OUTMANEUVER UNCERTAINTY NOW NEXT

JUNE 2020

Purpose-Driven BankingLooking beyond COVID-19

CONTENTS

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010203040506

Introduction

Banks tackle COVID-19 with focus and innovation

Will the new digital models endure beyond the crisis?

The challenge of rebuilding customer trust

The pillars of purpose-driven banking

Give your customers reasons to believe

When we published our Purpose-Driven Banking report1 in early March this year, few people foresaw that COVID-19 would become a global pandemic or that its impact would go so far beyond the health and lives of those who contracted the disease.

We certainly don’t claim to be more prescient than others, but COVID-19 has not only validated the key premise of our report, it has also magnified the need for the changes we recommended and compressed the time frame in which banks need to execute those changes. These are difficult times for banks, but they could also be the first days of a different, more sustainable future in which they authentically support their customers and help them develop their financial resilience.

Our research showed that while most customers trust their banks to look after their data and manage their transactions correctly, far fewer trust them to put their best interests first and look after their long-term financial well-being. As a result, only about 1 in 7 turn to their banks for advice on managing their money.

We found that on average 5 percent of banks’ retail revenue, worldwide, is at risk as a result of this trust gap. Much of that revenue is the fees and charges banks earn from customers’ financial missteps – things like overdrawing their account. These are revenue streams that have been targeted by both challenger banks and regulators.

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Introduction

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Alan McIntyreSenior Managing Director –

Banking, Accenture

Julian SkanSenior Managing Director –

Accenture Strategy, Banking

Our analysis also revealed the opportunity for banks to increase retail revenue by 9 percent by introducing a range of innovative advisory services. To succeed, however, it was essential that banks restore the trust of their customers. And to do that, we argued, they needed to rediscover their original purpose: to help customers better manage their finances, even if doing so generates no immediate benefit for themselves.

COVID-19 has turned an intense spotlight on the banking industry. The fate of many millions of customers – especially consumers and small and mid-sized enterprises (SMEs) – depends on how banks respond to this crisis. In many countries, the success of government relief programs lies in their hands too. The decisions and actions that banks take today will be remembered by their customers for many years to come.

This is a pivotal point for the banking industry. While carefully safeguarding their own businesses, banks need to adopt novel measures to help their customers stay afloat – in many cases, overhauling their operations far more rapidly than they had intended. But the tale of the pandemic is not an entirely negative one for banks. Forced as they are to change the way they operate, it’s also an opportunity for banks to consider what kind of organization they would like to be when the dust settles. What kind of relationship do they want to have with their customers? What new capabilities and attributes would they like to possess?

In this follow-up to our earlier report, we examine how COVID-19 – and banks’ actions to date – have affected our earlier analysis. Our conclusion? While continuing to prioritize their immediate imperatives, banks have a great deal to gain by using this crisis to reset priorities. There is certainly regret that they were not already more digital, more data-driven, more in the cloud, and less constrained by their legacy technology. But there is also a recognition that COVID-19 is impelling them in this direction, while forcing them to be more proactive in protecting the interests of their customers.

Most importantly, we believe, the COVID-19 crisis is the ideal time for banks to start establishing more collaborative, trust-based, win-win relationships with their customers. This is an opportunity for them to be heroes rather than villains, and a chance to lay important foundations for future success.

The consumer survey for Accenture’s global Purpose-Driven Banking report, completed at the end of 2019, found that even pre-COVID-19, and despite the generally buoyant macroeconomic conditions, many consumers were struggling financially.

Only 29 percent earned more than they spent every month, and 75 percent lacked sufficient savings to cover six months of living expenses.1 SMEs too were constrained – more than 70 percent reported that they were unable to meet their needs by borrowing from traditional banks.2

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Banks tackleCOVID-19 with focus and innovation

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* Unless specified otherwise, all findings mentioned in this report are from Accenture’s Purpose-Driven Banking Survey (second wave, post-COVID-19), April 2020.

