According to BCG Study, Retail Banks Must Adapt a Digital-First Operating Model in Light of Acceleration Brought on by Pandemic

Digital banking. It was a hot button topic for financial institutions even before the pandemic broke out. Now, as customers experience a fundamental shift away from physical services, a “digital first” approach is more important than ever. According to a new BCG study, banks are reeling, but can conquer future challenges by focusing on the right alternatives to retool their operating models.

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The Shift To Digital First Has Left Many Retail Banks Scrambling

The pandemic accentuates the digitization of banking in a way that puts downward pressure on key revenue streams. Adopting a “digital first” operating model has become a necessity for banks. Consumer lending is down, as families avoid taking on debt in the face of an uncertain economic future. And the loans that banks do originate come attached with ultra-low interest rates. From a spending perspective, mobile payments threaten credit card usage, and consumers that are swiping their cards are proceeding cautiously. Even with banks clinging to more resilient sources of revenue, average revenue per bank customer is low. To make things worse for large banks, digital-only players like Chime and Monzo are snapping up market share. These “challenger banks” offer customers low switching costs and attractive digital alternatives to retool their portfolio of financial products.

How Retail Banks Can Change Operating Models In The Middle Of A Pandemic

Banks can change their operating model organically by digitizing the most important value streams for customers. As we’ve talked about, the typical suite of banking products is large and complex. As a result, average revenue per bank customer constitutes a mix of different things. But – some things matter more than others! Selling the most profitable products, digitally, will help banks bring average revenue per bank customer up and simultaneously streamline costs. The process of becoming digital first will then naturally realign functions across the bank. Product, sales, and marketing will stack up in a manner that prioritizes the customer’s digital needs on the front end.


The shift to digital first operating models amidst the ongoing pandemic creates the perfect storm for traditional banks. Consumers with tight budgets increasingly want to bank with nimble, digital-only players. But the battle is not yet lost for the bigger banks. By putting the digital needs of the customer first, traditional banks will find innovative, alternative ways to retool their operating model for the future.

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