Banking: short-term pain, long-term gain

As in many countries, Australian banks have taken centre stage in managing the economic fallout of the pandemic, helping struggling homeowners by offering extended payment holidays, including mortgage deferrals. Banks have also been a critical transmission mechanism for national programs providing disaster and pandemic-related government grants and loans to small businesses and the self-employed.

"Once the pandemic winds down, though, banks will need to decide if they will continue to embrace this type of purpose-driven banking or if they will return to business as usual.”

But banks have also taken several voluntary actions to help their customers through this crisis, especially in the area of fee relief, halting charges on overdrafts and ATM transactions.

This period of quick action and outreach has the potential to fundamentally change the relationship between banks and their customers - from something that felt adversarial in the past, to one starting to feel cooperative, even supportive.

Once the pandemic winds down, though, banks will need to decide if they will continue to embrace this type of purpose-driven banking or if they will return to business as usual. The choices they make will directly affect their bottom lines in the short term and could also shape their longer-term business prospects and relationship with customers.

The stakes are particularly high in Australia, where research from Accenture shows banks stand to lose as much as 9 per cent of the revenue they generate from overdraft and other fees, such as charges for cross-border payments and foreign transactions, as new competitors draw customers with no-fee banking services and regulators mandate simpler banking fee structures to protect consumers.

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Levels of trust

Accenture research shows consumers tend to trust banks more than many other businesses – but there are levels and layers to that trust. The levels of trust is high in banks to manage and secure customers’ financial data and their ability to manage transactions but people are far less confident banks are looking after their best interests and long-term financial wellbeing. This indicates a level of scepticism that the interests of banks and their customers are truly aligned.

Fintech start-ups have exploited this lack of advisory trust, luring customers with a “we’re in this together” tone of voice and advisory approach, backed up with digital and mobile-based services that make sourcing, sending and spending money easier. For example, eliminating fees and providing insights for longer-term needs like retirement planning.

Most consumers surveyed wanted more proactivity and personalisation in the interactions, recommendations and advice from their bank. Accenture believes in a strong opportunity to drive enhanced customer trust, through purpose-driven banking – establishing win-win relationships anchored on the premise banks are acting in the customers’ best interests, being more useful and developing new revenue streams from those new value-added services.

Evolving purpose

The research suggests there is an upside, with potential revenue growth of up to 11 per cent in Australia, if customers can be persuaded to see their bank as an advisor rather than just a transaction processor, more than offseting the short-term revenue at risk.

But in order to capture those potential gains, it’s key for banks to evolve from campaigns triggered by their needs, to smart customer-centric journeys triggered by the customer’s needs and behaviours. While money management is a good start, consumers want to go beyond product and focus on experiences.

So, banks need to mobilise end-to-end teams that aren’t confined to product silos to be sure the experience is complete, total – and aligned with customer priorities of speed and efficiency, adding additional services from third parties if needed.

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A fundamental shift in operating model is also required to capitalise on this trust and grow new revenue streams. Accenture knows 55 per cent of consumers are ready to pay for services that add value to them, such as a differentiated approach in distribution models, Netflix-style pricing or pay-as-you-go pricing.

Finding the right advisory model is key – with propositions shaped around individual customers’ needs to open these new revenue streams.

Australia is already on the journey, exploring different advisory propositions such as:

• Digital financial helper: uses tools like AI assistants to improve customers’ financial literacy.
• Online advisor: provides personalised customer recommendations regularly or constantly.
• Financial wellness visit: human-led, supported by robo-advisors, providing personalised recommendations affordably, at scale, a few times a year.

With the recent launch of the customer data right, so-called open banking is also a good way to create new services and products with more understanding of the client’s situation and also by potentially adding other financial services from third-parties. But in parallel, and fundamental to maximising the impact, there needs to be a culture and operating model change.

While we are cognisant of the huge challenge this creates, the data does show getting this right is a win-win situation for the long term.

Alex Trott is Banking Practice Lead in Australia & New Zealand at Accenture