RESEARCH REPORT
Total Enterprise Reinvention in Banking
Prepare for the future of banking
5-MINUTE READ
August 8, 2023
In brief
- Intensifying disruption of the banking industry creates a wide range of opportunities — but most banks aren’t ready to take full advantage.
- Our research reveals the need for reinvention — continuous, dynamic change that targets every part of the banking organization, underpinned by a strong digital core.
- While only 10% of banks are adopting a strategy of Total Enterprise Reinvention , “Reinventors” deliver 30% more financial value in the first six months.
Banks in a permanent state of change
The banking industry is in a state of unprecedented upheaval, requiring an urgent reimagining of traditional strategies. The effects of the first rising rate environment in 17 years have hit hard. While historically rising rates have favored most banks, they have also caused chaos. We’ve seen bank failures, record market volatility and plunging commercial real estate valuations. Banks must now also contend with increasingly demanding customers, a new breed of competitors and increasing talent challenges.
As a critical source of capital, banks have a special responsibility to help businesses address their sustainability goals: 59% of banking executives surveyed in our recent Net Zero Banking survey said they aim to help corporate clients reach net zero carbon emissions — and stakeholders expect them to report on their progress. Meanwhile, escalating cyber threats and increasing regulatory demands are further straining banks’ compliance functions.
To gain insight into these challenges and opportunities, Accenture conducted a survey of 1,516 C-suite executives across 19 industries in 10 countries, including 94 banking executives. We also analyzed the performance of 131 banks across North America, Europe, Asia, the Middle East and Latin America.
What we found is that siloed and remedial digitalization have failed to deliver. By embracing Total Enterprise Reinvention, banks can differentiate themselves and reap the rewards of greater profitability, operational efficiency and cost management.
The flip side of disruption: Opportunity!
Our research reveals that almost 10% of banks are adopting a strategy of Total Enterprise Reinvention compared to only 8% of organizations across all industries. These strategic leaders — we call them Reinventors — embrace continuous, dynamic change across every business area within the bank. They are strengthening their digital core and breaking down the silos that inhibit the flow of data. And they are using technology and data-driven insights to fully realize their human potential.
Banking Reinventors show early signs of superior financial impact compared to their peers:
120 basis points
higher pre-tax return on equity
37 basis points
lower operating expenses over assets
130 basis points
lower cost-to-income ratio
Rapid results
Reinventors across all industries deliver 10% higher revenue growth and 30% more financial value in the first six months of their transformation investments than their peers. They also execute their transformation strategies significantly faster.
10%
higher incremental revenue growth
30%
more financial value
360° value
Beyond financial value, the results are equally impressive. Compared with industry peers, front runners in Total Enterprise Reinvention achieve:
32%
better on sustainability
31%
better on experience – for customers, suppliers and employees
11%
higher “net better off” outcomes for talent
7%
greater inclusion and diversity
How to succeed in banking reinvention
Rather than looking at transformation as a series of one-off projects, banking Reinventors have embraced a culture of continuous reinvention and have prioritized the capabilities they will need.
Digital core
Goodbye legacy – Hello new technology
If they are to be truly cutting-edge, a bank’s capabilities must be embedded with a digital core that comprises the latest technologies — most importantly cloud, data, AI and security — and has unimpeded access to the organization’s data. 39% of Reinventors say technology is a critical enabler in executing their reinvention strategy. So, a strong digital core is essential and gives a bank a significant competitive edge by enabling swift composability and resilience at scale. It replaces legacy systems, amplifies customer value, enables agility and improves innovation. It also facilitates the exploration of new business models and fosters collaboration in an innovative ecosystem.
We define the digital core as the set of enterprise-wide enabling technologies such as cloud-first infrastructure, security by design, composable API integration, data and AI foundations and platform enablement.
Seek and scale new growth
Shifting mindset to boost revenue
Many successful banks have consolidated their existing revenue streams while also creating new waves of growth. Often, they’ve done this by stepping outside of the traditional industry mindset and considering how they can help their customers and partners. The most important capabilities are:
Create and enable winning experiences
Putting customers at the center of your business
As banks built new digital experiences, they focused on functionality but lost the human touch. Banking became impersonal and undifferentiated, weakening customer loyalty and hampering cross-selling. To retain the best of the new digital approach while restoring the sense of belonging that comes from being treated as a unique person or business, banks need to master three key capabilities:
Unlock value
Reimagining operations to deliver new opportunities
Total Enterprise Reinvention aims to improve banks’ immediate financial performance while creating significant longer-term value across many other dimensions — including sustainability, experiences, innovation, talent, and inclusion and diversity. To pursue this more holistic goal, banks need to re-examine both their business and operating models:
Gain and retain talent
Lead, inspire, transform: A modern approach to people power
Like the digital core, talent strategy is essential. To become a Reinventor, banks need to master three vital capabilities:
So, what are you waiting for?
For banks to seize the opportunities intrinsic to the current environment, they need a new ambition and a reimagined approach enabled by new capabilities. This takes boldness and vision. It also demands a realistic, clearly articulated strategy that looks to build 360° value.
We believe that Total Enterprise Reinvention isn’t just important — it’s imperative. And over the next 10 years it will become the norm in the banking industry. Those that embrace this strategy will be the most successful in the long term and most able to withstand whatever surprises the future holds.
Let’s talk reinvention
Reach out to talk with one of our industry experts about Total Enterprise Reinvention and complete a diagnostic to assess your organization’s performance and ambition against industry peers.