Lack of business cases for “beyond banking”

What´s next after conventional banking?

In light of the low interest rate environment, intensified competition and digital transformation, this question has been increasingly raised in recent years, turning “beyond banking” and “platform economy” into buzzwords. The strategy and management consultancy zeb has now examined the current state of digitalization in the banking sector at 159 European institutions – in the Digital Pulse Check 4.0.

“It’s sobering,” summarizes zeb Partner Sven Krämer. “Business cases for the platform economy are often non-existent.” 60 percent of the respondents cite unclear business cases as the greatest challenge in the implementation of new business models. Krämer’s theory: “This probably explains why many of the beyond banking approaches on the market are not bringing about the desired success. Without a business case, the potential of beyond banking is obviously overestimated.”

This uncertainty can also be observed among the participants of the study: 45 percent of the banks are concerned about unrealistic expectations of potential. “A key success factor of digital business models is the fastest possible scaling to achieve market shares of over 50 percent,” explains Sven Krämer. “Scaling often requires substantial investments in the first three to five years, and only after that can profits be generated.” Without a valid business case, false expectations regarding necessary investments and the time frame until break-even arise.   

Still, two thirds of the respondents want to expand their business models via digital ecosystems, especially multi-channel financial platforms (60 percent), by 2023. Aside from the potential and the financial possibilities, however, suitable staff is often also difficult to find. Only about one third of the respondents confirmed that their managers could be considered digital leaders. Only 11 percent say all managers are working together to drive digital transformation forward and act as role models. And not even half of the banks (43 percent) have now added digital skills to their job profiles. 

“Digital business models can definitely be implemented successfully if the business case has been properly derived and an appropriate team is available for implementation,” says Sven Krämer. For banks that need to reduce costs in the short term and become faster in their processes, Krämer recommends taking the obvious steps first: “By far not all efficiency gains made possible by digitalization have been realized and the potential of data analytics is by no means exhausted.” The zeb Partner estimates that a period of three to five years is required to get there.

While digitalization in retail banking is already well advanced, the corporate banking segment is still lagging far behind. Currently, only 17 percent of banks offer an end-to-end online process for opening a business current account. So far, the processes for small business customers have not been very profitable. “Here, cooperative banks and savings banks in particular need low-cost digital services, which in turn would also help the companies,” advocates Krämer. 

He still sees opportunities with medium-sized and large clients too. The legal framework for e-balance sheets is now in place, however, they have not yet been implemented across the board. This makes granting loans unnecessarily complicated and expensive. “We see a backlog in the digitalization of corporate banking.”

In the field of data analytics, the zeb consultants often did not register a valid cross-bank evaluation of implementation ideas. “The potentials of data analytics could only be realized if all use cases were evaluated in a structured way. In addition to mandatory cost-benefit analyses, factors such as the availability of high-quality data, the maturity level of the organization, the degree of integration and other factors are required,” describes the zeb consultant. 

“For our fourth Digital Pulse Check, we chose to take a new approach,” explains Sven Krämer. Together with his study partner Dr. André Ehlerding, he formulated ten hypotheses (see below). These were tested in interviews with 159 banks from the DACH region, Luxembourg, Poland, Russia and Sweden. The results were entered into a database and the data can be dynamically linked and retrieved via our Digital Services Hub.

Digital Services Hub

Ever heard the following snarky quip: Do you have charts or something to say? Sven Krämer, a Partner at zeb, took it seriously: “With the Digital Pulse Check we have published a major study entirely on a digital platform, the Digital Services Hub.” All views are generated in real-time from the underlying cloud platform. Respondents can compare their own bank’s data on the status quo of digitalization directly with data from other countries or between segments, compare large banks with regional banks, savings banks with cooperative banks, etc. – all dynamically and without static charts.

“The benefit for participants is obvious,” says Krämer. “They don’t just get an off-the-peg story that we present to other clients too, but a tailor-made package.” In a first step, interested parties are given access to an aggregated version. After registration, a detailed version is available for all users – but without filter options. Study respondents then have access to the filters and can compare their own results with the anonymized benchmarks. Of course, all information is anonymized, so that no conclusions can be drawn about individual institutions. 

This means a change not only for the clients but also for the zeb consultants. “It is quite different to visit a client with just a set of charts or to discuss large parts live and online. It also means much more dialog and interaction with the client. But that is exactly what we want to achieve,” says Krämer. He admits that the format is “a test run”, but is confident that it will become a new, innovative standard.

Another advantage of the data-driven approach: there is considerably less time between data collection and publication of the studies. In the case of the "Digital Pulse Check 4.0", it took only three and a half weeks to complete the study, which was less than half the time in comparison.

The “Digital Pulse Check 4.0” includes data on:

  • 159 respondents
  • 42 percent from Germany
  • 31 percent from Switzerland and Liechtenstein 
  • 15 percent from Russia
  • 9 percent from Austria
  • 67 percent of the participants work for cantonal banks, savings banks, cooperative banks and other regional banks. 
  • 69 percent of the information was provided by board members and divisional managers. 

The ten hypotheses of the Digital Pulse Check 4.0

Banks are aiming for an ambitious digital transformation, but in some cases are standing in their own way due to insufficient implementation speed and focus.
Even among the top 25 percent of the most digitalized banks, increases in growth and efficiency are not reflected in the P&L statements.
COVID-19 has caused online availability of financial products to skyrocket, further increasing the pressure on banks to digitalize.
Two-thirds of banks want to expand their business model via digital ecosystems by 2023, but are sticking to exclusively financial products for the time being, because clear business cases and the necessary skills to exploit beyond-banking potential are still lacking.
Retail customers already benefit from the possibility to purchase many standard products online – only mortgage applications usually have to be discussed in person.
Corporate banking is still lagging far behind the retail banking segment in terms of digitalization, as there is still a lack of digital product offering; moreover, there is still untapped potential in the area of process automation.
Banks could benefit much more from data analytics if they not only analyzed customer data, but also focused on optimizing operational processes.
Digital transformation places high demands on banks’ IT departments, which often cannot implement their ambitious strategies and services as quickly as required.
Banks do not yet sufficiently involve their managers and employees in the digital transformation process, thus neglecting a key success factor.
Banks that have successfully introduced agile working methods have better processes.



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