As we survey the damage from the pandemic and its multiple variants, technology services and consulting firm Accenture has some advice, “It is critical that every bank becomes a challenger.”
In a recent report, the firm uncovered that banking has moved from vulnerable to volatile on its Disruptability Index. Underlining this point, Accenture found that bank revenues declined in 2020, then rebounded last year. “Although COVID hasn’t been a solvency event for the banking industry, we have seen material profit compression that has reordered banks’ priorities,” the report states. “Leading institutions have witnessed double-digit net income declines of 7 percent in Asia-Pacific, 37 percent in North America, and 51 percent in Europe in 2020.”
This profit compression, along with an increased cost of risk and accelerated digital transformation, has resulted in what Accenture is calling a “neo-normal.” The more level playing field has resulted in a more crowded industry. Fortunately, Accenture leaves readers with four “imperatives for success” in this new, post-COVID arena.
Understand your market
While it has always been imperative for banks to understand their customer base, customers’ needs and wants have changed since the pandemic. For example, Global Banking Consumer Study found that when dealing with a bank, customers rank value as the number one priority. That’s up four slots from just two years ago when customers ranked it number five.
Also as a part of this, Accenture noted that banks must balance managing costs with customer acquisition. “Banks can no longer spend multiple years on complex integrations—they need to build a technical stack that can quickly onboard and migrate acquired portfolios and customers so the economic value of the acquisition can be realized swiftly,” the report said.
Future-proof your business
If this was important before the pandemic, it is even more so now. That’s because what we once thought was “the future” is here today. One of the best ways to do this may be cloud partnerships, Accenture explained, because the partnerships can accelerate digital transformation via partnerships.
Banks can’t take a blanket approach, however. There is no one-size-fits-all business model, especially for larger financial institutions. Instead, banks must adopt tailored models for each business sector in which they operate.
Focus on becoming digital
Accenture suggested that a mobile app is just a ticket to the game. Banks can’t rely on the app alone as their digital strategy. Instead of relying on their mobile app as their entire digital strategy, banks should shift their thinking outside of their budget. That is, digital tools shouldn’t be put in place just to decrease cost. Banks should also leverage digital to enhance differentiation, increase revenue, and boost customer acquisition.
Simply put, “there is a high correlation between technology adoption and revenue growth.” That’s what Accenture found in two separate studies recently. Similar to the point above, banks shouldn’t just look to technology to decrease costs and increase efficiencies. Instead, in order to get ahead, banks need to consider how technology can enable growth, boost differentiation, and facilitate productive partnerships.
This is, of course, easier said than done, so Accenture suggests two jumping off points for banks. First, banks should improve their boards’ knowledge about technology. Second, banks need to align their IT strategy and their growth strategy.
These four tips are just highlights. There is a lot more to the full report, including graphs and many more stats. Check out Accenture’s brief and download the report.
Go to Publisher: Finovate
Author: Julie Muhn (@julieschicktanz)