Retail bank sales fall as digital struggles to fill branch banking hole

Digital sales rose to a new record, but could not offset fall in branch sales.

Whilst the uptick in digital banking sales may indicate that customers are treading the expected digital trend, new data from McKinsey & Co. showed that customers still seek going to branches for their financial needs.

In 2021, more than 40% of core retail banking sales originated digitally, a new high, according to a report by McKinsey. However, this was not enough to boost the total sales numbers, which fell 10% globally.

“It is important to note that overall, the widely discussed increase in digital sales as a percentage of total sales owed more to branch declines than to actual digital gains,” said McKinsey & Co. partners Sergey Khon, Ahmed Nizam, David Tan, and Zubin Taraporevala in the report.

Digital sales rose 4% in 2021, which was not enough to compensate for the 15% decline in the still-larger branch channel when facilities became inaccessible during lockdowns.

Leaders vs Laggards
Performance varied per institution, based on one key factor: whether they were offering a fully digital retail banking experience. 

Banking leaders in developed markets saw total sales rise 10%, attributed to a 40% growth in their digital channels, whilst their branch sales declined to single digits.

It’s the same trend when it came to sales, with leaders increasing their digital-sales penetration by 15 percentage points (ppt) in 2021, from an average annual increase of 4ppt between 2017-2020. 

The laggards, meanwhile, saw both branch and digital sales decline.

“Many banks still lag on introducing capability to capture demand for simple and complex customer journeys. Nearly half of institutions globally still do not offer a savings-account-opening journey in their mobile app, whilst less than a third have introduced investment sales,” McKinsey’s Khon, Nizam, Tan, and Taraporevala wrote.

Indeed, leaders in digital new-to-bank acquisition consistently outperform their peers at every stage of the sales funnel and are rewarded with double the number of account openings. 

Banks introducing and investing in digital personal lending also have experienced sevenfold sales growth through the channel in just 24 months, the study found. 

“In other words, banks that had already established momentum by building a top-flight digital consumer experience extended their lead in 2021,” it read.

In order to keep up, banks must roll-out a full suite of digital-marketing capabilities, make use of data and analytics for personalization, and optimize as well as localize application journeys.

“Banks’ pre-COVID-19 digital investments primarily targeted customers predisposed to adopt such solutions. The focus must now shift to streamlining the sales journeys of mainstream consumers and generating new prospect traffic,” McKinsey concluded.