“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair”
—Charles Dickens, A Tale of Two Cities
Article by Geoffroy de Schrevel, CEO.
The harshest time since WWII
This time they are not the cause of the economic crisis. Most probably, thanks to established regulations, they will not add a financial crisis to the pot. Indeed, some of them are doing their best to support their clients in these trying times. Yet still, political authorities say they are not doing enough, the press is reporting cases daily where they are playing games to protect their own interests, the public sees them as compassionless. They, some of them, ran catastrophic communication about their dividends. Once again, banks see their reputation severely hit by a crisis. And as this crisis is likely to be a harshest since World War II, this blow to the reputation is likely to be a bad one. Perhaps more profound than ever before.
The consumer reactionIf we take a closer look at consumer behavior, however, there are reasons to be hopeful. Customers have not withdrawn cash from their accounts held at traditional banks (whilst neo-banks have a different experience), and some have increased their deposits in zero-return savings accounts. Consumers still trust their banks to keep their money safe. They are, however, increasingly skeptical about whether banks act with their interests at heart.
Does digitalization help?
Most retail banks have invested massively in their digitalization. The best ones already deliver efficient, highly appealing digital customer experiences. Their mobile applications are used more often and by a wider audience than ever. They collect awards, from peers, professional press, research study providers or consulting firms. They are legitimately extremely proud, and loudly exhibit their treasures through as many communication channels as possible. Nevertheless, consumer surveys continue to show pronounced skepticism that banks care about their interests, or that the interests of banks and their customers are truly aligned. Of course, the same can be said for other industries. Are the interests of say, supermarket chains and their customers truly aligned? When it comes to physical health of their clients, the quality of food, a number of supermarkets seem to have adapted their strategies, displaying, for example, more clearly the nutritional facts of the products they propose, favoring local producers, or partnering with cooking or food scoring application providers. Regulations helped and there is still a lot to do, but with this, a number of new, smaller, more involved brands are emerging in every community.
The trust deficit
As banks deal more with their customer’s financial well-being, the question is whether they will decide, and be able, to put the interest of their clients first. In a recent study, Accenture estimate that retail banks could save on average 5 % of their revenue if they address this trust deficit.
What is purpose-driven banking?
This is what our fellow Chris Skinner, Accenture, we at Gambit, and many others, call: purpose-driven banking. To re-use their definition: ‘ Purpose-driven banking is an authentic, transparent effort to help customers manage their finances more wisely and effectively, even if it means offering advice that may not immediately make money for the bank.’ It’s about having the vision and the guts to cannibalise some of their, at-risk anyway, revenue. It’s about offering more choices and better advices to people, even at the cost of short-term profits for the bank. It’s about helping people understand the consequences of their financial actions and making them take better decisions. It goes much further than engaging with people who need help with their financial health, it’s about earning their trust. It’s not putting clients first, it’s putting them at the centre of the bank’s mission. It’s not simplifying interactions between a bank and its clients, it’s acting as the institution and its clients are carried in the same boat.
Successful retail banks, over the next few years, will be those that use technology not only for efficiency but also to (re)build trust and a sense of shared interest, through client centricity.