COVID-19 has made the situation much worse for many people and businesses. Our latest Purpose-Driven Banking Survey, conducted in April, found that the impact on both consumers and small businesses has been severe (Figures 1 and 2). In a May 2020 survey by the Society for Human Resource Management in the US, more than half of the SME respondents said they expect to be out of business by October.3

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Figure 1. The impact of COVID-19 on consumers’ finances Q. How, if at all, has the pandemic affected your personal financial health?

Figure 2. The impact of COVID-19 on SMEs’ finances Q. How, if at all, has the pandemic affected your business’s sales?

Negatively impacted

Neither positively nornegatively impacted

Positively impacted 12%

46%

42%

Source: Accenture Purpose-Driven Banking Survey, second post-COVID-19 wave, April 2020. Source: Accenture Purpose-Driven Banking Survey, second post-COVID-19 wave, April 2020.

11%

34%

55%

13%

31%

56%

18%

40%

42%

Sales have increased

Sales have decreased slightly, but the effectsare manageable

Sales have decreased significantly or the business has had to shut down

Size of enterprise Sole proprietors Small enterprises Medium enterprises

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Banks have played a vital role in helping customers deal with the immediate impact of the crisis, maintaining operations with remote workforces, easing financial demands on struggling customers, and facilitating the distribution of government relief funds. Many banks – incumbents as well as challengers – have risen to the challenge of COVID-19, showing customers what the industry can do for them on its best day.

Lloyds sent tablets to 2,000 senior customers who lacked suitable devices for online banking and partnered with a digital training provider to help them get started and offer dedicated phone support.

Alipay is opening up its platform to support the digital transformation of 40 million merchants throughout China, allowing many of them to sell their products online for the first time.

DBS in Singapore has partnered with Chubb to offer all its customers one month’s free insurance against COVID-19-related ailments.

ING is helping its Polish small-business clients transform their sales models through ecommerce sites and has suspended fees for three months for the use of its payment gateway.

NuBank is supporting customers in various ways, from sponsoring telehealth consultations to facilitating the delivery of pet supplies.

Innovative banks show customers their best side

When the crisis abates and business returns to a semblance of normality, banks will face a stark choice:do they revert to business as usual, or do they seek to combine the strengths of the traditional and the challenger models?

This crisis has also forced banks to change the way they work, moving as many of their operations online as possible. They have had little choice but to become more transparent and more agile, and to accelerate their digital transformation.

One mostly unintended consequence of these measures has been to negate, to a degree, the competitive advantage that has helped challenger banks around the world acquire millions of new customers. These newcomers have used innovative digital products and financial management tools to help customers improve their financial proficiency, keeping customers’ best interests at heart.

The challenge posed by these digital banks is also being weakened by two other factors: incumbents’ current fee leniency, which undermines the cost advantage of the digital banks; and the natural instinct of customers, in times such as these, to seek safety in size and stability. However, the question is whether this will prove to be just a temporary setback for the challengers, or whether COVID-19 will be the inflexion point at which incumbents learned what was needed to combat the rise of their digital rivals.

When the crisis abates and business returns to a semblance of normality, banks will face a stark choice: do they revert to business as usual, or do they seek to combine the strengths of the traditional and the challenger models? Do they recreate their organization by retaining and building on the best of the capabilities, practices, and attributes adopted during this pandemic?

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In our Purpose-Driven Banking report we make the case for banks to rediscover their true, original purpose. We cite the example of George Bailey’s emblematic bank in the 1947 film It’s a Wonderful Life, which stood by its hard-pressed customers whom it knew personally and sympathized with.

As they grapple with the challenges of COVID-19, most banks are doing everything they can to keep their customers afloat. They are in a precarious situation, however, and insufficient insight into the risks they are taking on could jeopardize their solvency.

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Will the new digital models endure beyond the crisis?

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It requires a delicate balancing act. But what do they do when the pandemic is under control, businesses re-open, and most people return to work? On the one hand, it would be tempting to restore all the old fees and charges in an effort to recoup the revenue they forfeited, to revert to their traditional practices, and to take the foot off the accelerator that is driving them toward their digital future.

