19 and Brexit, the digital laggards may be ill-advised to write this off as a temporary surge in digital engagement that ends with lockdown restrictions. Deloitte’s research – conducted across a range of banking services, including taking out a mortgage – shows that only one in three first-time users of digital banking would still prefer to bank in branch. Across the demographics that have previously been reluctant to embrace digital this is a surprising and positive conversion.

Is more digital engagement translating into more digital transformation?

We have some evidence that customer driven digital engagement has received a lasting boost from Covid-19, but what about the bank-driven digital transformation to support it?

While an increase in both the volume of customers embracing digital channels and the range of services that they can engage with online tells us something about a bank’s digital maturity, it doesn’t tell us everything.

Has the overall digital transformation effort received a boost from Covid-19? To say it has, we need to find evidence that some of the blockers have been removed, or that the business case for digital transformation has strengthened (in the eyes of those that matter).

Gartner and KPMG say that almost 70% of businesses have accelerated their digital transformation strategies since March 2020.  They attribute this to a sudden realisation that game-changing technologies like AI and analytics are now must haves to survive in the post pandemic environment. I would attribute it to a more fundamental need to support staff and customers. Many of the solutions that have provided crucial support to staff and customers required digital transformation to make it possible.

Back in April, BofA, like many others, needed a quick solution to provide an online mortgage holiday solution for its 66 million customers. In the first week of the offer they were receiving 5000 requests a day. In parallel the Mortgage Analytics and Reporting team were tasked with creating a dashboard to provide insight to management and the operational teams managing the requests.

Should we attribute the successful implementation of a new customer journey and the introduction of a new staff-facing tool to a sudden realisation that analytics would be a must have in a post pandemic environment?

BofA don’t.

They explain how a structured approach to data management has built credibility, trust and authority with users. When using Tableau for the first time they recognised the need to blend the old with the new by replicating users Excel views in the Tableau dashboard.  It has taken years of investment in data management and governance to ensure that data originates from an authorised source and is synced across the enterprise so that everyone sees the same information, regardless of the report that they have access to.

Does an acceleration of digital transformation provide lasting benefits for all?

We can see examples of where Covid-19 has triggered banks like BofA to quickly launch new programmes at unprecedented speed, often using new digital tools – like Tableau – for the first time.

While this will benefit digital transformation in the short term, it is hard to claim that it is had a long-term impact on their ability to deliver solutions in an agile and timely manner. Long term success is much more dependent on the continued investment in the foundations of digital maturity of the last 10 years – cloud technology, enterprise data management, advanced analytics, DevOps tooling, agile ways of working and customer-centric design. BofA know this and it is why they are investing $3.5 billion in technology next year to remain above the digital baseline and continue to adopt emerging technologies that give them a competitive edge.

Last year we saw banks put some of their digital transformation initiatives on hold due to budgetary challenges to meet increasing capital requirements. The impact of this might not be felt for some time. Having witnessed a surge in digital engagement the banks now need to embed the positive practices that allowed them to meet this increase customer demand, by reigniting their digital transformation initiatives.

Let’s not mistake the positive impact Covid-19 may have had on digital engagement and assume that it’s made digital transformation any easier. In fact, the widescale acceleration of digital may require banks to increase their investment to keep pace.

How do banks capitalise on this surge in digital engagement?

• Make sure that the agile and innovative ways of working stick across the organisation. The rapid product deployments in the early days of the pandemic showed the way, but a digital first culture needs to be carefully and purposefully cultivated.
• Re-prioritise any digital transformation initiatives that were put on hold due to Covid-19 because we know that a piecemeal approach to digital initiatives is far less effective.
• Use the benefits that have been realised by greater digital engagement to secure further commitment from senior leadership for a more holistic approach to digital transformation. We have shown how this can increase ROI tenfold.