Is banking about to have its electric car moment?
The transition from gasoline cars to electric cars is a compelling illustration of how quickly business models in a well-established industry can crumble in the face of new technologies and customer expectations. Although innovative competitors like Tesla have long been preparing for this moment, many incumbents failed to appreciate how quickly it would arrive.
For banks, the lesson is that there is no force more powerful than clarity of purpose combined with digital maturity. It is how Tesla seized a commanding lead in the shift to the new auto market. Likewise, the next generation of banks are thinking about how they can use purpose as a competitive differentiator while they pair it with behavior-influencing digital experiences to create unrivalled economic value.
Our research shows that purpose isn’t only about doing the right things for customers and society—it is also a powerful way to drive growth and higher market valuations. This study is the latest addition to a series of Purpose-Driven Banking reports we launched in 2020 to understand how purpose can move the financial performance needle for banks.
The recent Banking on Empathy report examined how purpose is applied to customer interactions. Our new study builds on this by analyzing the intensity of purpose-driven strategies at 70 leading banks from around the world across three key areas – customers, employees, and products. It assesses how the different facets of being a purpose-driven business impact profitability, customer trust and market position.
Purpose helps banks enhance profitability and shareholder value
Our findings suggest that banks that earn recognition as a purpose-driven institution will unlock substantial value and competitive advantage, which in turn will drive customer satisfaction and retention. We found higher levels of customer loyalty among Purpose-Driven Banking Leaders.
Earlier Purpose-Driven Banking research from Accenture suggested that incumbent banks with a clear purpose and high levels of customer trust could lift their retail revenue by 9 percent per year. The new research indicates that Purpose-Driven Banking Leaders are already realizing significant gains. This group achieved double the revenue growth of their peers over the past four years.
One of the most compelling findings is that embracing a purpose-driven agenda can help banks to unlock the full value of their investments in digital transformation. The highest ROE and price-to-book ratios are to be found among the banks that excel across both dimensions, confirming that purpose and digital maturity are a potent competitive combination.
Why banks are making slow progress on the purpose-driven journey
Despite this evidence, only a handful of banks are embracing their purpose with genuine enthusiasm. We believe there are four major reasons:
It’s unsurprising that some banks are reluctant to cannibalize revenues, realign their business models and re-engineer their value propositions during a pandemic. Yet inaction may pose a bigger threat than grasping the nettle.
Purpose-Driven Banking Leaders in our research show how banks can grow revenues, profits and market valuations by doing the right thing for their customers. Read our report to learn more.