trending
This challenge has been exacerbated by COVID-19, as central banks around the world have scrambled to cut rates. Over the medium term, banks vertically-integrated business model faces disruption, as evolving customer needs are increasingly being met by innovative newcomers that are picking off some of banks’ most profitable lines of business, like payments and foreign exchange. Over the long term, banks need to ensure that their purpose meets the expectations of a range of stakeholders well beyond shareholders who have held sway since the 1980s.
Deloitte has addressed both near- and long-term challenges in recent research. Following the spring lockdowns across Europe, we explored how European banks can respond, recover and thrive again, by outlining different routes to rebuild capital.
In a collaborative research effort with the European Investment Bank (EIB), the Global Alliance for Banking on Values (GABV), and KKS Advisors, we showed how commercial banks with good performance on material environmental, social and governance (ESG) issues financially outperform those with less good performance.
In this report, we are addressing the medium term challenge around banks’ business model. We believe that hyperpersonalisation is an imperative for banks, enabling them to respond to customers’ manifest and latent needs. In so doing, hyper-personalisation will differentiate their brand, boost their revenues, and improve financial inclusion. To achieve these objectives, we outline those building-blocks that banks must have – data science, behavioural science, and ethnographic research capabilities – and how these can be applied to innovate, in terms of both product functionality and product design.
In particular, we believe that banks must become more like corporates. In the past, banks’ success rested on mastering a small number of capabilities, namely credit allocation, capital management and operations. There was little differentiation between various banks’ product offerings, and limited understanding of customer needs. We believe that, in future, banks will have to understand customers much better, and to develop the marketing and branding skills that would enable them to foster an emotional connection with customers. These competences are commonplace in other sectors, such as fastmoving consumer goods and retail industries.
This report is of particular relevance to banks’ boards and senior executives as well as to strategy, marketing, and digital specialists. We look forward to discussing its findings with you.