This may be their natural instinct. But it would disappoint many of their customers, who probably expect that their bank’s new ways of working will endure beyond the crisis, and who will have acquired new digital habits in managing their finances. It would also restore the gap that the challenger banks exploited to establish their foothold in the industry and re-energize the regulators who seem determined to suppress banks’ ‘bad revenues’ (see sidebar overleaf).

Hancock Bank’s ‘money laundering’ rescued Katrina victims

When Hurricane Katrina hit New Orleans in 2005, an HBR article4 relates, cash was in desperately short supply due to flooded bank branches and damaged ATMs. Employees of Hancock Bank scoured the waterlogged vaults at all of its city branches and recovered as many of the soggy, muddy banknotes as they could find.

After carefully washing, drying and hand-ironing them they set up tables outside the branches, offering the ‘laundered’ money to anyone who needed it. A total of $42 million was lent, with most borrowers – only some of whom were customers – providing just their names, addresses and Social Security numbers to the bank’s staff, who recorded the details on scraps of paper.

In the months that followed, Hancock recovered 99.5 percent of the money loaned. Twelve months after the hurricane the number of new accounts had risen significantly, and deposits had increased by $1.5 billion. Since Katrina, Hancock Bank’s ‘last to close, first to open’ philosophy has become core to its brand identity.

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BAD REVENUE: 5% OF BANKS’ RETAIL INCOME AT RISKIn the markets we analyzed, an average 5 percent of traditional banks’ total retail revenue is at risk because of a lack of trust (Figure 3). This comprises the ‘bad revenue’ derived from services that have hidden or opaque fees, or that result directly from customers’ poor financial habits and decisions. The amount is potentially higher in certain countries if local threats materialize but could also be lower if banks increase their transparency and simplify their fee structures and products.

The revenue threat also comes from the actions of regulators who have been prompted, by recent banking scandals in a variety of markets, to insist on the simplification of some fees. Their aim is to protect vulnerable customers who find themselves paying unnecessarily high rates of interest. These ‘gotcha’ moments reinforce the perception of customers that banking is a win-lose relationship in which their interests invariably come second to those of bank shareholders.

In the US alone, these fees amount to billions of dollars for each of the leading banks. A recent HBR article5 cites a survey that found a strong correlation between the level of hardship of a bank’s customers and the fees earned from overdrafts – in some cases rising to almost 20 percent of the bank’s total revenue. Not surprisingly, only 20 percent of the 100 largest banks in the US offer overdraft fee assistance.

Figure 3. An average 5% of retail banking revenues are at risk

Number in %Due to:

Potential improvements in customers’ financial habits (borrowing and saving)

Regulatory and competitive pressures

Source: Accenture Research analysis

Figure 3. An average 5% of retail banking revenues are at risk

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Annual revenue growth rates (%, 2018 vs. 2017)

Figure 4. Trusted companies achieve higher revenue growth rates

* Companies within the top 25 percent of the Arabesque S-Ray Trust score.

Note: Analysis of 3,800 banks and other B2C companies based in 12 countries. The Trust score is calculated as the average of the quarterly Trust scores between 2016 and 2017. Companies with bottom and top 10 percent revenue growth values were excluded from the analysis.

Source: Accenture Research analysis of S&P Capital IQ data and Arabesque’s S-Ray Trust score.

All B2C Companies

Banks

Most-trusted companies* All other companies

7.5 8.4 5.5 6.2

Banks have a rare opportunity to make a virtue out of necessity. As their ‘bad revenue’ will be difficult to sustain, they could self-cannibalize it in the interest of their customers. On top of that, they could commit to always giving their customers best advice, even if it does not generate any immediate benefit for themselves. And in a similar vein, they could continue to invest in the digital tools and services that help customers manage their finances more effectively and improve their financial expertise.

