RESEARCH REPORT

In brief

In brief

  • Accenture compared economic performances of 161 large traditional banks to answer a key question: Does digital leadership create superior economics?
  • We put banks in three groups per their digital maturity: 12 percent as "Digital Focused", 38 percent as "Digital Active" and 50 percent as "The Rest".
  • Overall, Digital Focused banks are the only group with a price-to-book ratio above 1x and the gap between the rest of the industry is widening.
  • Banks can reinvent in a disciplined way, pivoting to the New—or be content as a "fast follower," changing when the market changes.

With the right mix of strategic focus, talent, creativity and investment funding, a traditional bank can morph into a high-flying, digital-first bank. Many incumbents have made that metamorphosis a priority.

Based on our analysis of Celent data, global retail and commercial banks spent approximately US$1 trillion between 2015 and 2018 on efforts to transform their IT, with a large portion of that spend dedicated to enabling technologies such as cloud and AI-powered analytics. Yet, what has come of that investment?

We placed a magnifying glass on the impact of digital change efforts, comparing the economic performances of 161 large traditional banks to determine whether or not digital leadership creates superior economics.

Based on our assessment of the three groups of banks we created—Digital Focused, Digital Active and The Rest—digital maturity is indeed proving to be a factor that will separate future winners from losers. Consider that Digital Focused banks are the only group with a price-to-book ratio above 1x. Their operating expenses grew at half the rate of their revenues over the last six years. Improvements in operating economics are being driven by revenue and cost efficiencies.

While a bank’s next move will depend on its level of digital maturity, we believe that digitally enabled cost reduction is the first necessary step in building a future-ready bank and positioning it to win in the digital economy. Our market observations point to five tips for igniting future revenue growth:

1. Make the new truly new

If the end of the customer journey is an existing bank product, then it will be difficult to open up adjacent revenue streams.

2. View unicorns as exceptions, not the rule

Financial services players can only really support broad lifestyle platform plays as opposed to being the central platform.

3. Own and control platform services you arrange

Controlling platform services will better position banks to earn sustainable revenue from them.

4. Be more strategic toward economic outcomes

Reinvent core investment approaches to enable dynamic stage-gating.

5. Evolve the business model

Become proposition-centric, featuring digital factories and special processes for procurement, talent management and risk control.

View All

Transformation is doable

Digital maturity is just one factor in achieving stronger bank economics. Regardless of where banks are in the spectrum, there are clear steps they can take to bolster their strategy and operations to compete effectively in today’s open world. We can help you craft and execute your roadmap to get there.

Effective digital transformation appears to be associated with a return to a business model in which the balance sheet is the critical driver of income growth.

About the Authors

Alan McIntyre

Senior Managing Director – Banking

Julian Skan

Senior Managing Director – Accenture Strategy, Banking and Capital Markets

Cécile André Leruste

Managing Director – Banking, Europe

Francesca Caminiti

Director – Accenture Research

Contributors

Elena Vizzardi

Senior Manager – Banking, Accenture Strategy

Mauro Centonze

Manager – Banking, Accenture Research

Dariusz Orynek

Manager – Banking, Accenture Research

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