Accenture on the importance of purpose-driven banking
Incumbent banks risk losing revenue due to the rise of digital challenger banks and changing regulation, says Accenture
Customer trust is an essential factor in driving success in the financial services industry. According to Accenture, “many consumers doubt that banks have their best interests at heart”.
The consulting firm’s purpose-driven banking report found that 5% of banks’s revenue is at risk as a result of challenger and neobanks and regulators acting to help consumers to avoid the cost of poor decision making.
Banking with purpose
Accenture defines purpose-driven banking as an “authentic, transparent effort to help customers manage their finances more wisely and effectively, even if it means offering advice that may not immediately make more money for the bank.”
Creating and maintaining strong relationships, while at the same time assisting customers by acting as a trusted advisor will lead to greater success and increased revenue growth.
Accenture states that banks must authentically and consistently work to put their customers first, irrespective of whether this approach is to their immediate advantage or not.
It found that:
- 43% of consumers trust their bank to care for their financial wellbeing in the long term
- 14% said that they turned to their bank after a “major life event” impacted their financial situation
- 20 million have opened an account with a fintech or neobank in the UK
A question of trust
It was revealed that, while customers trust banks to manage and take care of their data and transactions, they don’t believe that their interests are put first. Being penalised for using an overdraft facility or bad finance management affirms this.
Accenture gave two reasons why banks must restore customer trust: regulators and digital competitors “are homing in on ‘bad revenues’”; and new advisory offerings that are a source of potential revenue.
Other reasons that trust has waned in banks include advances into financial services and retail banking sector by tech giants, the continued growth of new digital technology, and a poor revenue return on digital investments.
The rise of neobanks
Startups, fintechs and digital banks are a particular challenge to incumbents. According to Accenture, they have “attracted millions of new customers and achieved enthusiastic customer advocacy by persuading these customers that - unlike their old bank they have their best interests at heart.”
The research also pointed the stronger focus by fintechs on customer experience, particularly in terms of value added services and additional tools and features that assist with money management.
Accenture offers two core strategic pillars that banks should address in order to win the purpose-driven banking battle:
- Transform core business models for efficiency and the enhancement of ‘experiences’ with immediate effect in order to grow market share
- Focus on a strategy to expand service offerings in order to cover aspects such as financial advice and more
In summary, it found that banks should focus on a “combined set of trust-based propositions” that, if implemented correctly, could generate a revenue uplift of 9%.
Read more about purpose-driven banking, and view Accenture’s full report here.
For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.