This would demand a significant strategic and cultural shift for most banks. But with the pressure from customers and regulators, and the recognition of shareholders that drastic action is called for, there could hardly be a better moment for them to make this pivot. The benefits would be far-reaching, and would include:

• Increased brand value, oriented around the bank’s purpose, enabling market differentiation to grow share of wallet and customer acquisition;

• Improved operational metrics, such as lower NPL risk (now more important than ever), better capital-to-risk-weighted assets, cheaper funding sources, and reduced compliance risk due to less mis-selling;

• Enhanced ability to attract talent. Our research shows that 75 percent of millennials would take a pay cut to work for a socially responsible company.6

Most importantly, it would lay the foundation for improved customer trust. A key finding of our recent analysis was that the most trusted banks achieve revenue growth that is on average, one-third greater than that of their peers (Figure 4). In other words: trust pays, and it does so handsomely.

Trust is also critical if banks are to capitalize on one of their most promising opportunities for revenue growth: new digitally-enabled advisory services that help customers optimize their daily spend, rationalize their product portfolio, or take advantage of tailored life-planning or business advice. Our analysis indicates that these could generate an average 9 percent retail revenue uplift for incumbent banks (Figure 5).

The opportunity is greater in markets that are underserved by advice and have greater concentrations of innovation-seeking customers, such as in the UK and Spain. In contrast, it is smaller in France and Sweden, which have relatively more skeptical, conservative customers.7

Banks that rebuild advisory trust will generate an added bonus: a trust kicker. This is the potential revenue uplift that accrues to the most trusted players in their respective marketplaces. The potential is greatest in Italy and Germany, whose banks currently have low trust scores.7

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Source: Accenture Research analysis.

Figure 5. Trust-based propositions can boost incumbent banks’ revenue by an average 9%

Revenue increase for an average retail bank per market—change over 5 years

Number in %

Pillar 1: Protect and Grow

Pillar 2: New Trust-Based Revenue Streams

Trust-Kicker Effect

Average = 9%

AustraliaUK Hong KongSAR of China

Spain USA CanadaItalyGermany Brazil SwedenFranceJapan

12-15 12-14

10-12 10-12 10-129-11

8-10

3-4

6-85-6 5-6

7-9

Restoring trust will not be easy. Many banks have invested heavily in innovative banking services intended to increase customer engagement. Most have been successful –mobile tools have generally caused customers to transact more frequently. However, transactional engagement does not necessarily build emotional connections and establish the type of trust that banks need to foster advisory relationships with customers.

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The challenge of rebuildingcustomer trust

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There are different kinds of trust. Most customers are confident that their banks will protect their data and correctly manage their transactions. However, that doesn’t translate into trust that their bank will also look after their long-term financial well-being. The gap is especially evident among small businesses (Figure 6).

Figure 6. Consumer and small-business trust in banks

CONSUMERSQ. To what extent do you agree with these

statements about your bank?A. Strongly agree + Tend to agree

SMEsQ. To what extent do you agree with these

statements about your business’s bank?A. Strongly agree + Tend to agree

I trust my bank with my data

I trust my bank with my long-term financial well-being

I trust my bank to provide fast and reliable services

I trust my bank to help me look after the financial success of my business

Note: Aggregated results for Italy, UK, US and BrazilSource: Accenture Global Financial Services Consumer Survey, 2019.

Note: Aggregated results for Italy, UK, US and BrazilSource: Accenture Purpose-Driven Banking Survey, second wave post-COVID-19, April 2020.

Main bank

54% 45%

Main bank

70% 51%

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Customer actions demonstrate the lack of trust in banks as true financial advisors. Of those consumers who, in the past five years, experienced a major life event with serious financial consequences, only 14 percent turned to their bank for help (Figure 7).

Similarly, many SMEs depend more on professional advisors for help with their business finances than their bank.

Their reasons may be different from those of consumers – “I’m too small to get my bank’s attention”, “they don’t understand the peculiarities of my industry”, “they give me ‘canned’ advice that’s not really relevant” – but they boil down to the same thing: a perception that banks are unable or insufficiently interested to promote their customers’ financial well-being.

