Banks that master change – capitalizing on it while others succumb to it – are more likely to thrive in an uncertain future. Our survey identifies these change leaders, and reveals what they are doing to lead in the new digital economy.
In many ways, over the past 10 years, change in banking has felt like a tough endurance cycle race. After decades of relatively stable business models and high returns, the global financial crisis marked the start of a prolonged period of regulatory, political and cost pressure. These pressures have been felt differently in different markets. For instance, returns in Canada and Australia have remained relatively healthy, whereas banks in the UK and the US have faced significant pressures. The disruption has been amplified by innovation in the wider financial services ecosystem: the maturing of fintech; the growth of niche value-chain players like Lending Club, TransferWise and PayPal; and the emergence of challenger banks such as Atom, N26 and Starling – although none, as yet, has achieved a breakthrough at scale.
The race is starting to speed up, as the pressure intensifies and banks realize their responses to it will determine their future prosperity. In the last couple of years, while cost reduction and regulation have remained considerable challenges, banks have started to shift their attention to more customer- and growth-focused change. In particular, banks have started to leverage new digital technologies to enhance the customer experience, while simplifying the inside of the bank to reduce costs and risks. The pace of this change varies by market. In Scandinavia, for example, universal connectivity and rapid consumer adoption have allowed banks to move more assertively toward digitization than their US counterparts, which still have to deal with large volumes of checks and cash, plus a more complex regulatory framework.
The upshot of all this is that most banks are exploring – or shifting toward – new business and operating models that are more fragmented and have more of the features of an ecosystem than the traditional vertically integrated bank that seeks to capture the full value chain and be all things to all customers. This is understandable. There are many examples, in financial services (FS) as well as other industries such as travel (Airbnb), media (Netflix), transportation (Uber), retailing (Amazon) and music (Spotify), of well-established incumbents being swiftly unseated by innovative newcomers, often operating more focused, digital and asset-light business models. Accenture believes there will be a growing diversity of banking models over the next decade, but that four primary models are likely to succeed in the retail and commercial sectors (see “Winning in the Digital Economy”).
Like the moment in a long-distance race when the peloton breaks up, there are some banks that are now accelerating away from the pack. Their ability to manage change effectively is a key differentiator, allowing them to put space between themselves and their rivals.
To gain a better understanding of the state of change in the industry, and how banks are tackling change, we commissioned the FS Change Survey. The most important finding is that there is a small group of banks that are more committed than their peers to change, are better at it, and are achieving significantly better change outcomes and commercial performance. These change leaders, as we call them, have a culture that embraces innovation and transformation. This makes them more agile and better able to manage continuous, rapid change. Like in a long-distance cycle race, as the race speeds up the disruption initiated by these front-runners will eventually cause the chasing peloton to break up. Those not able to adapt and keep pace will slip off the back and out of contention.
The Financial Services (FS) Change Survey is a global study in which we interviewed 787 senior FS executives who are responsible for developing their organizations’ change strategy and/or implementing their change programs. Of these, 302 represent large banking groups, 292 are insurers and 193 are wealth and asset managers. While the charts below represent the full survey sample, this report is based on the findings of the banking interviews. A parallel bottom-up study is being conducted using Accenture Change Tracking analytics. That report will be published later in 2017.