Purpose-driven banking: Win customer trust

What is purpose-driven banking?

Many consumers doubt that banks have their best interests at heart. 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. By building strong relationships and assisting customers in increasing their wealth as trusted advisors, banks benefit from improved retention and revenue growth.

Trust is essential to defend market share and grow

While most customers trust their banks to take care of their transactions and their data, they are skeptical that they truly put their interests first. It doesn’t help that when these customers slip into overdraft or manage their money unwisely, they are penalized rather than assisted by their banks.

Banks need to restore customer trust, for two reasons. Firstly, regulators and new digital competitors are both homing in on these “bad revenues”—which make up five percent of banks’ total income—putting billions at risk worldwide. And secondly, new advisory offerings are one of the most promising sources of potential new revenue—but without trust they will find no buyers.

Our new Purpose-Driven Banking study sheds light on this vital issue. The research consisted of two major components: a quantitative survey which polled 14,900 retail banking customers, in 12 key markets, on their financial habits and attitudes; and an analysis of the revenue uplift that incumbent banks in these markets can expect if they implement the initiatives recommended in the report.

Banks to the rescue? Maybe.

Digital challengers are winning consumers’ hearts

Digital banking start-ups have attracted millions of new customers and achieved enthusiastic customer advocacy by persuading these customers that—unlike their old bank—they have their best interests at heart. Among other things, they promise to help them reduce fees by managing their finances more wisely.

Traditional banks risk losing the five percent of their revenue that accrues from overdraft and similar charges. But by proactively cannibalizing this revenue, they could gain the trust that is essential for selling the innovative, transparent value propositions—especially those with advice at their core—that are critical to their long-term success.

Growth strategies based on mutual trust

As retail banks strive to develop more purpose-driven businesses, we believe there are two sets of strategic actions they should consider taking in parallel:

In summary

Our Purpose-Driven Banking analysis indicates that the combined set of trust-based propositions could generate an average nine percent revenue uplift for incumbent banks in the markets we surveyed. Those that rebuild advisory trust through both growth pillars will generate an added bonus. This “trust kicker” is the potential revenue uplift achieved by banks that become one of the most trusted players in their respective marketplaces.

If you would like to find out more about our analysis, and the two strategic pillars for trust-based growth, read our report or contact the authors.