Purpose-driven banking research finds a 9% uplift in revenues

April 20, 2020 by Chris Skinner

A lot of things seem irrelevant right now, as we sit in the dark of a crisis, but life will go on and things do go on. It therefore intrigued me to see that Accenture has just performed a survey around purpose-driven banking. Purpose-driven banking is something I started writing about almost a year ago and is my new theme. Therefore, it intrigued me to see that Accenture has focused upon this. Here’s their analysis:

In brief

Our Purpose-Driven Banking study polled 14,900 consumers in 12 markets about their banking habits and attitudes.
Our analysis shows that 5% of banks’ revenue is at risk as regulators and digital competitors act to help consumers avoid the cost of bad decisions.
Banks can rebuild customer trust by authentically and transparently putting them first, even when it’s not to their immediate advantage.
By proactively cannibalizing their at-risk revenue and helping customers manage their money, banks stand to profit together with their customers

Many consumers doubt that banks have their best interests at heart. Purpose-driven banking is 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 money for the bank. By building strong relationships and assisting customers in increasing their wealth as trusted advisors, banks benefit from improved retention and revenue growth.

Trust is essential to defend market share and grow

While most customers trust their banks to take care of their transactions and their data, they are skeptical that they truly put their interests first. It doesn’t help that when these customers slip into overdraft or manage their money unwisely, they are penalized rather than assisted by their banks.

Banks need to restore customer trust, for two reasons. Firstly, regulators and new digital competitors are both homing in on these “bad revenues”—which make up five percent of banks’ total income—putting billions at risk worldwide. And secondly, new advisory offerings are one of the most promising sources of potential new revenue—but without trust they will find no buyers.

Our new Purpose-Driven Banking study sheds light on this vital issue. The research consisted of two major components: a quantitative survey which polled 14,900 retail banking customers, in 12 key markets, on their financial habits and attitudes; and an analysis of the revenue uplift that incumbent banks in these markets can expect if they implement the initiatives recommended in the report.

Banks to the rescue? Maybe.

43_%of consumers trust their bank to look after their long-term financial well-being
14_%of consumers turned to their bank when a major life event affected their finances
20 million customers have opened accounts with digital neobanks in the UK alone

Digital challengers are winning consumers’ hearts

Digital banking start-ups 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. Among other things, they promise to help them reduce fees by managing their finances more wisely.

Traditional banks risk losing the five percent of their revenue that accrues from overdraft and similar charges. But by proactively cannibalizing this revenue, they could gain the trust that is essential for selling the innovative, transparent value propositions—especially those with advice at their core—that are critical to their long-term success.

Growth strategies based on mutual trust

As retail banks strive to develop more purpose-driven businesses, we believe there are two sets of strategic actions they should consider taking in parallel:

In summary

Our Purpose-Driven Banking analysis indicates that the combined set of trust-based propositions could generate an average nine percent revenue uplift for incumbent banks in the markets we surveyed. Those that rebuild advisory trust through both growth pillars will generate an added bonus. This “trust kicker” is the potential revenue uplift achieved by banks that become one of the most trusted players in their respective marketplaces.

The combined set of trust-based propositions can generate an average 9% revenue uplift for incumbent banks.

You can download the full report here.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...