Other parts of this series:
In this series we’ve taken a close look at the business case for embracing purpose in banking. In short, there’s compelling evidence that focusing on customer wellbeing can catalyze growth and digital transformation.
Embracing purpose is more than a PR move. It is a powerful opportunity—and a formidable challenge.
Today we’re going to unpack four of the most common barriers to purpose-driven banking and how to overcome them.
Barrier 1: Banks don’t believe there is a burning platform
Some banking leaders might think that wide-scale disruption is not imminent. While challenger banks have grown their customer bases, most challenger customers still keep their primary accounts with an incumbent. Likewise, open banking has not yet been the game-changer it was expected to be. Also, in many respects COVID has been a positive for incumbent banks with credit losses far lower than predicted and the development of digital channels and product roadmaps accelerated.
This perspective overlooks at least three signals that indicate the fundamental market structures of banking are changing.
First, emerging players like Chime, Afterpay and Stripe are targeting new parts of the industry’s traditional value chain and expanding the addressable market of the banking industry.
Second, open finance and open commerce business models are gaining traction in many markets and are poised to pose a serious challenge to the primacy of banking’s customer relationships.
Third, electronic ID as the central reference point for financial services identity verification could become the new current account, allowing customers to self-assemble individual components into a seamless facsimile of a traditional full-service banking relationship.
Actions to consider
If a bank doesn’t think market disruption is imminent, it can keep its finger on the pulse by:
- Monitoring net promoter score, customer satisfaction, and churn, and investigating whether purpose influences these metrics.
- Evaluating why new players succeed or fail, with particular emphasis on their business models.
- Conducting ethnographic studies to understand customers’ needs and expectations.
Barrier 2: Banks are focused on delivering shareholder returns
Embracing purpose in banking maps very neatly onto the classic innovator’s dilemma. Banks may feel they face a choice between sacrificing revenue today for the good of the business in the future or continuing to profit today and in so doing risk the future of the business. Leaders may think purpose is important but fear it will distract from delivering short-term shareholder returns.
Accenture’s Purpose-Driven Banking 2021 report provides strong evidence that purpose-driven banks deliver superior financial returns. However, banks will still need to bring all stakeholders along.
Actions to consider
- Develop and use purpose-related key performance indicators that go beyond financial metrics and show the link between leading indicators of improved purpose and trailing indicators of financial performance
- Create a clear and consistent communication strategy to align all stakeholders on the financial benefits of a purpose-driven approach to banking.
- Put the “Tesla moment” on the board agenda to reach consensus about the extent to which purpose should guide strategy.
Barrier 3: The magnitude of the change is overwhelming
Truly embracing purpose will require a bank to rewire its entire business, from data architecture to product development and beyond. It will take several years and call for a delicate balancing act between managing existing change programs and driving the purpose agenda to deliver tangible results.
Bank leaders—especially those already managing multiple large change programs—may be dissuaded by the scope of the required change, or not know where to start.
Actions to consider
- Start by defining what purpose means for your organization.
- Follow this with a review of customer propositions to assess their alignment with the bank’s brand and purpose.
- Pilot some purpose-related use-cases with select customers.
Barrier 4: There is no explicit mandate from regulators and government
Among its other impacts, regulation has helped to shield banking from disruption in most markets. This has made many banks content to sit back in the absence of regulations that mandate them to take actions like improving pricing transparency, simplifying products, and focusing on the financial health of customers.
But what starts as a novelty can soon become an imperative. Look at the spotlight most companies give to environmental, sustainability and governance messages today. Markets like Singapore offer a glimpse of the future. Seven banks there are collaborating with regulators to create a digital infrastructure that allows citizens to better understand their overall financial health. The rapid change in the overdraft market in the US is also an indication of how quickly new entrants with strong purpose messages can act as a catalyst for change across the entire industry.
Actions to consider
- Keep an eye on new regulations within and outside your home market to anticipate potential changes in direction.
- Engage regulators and government to shape the narrative for the future of banking.
If you’d like to discuss how your bank can transform by embracing purpose, please reach out to us.
To learn more about our latest report on purpose-driven banking visit the Accenture website to register to download the full report.
View Report
