Banking on a new model

To thrive in the new digital environment, banks will need to rearticulate their value proposition, bearing in mind the power of simultaneously simplifying and upgrading the customer experience and creating value through data. Each bank should prioritise a retail business - or, depending on capital resources and competitive strengths, multiple businesses - and develop a digital platform that supports the full search-shop-manage value chain of the priority businesses....

Each of the three business models - daily banking, navigating life events and building and protecting wealth - if executed successfully, could provide a much-needed boost in profitability for retail banks, with target cost-to-income ratios between 40% and 50%. Cost-reduction levers would differ for each model but would include optimisation of branch networks and maximum automation of customer acquisition/onboarding, credit underwriting, servicing and more. In addition to increased product penetration across the customer base, income levers include new revenue streams with ecosystem partners....

The adoption of platform-based business models will unleash a kind of internal disruption, requiring banks to give up revenue in some areas as they position themselves for fast growth in the target business.


From 'Reshaping Retail Banks: Enhancing Banking for the Next Digital Age', McKinsey & Co