Other parts of this series:
Modern business can do anything. We have the brainpower, the manufacturing and engineering ability, the economies of scale and even the capital to do literally anything.
I realised this again, looking at how companies have responded to the Covid pandemic.
Suddenly, projects that would have taken months or years to get approved were approved and working in a matter of weeks. In our forthcoming payments disruption report we make the point that businesses in Italy achieved five years’ worth of progress towards a more digital society in the first month of the pandemic alone.
What has changed? The money was always there. The technology was always there. The people and engineers and customers were always there. The only thing that changed was the sense of urgency.
If the businesses didn’t get online now, immediately, things would start looking bad. And that assessment wasn’t wild-eyed crazy talk either. We have seen big retail giants go out of business in the last few weeks and months — brands that have been part of the South African landscape for generations.
So if modern businesses can do anything, then financial services companies can do anything. It just depends on how urgent a priority they think it is.
And bang on time, just a few weeks ago, Accenture produced a piece of research called Purpose-Driven Banking. It makes a pretty bold claim. The analysis says that banks can increase their retail revenue by up to 9% if they become more purpose-driven.
Purpose-driven is one way of putting it. I prefer “value obsessed.” The research is asking banks to acknowledge that they are in the business of helping customers make the most of their finances rather than simply offering an array of capabilities for safeguarding money and moving it around when required.
The trouble is we have trained our customers really well. If you ask them why they chose one bank over another, you will hear that in addition to feeling good about the brand they are after features and benefits and price. The are looking at how many transactions this product gives them at what price per transaction, or they’re looking at the bank fees on that product and what the interest rate is.
Very seldom — hardly ever, in fact — will you hear customers tell you what they really need. And what they really need is some help to make sense of their changing financial needs. The Accenture research echoes this: most of the people hit by the pandemic didn’t ask anyone for help in dealing with the financial consequences. And of the less than 50% of people who even thought of asking for input, a vanishingly small percentage trusted that their bank would help them at all.
The reason? Most customers trust their banks to manage their transactions. But our research shows that fewer trust banks with their long-term financial well-being. This lack of trust is reflected in other surveys, which show that most customers believe banks’ advice is driven by more by their own business goals, rather than the customers’ best interest.
We’ve seen this with the rise of fintech offerings such as 22seven (which, as I said in my last post, was started by the team which launched Saambou’s online digital bank 20twenty nearly 20 years ago, and which was bought by Old Mutual). The idea is that this 22seven app would be able to log into your bank accounts and use its data analytics to tell you what you have been spending money on. Their advertising said: “We recognise nobody’s perfect, even when it comes to money.” Their insight, if you can call it that, is that money is an emotional subject.
By giving customers some visibility on where their money was going, those customers realised where it could be better spent. So they diverted some of that discretionary spend into investment products sold by Old Mutual — or even just a savings account. The point is that customers were accessing their own banking information in a way that helped them make better decisions.
And, as a life-long banker, that stings a little. Because where was the data originally? The banks had it. The banks were so busy teaching their customers to shop for products on price that they missed completely the obvious needs that banking customers had.
I’ve written before about how transactional banking is becoming a bit like a service. They call it banking as a service (BaaS) — the company Revolut is offering a banking service using a Lithuanian bank as the back end.
What’s exciting is to see the opportunity that this purpose-driven banking research presents. Banks still hold lots of cards (forgive the pun). They have years, sometimes decades of financial information on every customer. With a bit of analytics and AI they could start understanding those customers like no fintech upstart ever could. And the revenue upside is there, according to the research, as long as you have a CEO and a board that finds this approach sufficiently urgent.
If you want to read the research, and it’s really worth it, here it is. And if you think I’ve hit the nail on the head — or you think I’m talking out my hat, please drop me a quick email. I’d love to hear your thoughts.