This points to a significant opportunity for advisory services, especially in countries like Italy and Brazil, where our research found a high proportion of SMEs would welcome a more comprehensive business relationship with their banks.

Figure 7. Consumers and small businesses typically do not turn to their banks for advice

CONSUMERSQ. Did you seek help in dealing with the financial implications

of a major life event? If so, to whom did you turn?

SMEsQ. To whom do you typically go for advice about

your business’s finances?

Source: Accenture Purpose-Driven Banking Survey, second wave post-COVID-19, April 2020.

Source: Accenture Purpose-Driven Banking Survey, first wave pre-COVID-19, December 2019.

Sought help

Don’t know

Did notseek help

51%

44%

5%

56%

28%

25%

21%

19%

19%

15%

11%

Friends / family

My bank

Work colleagues

A financial advisor

An independent expert other than a

financial advisor

Clubs / communities

OtherAll respondents who went

through at least one financially impactful life event in the past 5 years

Online (e.g. forums, blogs,

social media etc.)

58%

35%

26%

17%

4%

16%

My business bank

My business’s trade industry organization

Business associates (whether or not they

are part of my business)

I don’t go to anyone for advice about by business’s finances

Other

External professional services (e.g. accountants, consultants,

lawyers etc.)

Online sources (e.g. forums, blogs, social media etc.) 26%

Source: Accenture Purpose-Driven Banking Survey, second wave post-COVID-19, April 2020.

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If customers’ confidence in banks as an advisor was weak prior to COVID-19, their handling of the crisis hasn’t moved the dial in the banks’ favor. Our new survey shows that, while banks’ actions during the crisis have caused meaningful shifts in customer trust, the overall impact is neutral (Figure 8).

Our research found that many customers seem to be less satisfied than before with the services banks are offering them. Much of banks’ good work in extremely trying times has been undermined by some customers’ failure to secure loans, by overloaded call centers, and by allegations that some banks have skewed the distribution of government benefits in favor of larger, more influential clients. These issues are complex and difficult to refute, and are more likely to attract media attention than the good that banks do; as a result, they have a disproportionate effect on customer perceptions.

The upshot is that while there is a clear opportunity for banks to convert the trauma of the COVID-19 crisis into closer, more trusting relationships with their customers, most have yet to capitalize on it.

Figure 8. COVID-19 has resulted in a shift in consumers’ and SMEs’ trust in their banks

CONSUMERS

Q. Has the COVID-19 pandemic affected the extentto which you trust your main bank to help lookafter your financial well-being?

SMEs

Q. Has the COVID-19 pandemic affected the extent towhich you trust your main bank to help look afterthe financial success of your business?

I trust my bank more

I trust my bank the same

I trust my bank less

16% 9% 6% 21%

68% 83% 70% 63%

15% 8% 24% 18%

US UK Italy Brazil

I trust my bank more

I trust my bank the same

I trust my bank less

28% 9% 25% 39%

57% 57% 48% 42%

16% 24% 27% 18%

US UK Italy Brazil

For most customers, the pandemic has not impacted trust in their banks. A reasonable portion did say they trust their bank more today than they did before the crisis, but those positives are offset by a similar decline in trust for other customers – resulting in a zero net impact. When we narrow the focus to consumers who are struggling financially, the picture is more negative: 11 percent trust their banks more, but 32 percent have lost trust.

We believe the solution is purpose-driven banking. We discussed this in some detail in our earlier report, and we believe the rationale for it has become even more compelling since the outbreak of COVID-19.

The current crisis, and the actions that most banks have taken in response to it, are a crucial opportunity for them to reposition themselves for growth in a digital future.

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The pillars of purpose-driven banking

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Figure 9. Actions banks should consider to build a foundation for customer trust

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To adopt an authentic win-win model that puts customers’ interests first, banks need a strategic plan that is based on both the realities of the current crisis and a new vision of their future role. It should recognize that the economic crisis has caused customers’ needs to become more disparate than before, placing a higher premium on the ability to understand these needs, segment markets with a sharper focus, and customize offerings.

