Digitally Engaging Customers for Value Generation

Deeper digital engagement with customers generates value for banks in two ways where digitally active customers buy more products and have a lower cost-to-serve than non-digital customers, said Mckinsey.

The firm revealed in its proprietary Personal Financial Services (PFS) survey that digitally active customers bought 1.6 products on average over a 12-month period, compared to 0.5 on average for customers that were not digitally active at all.

“The active digital customers also owned 1.5 times the banking products compared to their nondigital peers.

“Since most simple digital transactions are conducted through self-serve channels, digitally active customers have a lower cost-to-serve,” it said.

In terms of their digital preferences, the firm categorised banking customers into three segments:

- Digitally active consumers use digital banking at least every two weeks and have made e-commerce purchases in the last six months

- Moderately digital consumers use digital banking less than fortnightly, but have made e-commerce purchases in the last six months

- Non-digital consumers use no digital banking products or services

“The 2017 PFS survey found that the percentage of digitally active consumers has doubled in Emerging Asia since 2014, and grown by 20 percent in Developed Asia over the same period.

“Globally, there are examples of banks that have had success in developing digital offerings that attract new customers and migrate their existing ones to digital channels,”it said.

It said Itaú Unibanco of Brazil created a digital app— Itaú Light—in 2017. By the second quarter of 2017, the bank’s customers’ internet and mobile transactions grew by 400 basis points (compared to end of 2016).

“In 2017, Itaú Unibanco also saw 6 percent growth in digital clients, a 15 percent rise in mobile users, and over 140,000 accounts opened using mobile phones.

After a few years of investments in creating a seamless, multichannel experience, Spain’s Banco Bilbao Vizcaya Argentaria (BBVA) was named the best mobile banking service in the world in 2017.

“Their banking app is intuitive and easy to use, and the bank focuses on three pillars—convenience, transparency, and advice—to promote customer satisfaction and digital sales,” it said.

The firm said digital sales share across the banking group grew from 10 percent of total sales in 2015 to 33 percent in 2017.

“The bank has 22.6 million digital customers—25 percent higher than last year—17.7 million of which are mobile customers (representing a 44 percent increase over 2016 figures).

“In Turkey, Spain, the United States, Argentina, Chile, and Venezuela, digital customers comprise half of BBVA’s overall customer base.

“In Asia, DBS was the first bank to develop a methodology to measure digital value creation, reflecting the changing attitude of banks towards the topic,” it said.

“Digital customers” are defined as those who either purchased a product digitally over the last year, or conducted over 50 percent of their financial or nonfinancial transactions over digital channels.

“Tracking digital value creation helped DBS enhance value from digital channels. Today, DBS digital retail segments report twice the income, 20 percentage points lower cost to-income ratio, and 9 percentage points higher return on equity (ROE) than non-digital segments.

“Digital customers, who form 39 percent of the customer base, contribute to around 68 percent of profit for the bank, before allowances,” it said.