When COVID-19 was at its peak, digital was the only option for Europe’s consumers to get their necessities. But with the worst of the pandemic over, Europe’s consumers are not only venturing more into the analog world but also asking more from the digital world. Companies need to pay heed, especially as new concerns stemming from economic and geopolitical uncertainties create more unease among consumers, businesses, and governments alike.
Our third annual Digital Sentiment Survey in Europe1 found that, despite some expected growth in offline activity following the end of COVID-19-related quarantines, digital adoption remains strong. But with uncertainty increasing, companies need to focus on becoming more digital, a capability that past experience has shown leads to greater resilience by opening new markets, improving efficiency, and enhancing decision making. These uncertainties are underscoring a need to double down on three key areas of digital opportunity that our survey revealed: user experience, mobile, and revenue-generating interactions.
This year’s survey also brings a strong message: companies need to invest differently in digital offerings. While IT investment has surged the past two years to enable growth in digital adoption, these investments were not fully directed at the areas consumers themselves value most today. The nine exhibits that follow tell the story behind the trends and how companies can act.
Would you like to learn more about McKinsey Digital?
1. Digital adoption has settled down, but usage jumped overall
Although digital adoption1 has, as expected, retreated slightly from its pandemic highs, Europe has still registered a net gain of some 100 million digital users since 2019. Europeans are interacting digitally with twice as many industries as they did before the pandemic. Banking, grocery, and healthcare made the biggest gains in countries with high adoption rates, with public sector, utilities, and insurance lagging behind. In countries with low digital adoption, however, banks and telco carriers maintained their gains best, while education, retail, and healthcare lagged.
Digital adoption during the pandemic correlates strongly with a country’s per capita GDP: of the six countries with the highest adoption rates, five (Denmark, Finland, Sweden, Switzerland, and the United Kingdom) had per capita GDP above €45,000. At the other end of the spectrum, countries where per capita GDP was less than €30,000 (the Czech Republic, Hungary, Poland, and Romania) had a much lower level of adoption; two exceptions to this trend were Greece and Portugal, which experienced very strong growth in digital usage in education and healthcare, though adoption slowed in 2022. At a demographic level, high digital adopters—those who interacted digitally with more than seven industries—tended to be younger, live in urban areas, and have more education and higher available incomes than their peers.
2. Countries are converging on digital adoption
Digital adoption has created a great convergence among countries in the European Union. Austria and Germany, which have traditionally been slower to adopt digital behaviors, saw the greatest surge in adoption, catching up in industries such as banking, healthcare, and grocery and in satisfaction with digital services, as well. The United Kingdom had the highest adoption overall, while the Czech Republic, France, Greece, and Portugal, on the other hand, saw the greatest decreases in adoption, though returned to more moderate growth from 2020 to 2022.
3. There are significant variations in digital adoption by sector and country
In general, adoption trends fell into two groups: a consolidated group of leaders, including banking, telcos, and insurance, that are maintaining high adoption levels of 80 to 90 percent, and a second group of “high-touch” sectors, including education, healthcare, and travel, that relied almost exclusively on in-person contact prior to the pandemic. Countries with the greatest digital adoption showed, in most cases, consistent adoption across all sectors, with a few notable exceptions (insurance in Austria and public sector in Germany). Although some digital practices are declining in use, some new digital offerings, such as telemedicine, are holding their own. Education continues to highly value in-person instruction and is, therefore, facing the strongest uphill battle in digital adoption in all countries. In a few sectors, notably grocery and telco carriers, digital adoption varied significantly by country.
4. Despite high adoption rates, customer satisfaction lags on design and experience
Even with historically high rates of digital adoption and historic increases in digital and analytics spend—about 25 percent growth in the past two years across all industries1—an off-putting trend emerged: customer satisfaction with digital experiences edged downward four percentage points from 2021.2 Poor user experience tops the list of pain points for 28 percent of dissatisfied users. User interface (UI) and user experience (UX) shortcomings also leads the list of sources of dissatisfaction in 15 of the 19 European countries surveyed.