Faced with shrinking investment capacity, banks will be challenged to maintain a holistic strategy: drive cost savings through digitalization while simultaneously enhancing their offerings and their overall customer experience.

This plan should comprise a set of practical actions which, in our view, can be aggregated under two key pillars (Figure 9).

Two strategic pillars, operating in parallel, to future-proof both banks and their customers

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Pillar 1Take immediate steps to improve operational efficiency and transparency to protect and grow market share. Self-cannibalize at-risk ‘bad revenue’ to show increased commitment to customers’ interests and gain trust. Accelerate digitalization to become more agile, more data-driven and more automated, and less constrained by legacy technology. Transform the core business to not only help retain but also attract new customers.

These measures – which we originally suggested could be implemented within a time span of two to three years –have now become more urgent and completion should be targeted within 12 to 24 months. Many banks have already waived overdraft fees and minimized ‘bad revenues’ to help customers through the COVID-19 disruption. Now is the time to question whether those fees should be reinstated or whether there are better alternatives.

This pillar encompasses the steps banks can take now to improve their understanding of how to enhance customers’ management of their finances. It includes offering more tailored propositions that help individuals spend more wisely, manage their debt, and save money; and that help businesses improve their cashflow and gain a better understanding of their credit options.

Cases in point: Retail banking Discovery Bank uses its Vitality platform to reward customers who adopt and maintain the five key behaviors it claims are essential for financial health. It tracks these behaviors and provides frequent reinforcement and advice.

Commonwealth Bank of Australia’s redesigned banking app uses machine learning, data analytics and behavioral science, analyzing 157 billion data points in real time, to offer personalized content for each customer. For example, it sends smart alerts to advise customers when their credit card payments are due, or if they are in overdraft. It helps them minimize banking fees and encourages them to save.

Cases in point: SME banking Credit Agricole has created an advanced digital multiservice cash register for small retailers, offering a suite of value-added services such as automated stock management, reporting dashboards, and loyalty program management.

Royal Bank of Canada has built a customizable mobile dashboard for SMEs that summarizes their current cash position in a single view and includes push notifications of business insights based on cashflow analysis.

Standard Bank in South Africa offers an all-in-one e-commerce package dedicated to SME clients that want to start an e-commerce operation. It provides tools to build a web store, accept in-app payments, manage invoicing, and prevent fraud.

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Use behavioral analytics to better understand customers and engage in individually relevant interactions, with transparent data and insights. Measures like highlighting their necessary vs. discretionary spending will improve their financial proficiency, enhance the way they manage their money, and encourage them to take actions like setting saving goals.

Offer engagement tools to enhance customers’ financial management, such as an app that allows SMEs to run their day-to-day operations more effectively. Leveraging real-time prescriptive analytics, the app could be layered on top of the bank’s existing infrastructure.

Deploy a multi-disciplinary team to compile holistic solutions that strengthen the customer value proposition. Use AI and digital channels to make it affordable, and partner with third-party providers to serve customers’ needs from different angles. For consumers, banks could partner with insurers to provide medical coverage, whereas for businesses, they could facilitate access to government and third-party services.

By starting with such actions, banks can build trust and control the speed at which threatened revenues are lost. However, executing Pillar 1 initiatives is likely to enable the bank to do little more, economically, than tread water. To capture the upside of purpose-driven banking it should develop and scale new trust-based revenue streams.

Banks can implement Pillar 1 initiatives by leveraging predictive analytics to understand which customer segments to target and how to serve them profitably.

of retail customers said they would be eager to receive insights that would support their financial well-being.8

62%of SMEs would welcome a solution to help them with liquidity forecasting and optimization. 8

67%of SME executives said they already had, or would like, access to a digital relationship manager. 866%

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PILLAR 2Start to plan a steady shift to expand the scope of financial advice. The focus should be on addressing retail and SME customers’ unmet needs and creating new revenue streams. Full maturity can be achieved within three to four years.

