Great expectations: Banks squeezed on revenue
Australian banks risk losing as much as 9 per cent of their retail revenue due to increased competition and regulation for simpler and more transparent fees with consumers even willing to pay extra for help in managing their money.
According to a report from Accenture on purpose-driven banking and trust, eliminating fees, increasing transparency and helping customers make good financial decisions could stem losses and help banks increase revenues.
The report is based on quantitative analysis of retail banks’ revenue pools across 12 markets in Europe, North America, South America and Asia Pacific.
The research is supported by a survey of nearly 15,000 banking customers across these markets - including over 1000 Australians - to understand their preferences and attitudes regarding their relationship with their main bank, money management, financial habits, financial preparedness around key life events and willingness to pay for new value propositions.
Against these themes, the report found that 44 per cent of Australians find it difficult to manage their money – the global average was 41 per cent.
The two most cited difficulties globally were a lack of knowledge on financial products and confusion on services/products.
Interestingly, the report found that people were willing to pay to firms help them better manage their money.
The report found that 60 per cent of Australians would pay an extra fee to get additional services from their bank - higher than the 55 per cent global average.
The three most cited services that Australian consumers would be willing to pay were: discounts on daily expenses, based on spending patterns; a personal loan fully tailored to customers’ needs; and long-term planning to help meet customers’ long-term plans
The report also found that Australians are multi-banked compared to their global peers with 65 per cent of Australians who have more than one bank account versus 58 per cent of the global average.
In fact, RFi Group data shows that 68 per cent of consumers are multi banked, a proportion that has grown over time.
These are undoubtedly difficult times for the banks, but they could also be the first days of a different, more sustainable future, Alex Trott, Accenture
This research highlights that as consumers age and their needs change, they tend to take out more products and use a wider range of providers.
Here there are implications for loyalty, which could be at the expense of incumbents.
“The growth in multi banked consumers is driving an increase in market share for the non-majors.
“And we’re seeing the importance of the MFI relationship as a driver of products choice decline over time,” RFi Group client insights manager Sarah Niessen said.
“It’s important that banks reaffirm the value offered on propositions as well as differentiate from other key players,” she added.
For Accenture banking lead Alex Trott, there is a clear and positive relationship between trust and revenue growth, as underpinned by the report’s research.
“Banks that are trustworthy and driven by a clear sense of purpose will be able to survive the short-term and thrive in the long term,” Trott said.
He added that banks had the opportunity to help their customers make better decisions and in the process re-set the trust narrative particularly as more people embrace digital banking.
This is particularly important he believes given that Australia is entering its first recession in 29 years,
“It is key that banks position themselves as socially responsible, trusted partners who help both customers and businesses weather the storm, delivering personalised, meaningful and empathetic interactions and proactive support.”
If the banks fail to act on this opportunity, Trott said that there are a number of new digital banks recently granted licenses who prioritise customer experience and individual, data-driven relationships that are looking to take market share.
In fact, 86 400 which just celebrated a one-year anniversary revealed that is money management and offers was driving customer advocacy.
“We’ve seen over 20 million accounts opened with challenger banks in the UK, so in the face of this increasingly competitive digital economy, Australian banks should be taking the competition seriously.
“These are undoubtedly difficult times for the banks, but they could also be the first days of a different, more sustainable future.”