Finding products that fit particular needs is a major concern for 23 percent of users, particularly in the apparel market as well as general retail. In these sectors, consumers aren’t often able to test a product before buying and have to make returns. The need to avoid physical contact when making payments during the pandemic drove significant increases in electronic payment systems both online and in physical locations.
Another disturbing finding in our survey is that consumers are losing trust in digital channels, which was two percentage points lower compared with 2021.3 The main sources of distrust are the handling of personal data and cyberattacks. Interestingly, trust in payment processes has increased.
What’s next for digital consumers
5. External factors also threaten to hamper digital growth
Consumers are clearly concerned with economic uncertainty. Many harbor fears stemming from dangerously high inflation, financial-market volatility, and the possibility of extended bear markets. These fears can easily translate into lower consumer confidence. Our survey indicated that these negative anticipations could significantly reduce consumers’ discretionary spending on travel, groceries, and retail goods.
Interestingly, consumers currently don’t expect the war in Ukraine to have much of an effect on their digital usage. About 15 to 30 percent of European consumers in five large European markets, three bordering Ukraine, expect a negative impact on digital usage from the war (though Spain had the highest negative sentiment). Moreover, those who are concerned about the Ukrainian conflict say they would likely reduce their discretionary spending. While negative digital sentiment rates are currently low, we expect them to rise if the Ukraine situation worsens.
6. Digital can protect against softening markets
As companies consider how to address consumer pain points and global uncertainties, they should absorb the lesson that, historically, digitized industries have been the most resilient, in that companies have the fewest customers planning to reduce their digital use.
One of the main pillars of increased impact could be increasing the number and quality of revenue-generating transactions. The vast majority of consumer digital transactions are service oriented, such as checking shipment details or product availability or other simple transactions. Companies could consider migrating those interactions to social media, which has eclipsed call centers as the primary contact point for service-related questions.
7. Significant opportunities exist for companies to create more revenue-generating interactions
Simple service transactions aren’t where the money is. For all digital leaders, except entertainment, more than half of the interactions are service driven and don’t generate revenues. For banking, historically a digital leader, less than 30 percent of online interactions generate revenue (such as funds transfers or direct debits). The same is true for the utilities sector (such as checking power consumption or service status).
Industries such as banking and insurance can garner significant growth by digitizing more complex transactions that users still mainly do in person or via paper (such as mortgage applications and insurance claims). Their fintech competitors are already doing so—processing insurance claims in as little as a few minutes. Moreover, as stated earlier, digital adopters tend to be younger and live in urban areas. This means businesses have significant opportunities to increase their customer bases in rural areas. The insights from our survey indicate that mobile could be the key, as the mobile penetration rate in rural areas is high.
8. Mobile is a primary on-ramp to digital adoption
Industries with higher mobile app utilization as the primary channel of contact for a brand tend to have a larger share of fully digital users. Banking and entertainment lead the way in mobile adoption and fully digital interactions. They also have a low share of users who use remote assistance (via chat, email, or phone). Industries with a large share of remotely-assisted users (such as insurance, utilities, and education) have an opportunity to optimize their digital channels by encouraging more users to use mobile channels.
9. Clear opportunities exist for better allocation of IT investments
Triggered by the digital surge during COVID-19, companies have invested significantly in IT. Compared to 2020, IT spending has grown 25 percent in Europe across all industries, with digital leaders increasing spend the most. However, there is a clear opportunity to reshift those investments toward customers’ key pain points. In the haste to build out end-to-end online customer experiences, many businesses invested in electronic payments and more effective means to track packages and handle customer-service-related support. They neglected to focus as much on the UX/UI they were offering, nor did they focus on improving the holistic consumer experience to determine how suitable a product is for them. This trend was clear in clothing and furniture as well as other physical products. Frustrations grew.
The good news is that technology solutions to address these pain points are improving quickly. Natural-language technologies, for example, are steadily becoming more sophisticated and, when used with other forms of AI, can improve the experience journey of digital users. In addition, virtual reality can allow consumers to test almost everything, from a new pair of eyeglasses to a new house, without ever touching or seeing it beforehand.