While much of Pillar 1 aims to save struggling customers from drowning financially, Pillar 2 provides the advice that benefits those who are in a stronger position, have the potential to improve, and both appreciate and can afford advice – the ‘neglected middle’. The demand is beyond dispute: 55 percent of the consumers we polled said they would be willing to pay for additional bank services that were of value to them.1

Among the SME executives we polled, more than 60 percent were interested in such services.8

True trust-based advice models need to redefine the practice and become broader than most current offerings. They should be:

• Stand-alone and impartial, without necessarily leading to product sales; • Able to identify what is best for customers, even if it means recommending another provider’s products;• Strong enough to challenge the classic banking orthodoxy that advice cannot be profitable when provided to all customers.

A Financial Wellness Visit to conduct financial ‘health checks’ and advise clients based on their circumstances. The human-led engagements would be repeated a few times a year, provided affordably and at scale. Several players are testing this with a mix of robo-advice and a stripped-down independent financial advisor model. But it has yet to be confirmed that it can retain the right balance of technology-driven advice and personalized human interaction at a price that most customers can afford.

An Online Advisor that provides regular or constant personalized recommendations. Possibly subscription-based, this service would give customers full access to their data and maintain a dialog with them about their needs and goals.

A Digital Financial Helper that improves customers’ financial literacy and decision-making. Tools like AI assistants can enable banks to make sense of the abundance of available information to answer customers’ queries effectively in plain human language.

PILLAR 2

01 02 03

We believe banks can explore and offer a number of distinct advisory propositions when making this shift. For retail customers, the list of advisory propositions might include:

At a time when supply chains are disrupted and small and mid-sized businesses are forced to reconsider how they operate, valuable advisory propositions might include:

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A Digital SME Helper would function like the Digital Financial Helper for consumers, using AI to tailor insights to the client’s industry and marketplace. It would collect, aggregate and make sense of the vast pool of available information to provide, for example, simple explanations and recommendations relating to trade laws and tax.

01 02Small-Business Introductions,recognizing the growing importance of ecosystems, would help small businesses with the challenge of finding, selecting and working with new partners. More than 62 percent of SMEs told our researchers they were interested in services such as these. 8

03

Market testing is critical to determine the effectiveness of these propositions from all key perspectives: financial, technical, regulatory and client receptiveness. Banks should experiment with the scope of the intended advisory

services, and then test the demand for the advisory proposition that they want to explore.

A Business Advisor could offer an array of hybrid in-person and digital services that address the SME’s financial and broader business needs. It could help the SME digitize its business model, including payments services within its financial solutions and making finance available to both the business and, potentially, its customers. It could also generate personalized insights and recommendations across a spectrum of operational areas. Our research indicates that almost 70 percent of SMEs would be interested in this type of proposition.8

Banks that aspire to being purpose-driven should start to implement Pillar 1 with minimum delay, to help customers manage their debts and begin their journey back toward financial stability. Simultaneously, they should invest time and resources in planning for Pillar 2.

The former will reinforce their advisory trust, but its effect will plateau and won’t be enough, on its own, to enable them to deliver the sustained organic revenue growth their shareholders expect. Hence, there is a strong case for banks to also implement the somewhat riskier but higher-return Pillar 2 initiatives. Together they offer a promising path to recapturing customer intimacy and creating win-win partnerships that will endure over time.

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Tackling both pillars together

Now, in the midst of the COVID-19 pandemic, is the ideal time for banks to give their customers good reason to believe they are putting their best interests first.

Customers have seldom needed it more, shareholders are more accepting of the need for change, and a strategic shift to purpose-driven banking is likely to yield benefits that will endure long after the current crisis has passed.

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Give your customers reasons to believe

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Banks need to create a digital-first environment where changes are implemented to propositions, channels, front- and back-office staff, the customer experience and many other areas. A behavior-influencing digital experience, empowered with data and intelligent technologies, is essential. The right technology partners will be invaluable in helping banks accelerate the introduction of innovative products and services. And the change needs to reach and transform everyone in the organization, with a broader set of personal KPIs and corporate objectives and a core cultural shift that overcomes siloes.

