The revenue banks make from customer fees is under threat from increased competition and regulation. According to new research from Accenture, Australian banks risk losing as much as 9 per cent of their retail revenue if fees from overdrafts, cross-border payments and foreign transactions dry up.
As more competitors emerge with no-fee banking services, the research argues banks can offset this revenue loss and increase revenue by up to 11 per cent with new services. But only if customers trust them.
The research, Purpose Driven Banking – looking beyond COVID-19, is based on quantitative analysis of retail banks’ revenue pools across 12 markets and a survey of 15,000 global banking customers – including over 1000 Australians.
“Whether in one year or five, the billions in revenues that traditional banks collect annually for basic services and penalties, like overdraft fees, will erode,” said Alan McIntyre, senior managing director and global head of Accenture’s Banking practice.
“Banks that proactively cannibalise this diminishing revenue by helping customers manage their money better will earn their trust, which benefits both parties. The economic logic is simple: Better advice leads to better customer decisions, which create more wealth over time — more wealth for banks to help manage.”
Fifty per cent of respondents in Australia said they would pay an extra fee to get additional services from their bank (higher than the 55 per cent global average, and compared to 72 per cent in Hong Kong, 48 per cent in the US, 46 per cent in the UK).
Services that consumers say they would pay for include discounts on daily expenses based on spending patterns, a personal loan fully tailored to customers’ needs and long-term planning to help meet customers’ long-term plans.
When it comes to establishing trust, the pressure is on Australian incumbent banks which are navigating the fallout from the royal commission coupled with the financial pressure Australian households are facing during the COVID-19 pandemic.
“With Australia entering its first recession in 29 years, it is key that banks position themselves as socially responsible, trusted partners who help both customers and businesses weather the storm, delivering personalised, meaningful and empathetic interactions and proactive support,” Alex Trott, Banking Lead, Accenture Australia and New Zealand.
“Our research found a clear and positive relationship between trust and revenue growth, and so banks that are trustworthy and driven by a clear sense of purpose will be able to survive the short-term and thrive in the long term.
“If the banks fail to act on this opportunity, there are a number of new digital banks recently granted licenses who prioritise customer experience and individual, data-driven relationships that are looking to take market share. We’ve seen over 20 million accounts opened with challenger banks in the UK, so in the face of this increasingly competitive digital economy, Australian banks should be taking the competition seriously.”