How banks can remain hyper-relevant

After the Cold War, the US Army College coined the term VUCA to describe the new world order. It stood for Volatile, Uncertain, Complex and Ambiguous. That description remains as true today as it was 40 years ago. 

In banking, however, VUCA has given rise to GAFA. This is our collective name for the digital businesses that are now suddenly playing in what used to be the preserve of traditional banks. 

The name comes from the first letters of Google, Amazon, Facebook and Apple, but it includes big platform companies such as Alibaba, Tencent/WeChat and Baidu in China, Samsung (through Samsung Pay) out of South Korea, and platforms such as Uber and Airbnb. 

Just a side note. When researching this article I found out more about Alibaba. I knew it was an online retailer, much like Amazon. But what I didn’t realise is that with a market cap of $500 billion, its turnover is more than the entire retail sector of the US combined – and has been since 2015. That includes Amazon, eBay, Walmart … everybody. 

When digital-native giants start nibbling at the corners of the banking industry, the businesses that will thrive will be those that can adapt nimbly and repeatedly to increase their relevance to customersWe call those businesses Living Businesses. 

Few of the world’s banks are sustaining a return on equity above 12% and a cost : income ratio of less than 45%.  

Compounded by this is the fact that more than 3 out of 4 of the “Digital Nomads” – that segment of consumers of banking services who are younger, more digitally savvy and make up 40% of the total market – would switch to bank with GAFA the moment they feel they are not getting what they expect from their conventional bank. 

Only 43% of the nearly 50,000 consumers who responded to our 2019 Global FS Consumer Survey said they have a lot of trust in their bank to look after their long-term financial wellbeing. Clearly, there’s not much room for complacency.  

For banks to be “living businesses” our research indicates these five key behaviours. 

Be engaging. This means being relevant beyond banking. The GAFA businesses are relevant beyond their digital offerings. Can your bank emulate them by being relevant beyond banking? 

Be intelligently personalised. Nearly half of all customers want relevant advice and product information at key decision points – for example, if the customer is looking to buy a bicyle online, she would welcome information about the best price for the bike, as well as financing and insurancoptions there and then. Especially, for example, if the bank could intelligently tell her if the bike would already be covered under her household insurance. 

Be credible. This goes without saying – but for Living Businesses in a GAFA world this would include on-line reviews and crowd-sourced ratings. 

Be consistent. Again, it goes without saying. Its the promise that every time a customer interacts with the bank – whether in the branch, via the call centre or by clicking a button on an app – they get the same quality of branded experience. 

Be generous. According to a Bank of America study, 90% of CMOs experienced a revenue lift from their card-linked marketing programs. What I found strange about that statistic is that fewer than out of (38%) CMOs have actually implemented such a program. 

There’s a lot more to being a Living Business than these five behaviours, and you can read about them in our report: Banking as a Living Business. 

Whatever your strategy, it’s vital to take the people along – to re-skill and “new-skill” them for the GAFA future. None of the five behaviours I’ve listed above is possible without the right mindset and capabilities. 

Learn more about how to manage disruption by downloading The Wise Pivot. Or, contact me to discuss how Accenture’s international research can help you understand and prepare for the coming disruption.