The strategy must be holistic, and the change deep, authentic, and consistent.

Embracing this opportunity requires bold leaders who are willing to play the long game. They will balance the drive for increased efficiency with a commitment to creating innovative new digital experiences. They will adopt a data-driven approach to prove our hypotheses in their specific markets and context, and then bring their many capabilities to bear under a common purpose. We believe these organizations, if they execute effectively, will be rewarded with bountiful gains in customer trust and economic value.

We would welcome the opportunity to work with these leaders, to transform their organizations and redefine banking for the good of all. If you’re one of them, give us a call.

Banks cannot fake this if they want to succeed

About the research

The first of our Purpose-Driven Banking reports, published in March 2020, was based on two research studies. The first was a quantitative customer survey of 14,900 banking customers in 12 markets: Australia, Brazil, Canada, France, Germany, Hong Kong SAR of China, Japan, Italy, Sweden, Spain, the UK and the US. Conducted in November and December 2019, it asked respondents about their preferences and attitudes on a variety of issues: their relationship with their main bank, money management, their financial habits, their readiness to deal with the financial impact of key life events, and their willingness to pay for new value propositions. The second study was a quantitative analysis of the retail banking revenue pools which, in each of the 12 markets surveyed, might be defined as “under threat” due to pressure from digital challengers and regulators, and improvements in customers’ financial habits. We also analyzed the potential revenue uplift which we expect will result from the initiatives that we describe in the Pillars of Purpose-Driven Banking section of this report.

Following the onset of the COVID-19 pandemic, in April 2020 we conducted a second wave of our Purpose-Driven Banking Survey. The aim was to evaluate the impact of the pandemic on customers’ relationships with their main bank, their financial health, and their willingness to pay for new value propositions. This survey included small and medium-sized enterprises in its scope: the relationship of SMEs with their business bank, their expectations when dealing with them, and how the COVID-19 pandemic has changed these. This second wave of research involved more than 5,500 customers and 1,300 SMEs in four countries: the UK, US, Italy and Brazil.

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1. Purpose-Driven Banking Survey (First Wave, Pre-COVID-19), Accenture, 2020.

2. Small Business Loan Approval Rates Plummet in March 2020, Biz2Credit Small Business Lending Index, March 2020. https://cdn.biz2credit.com/appfiles/biz2credit/pdf/report-march-2020.pdf

3. Navigating COVID-19 – The Impact of the Pandemic on Small Businesses, Society for Human Resource Management, May 2020. https://shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/SHRM%20CV19%20SBO%20Research%20Presentation%20v1.1.pdf

4. How Bad Times Bring Out the Best in People, Harvard Business Review, March 20, 2020.https://hbr.org/2020/03/how-bad-times-bring-out-the-best-in-people

5. Should U.S. Policymakers Force Banks to Waive Overdraft Fees During the Crisis?, Harvard Business Review, May 2020. https://hbr.org/2020/05/should-u-s-policymakers-force-banks-to-waive-overdraft-fees-during-the-crisis

6. Global Consumer Pulse Research, Accenture Strategy, 2016.

7. Global Financial Services Consumer Study, Accenture, 2019.

8. Purpose-Driven Banking Survey (Second Wave, Post-COVID-19), Accenture, 2020.

References

Alan McIntyreSenior Managing Director – Banking

a.mcintyre@accenture.com

Julian Skan Senior Managing Director – Banking, Europe

julian.skan@accenture.com

Kim Kim OonManaging Director – Accenture Strategy, Banking

kim.kim.oon@accenture.com

Cécile André LerusteManaging Director – Banking, Europe cecile.andre.leruste@accenture.com

Francesca Caminiti Director – Accenture Research, Banking

francesca.caminiti@accenture.com

Mauro CentonzeManager – Accenture Research, Banking

mauro.centonze@accenture.com

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Contact the Authors

Contributors: Dariusz Orynek, Manager – Accenture Research, Banking Emily Burns, Manager – Accenture Strategy, Banking

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