Purpose-driven banking: winning back customers’ trust
A recent Accenture article reports on the banking viewpoints and habits of 14,900 consumers across 12 markets. Unsurprisingly, trust in banks is at an all-time low. The average consumer lacks faith that their bank has their best interests at heart. Recent research suggests that traditional banking practices need to reprioritise their focus to win back their customers’ trust and loyalty.
New entrants to Financial Services, such as neobanks and fintechs, are putting this trust based approach at the centre of their strategy.
Accenture’s key stats are as follows:
- 43% of consumer trust their bank to look after their long term financial well-being
- 14% of consumers turned to their bank when a major life event affect their finances
- 20 million customers have opened accounts globally with UK-based digital neobanks
Due to the increased action of regulators and digital competitors, more procedures are in place to prevent consumers making financially unwise decisions.
Such procedures may consequently put 5% of banks’ current revenue at risk.
This at-risk revenue is derived from a number of sources such as hidden or obscure fees, costly fee overdrafts, foreign transaction fees and credit card debts. While banks may profit from these issues, it further reinforces the belief that they do not have their customers’ best interests at heart. This is where competitors are stepping in and promising a more transparent and honest approach to banking.
Accenture therefore recommends that banks take on the roles of these competitors themselves. While this may seem counter intuitive, banks stand to gain by increasing their consumer loyalty and subsequent business. They need to be seen as partnering with their customers in lieu of the traditional power structures that meant banks lacked accountability and customers felt powerless.
Customers are still frequently engaging with their banks – Accenture’s research shows that half of mobile banking users around the globe login at least once a week. However, engagement is not the same as trust. Trust is key to ensure brand loyalty and reduce the trend of consumers frequently switching between different banks.
Accenture’s analysis shows how business-to-consumer companies in the highest Trust score quartile also showed the highest revenue growth – 8.5% for banks compared to 7.5% for all industries.
The Accenture Report outlines the key priorities as part of purpose-driven banking:
- Protect and Grow – Banks need to understand how they can improve their customers’ everyday financial lives. A key focus here is helping customers to avoid poor financial decisions. This will remove the temptation to move to competitors who are engineered to provide such guidance.
- Create new trust-based revenue streams – Banks also need to start introducing additional advisory services as part of their core offering. This needs to be trust-based and reassure consumers that the advice is for their best interests and not to convince them to buy a particular product.
This broadening of advisory practice challenges traditional banking orthodoxy but is vital to meet the intense competition from challenger banks, neobanks and revolutionary fintechs who promise authenticity and transparency.
While these actions may seem risky in the short-term, it is important to acknowledge the long term benefits they will deliver in terms of both revenue and brand reputation.
To read the full Accenture report, please click here.