RESEARCH REPORT

In brief

In brief

  • Digital challengers and non-traditional competitors are going after the bedrock of big banks: customers’ core transactional accounts.
  • For a typical traditional financial institution, up to 40 percent of checking account revenue is at risk.
  • Offering low to no-cost banking—including a free deposit account in many cases—new competitors are rewriting the customer value proposition.
  • Instead of joining the race to zero, large banks can change the game by offering value and personalized service customers will pay for.


The race to zero

Digital challengers and non-traditional competitors are going after the bedrock of the large-bank balance sheet: customers’ core transactional accounts. Offering low to no-cost banking—including a free deposit account in many cases—new competitors are rewriting the customer value proposition.

This poses a huge threat for traditional banks. Global checking account revenue adds up to US$200 billion. For a typical institution, up to 40 percent is at risk.1

Instead of joining the race to zero, large banks can make the case for value, but they must begin now. It means turning their current model on its head, from expanding beyond banking products with the right ecosystem partners, to creating transparent, tiered levels of value and service.

Forty percent of a typical large bank’s checking account revenue is at risk to new competitors.

A delicate balance disrupted

Most large banks have a purely transactional relationship with their customers, rather than a value-based one, which puts them at higher risk for customer migration to competitors. Consumers now have a bevy of options to replicate or replace traditional banks.

One in six players entered the Banking industry within the past 15 years.2 Many of these entrants are digital payment and lending players. As a result, a material portion of payments and lending revenue is moving from incumbents to digital challengers.

One in six players entered the banking industry within the past 15 years, increasing customer migration from traditional banks.

New challengers challenge traditional banks

Point solutions are not the answer

Large banks are fighting back against new competitors, but too many turn to traditional cost cutting and digital options as point solutions. They will need a more holistic approach to redefine the value they offer customers. When faced with the reduced-price game, banks need to change the game—offering value and personalized service their customers will pay for.

Banks that take a longer-term, more strategic view are adopting a zero-based mindset (ZBx). Rather than looking at historical areas of investment, they map out investments that most align to where the bank needs to be. They map spend to strategy, using the cost savings generated to fuel new areas of growth.

Adding digital options to stay relevant is logical, as three out of four consumers now interact with their bank predominantly online.3 But a fair number of consumers (40 percent) are banking “nomads,” open to self-assembling their own suite of banking products.4 Digital options alone will not be enough to keep them. Banks will need to become more holistic in their offerings while adding tailored value to individual customers.



Easy to join, with reasons to stay

Half of banking and insurance consumers expect their financial providers to offer integrated value propositions to address their core needs.

Banks can target these propositions better by becoming a “living business,” one that moves in sync with its customers through AI and advanced analytics. Living businesses are so in touch with customer needs that they provide an individualized real-time customer experience, basing it on the wealth of information customers provide through every interaction.

Consumers are open to companies collecting the data that fuels those insights, if they get value in return. In fact, eight out of 10 consumers (79 percent) find it frustrating when companies fail to use personal information to make their offerings more relevant.5 And six out of 10 banking customers would share more data with their bank in exchange for offers relevant to them.6

Banks can also build on their advantages—scale and a trusted brand. Consumers trust banks on a transactional level, but financial institutions that can show they’re working more broadly in customers’ best interests could become trusted advisors. That moves trust from discrete transactions to relationships—and provides a competitive advantage.

79%

of consumers find it frustrating when companies fail to use personal information to make their offerings more relevant

6 out of 10

banking customers would share more data with their bank in exchange for offers relevant to them.

Creating a ledger you can love

If banks reimagine their value proposition, capitalizing on the trust and data they share with their customers, it’s a far wiser move than racing to zero against digital competitors with little overhead.

As we work with financial institutions around the world, we find keeping a few things in mind helps set a path in the right direction:

Reimagine your value proposition per customer

To avoid disintermediation, large banks must rethink their deposit account proposition, looking at relevant adjacent services they can offer consumers.

Open arms to open banking

To diversify revenue and protect core banking’s relevance, large banks can allow access to open banking players.

Structure to survive and thrive

Structure the entire organization and its offerings to deliver superior value and personalized service that customers are willing to pay for. Avoid one-off fixes like cost cutting.

View All

Banking on value, large banks can use their scale and brand to their advantage, offering trusted value to their customers versus racing to zero. Partnering with companies who can help them better create situationally relevant, real-time customer experiences, these banks can rewrite the rules of the game to favor their strengths.

1 Accenture Strategy analysis, 2019.

2 Banks, no time to gaze at as-is business models, Accenture, 2018.

3 Global Consumer Pulse Research, Accenture Strategy, 2018.

4 Winning in the digital economy, Accenture, 2017.

5 Global Consumer Pulse Research, Accenture Strategy, 2018.

6 Discover the patterns in personality, Accenture, 2019.

About the Authors

Jaime Laguna

Managing Director, Lead – Accenture Strategy, Financial Services – Iberia


James Vogtle

Managing Director, Lead – Accenture Strategy, Financial Services – Canada


Jonathan Grosfeld

Senior Manager – Accenture Strategy, Financial Services


Jonathan Magder

Senior Manager – Accenture Strategy, Financial Services

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