The rise of purpose-led innovation in banking

The introduction of the report refers to the Paris Agreement on climate change. Could you talk a little bit about what it means for banks to address sustainability and how we are seeing that trend manifest throughout the banking world?

In a world full of stories of companies starting to play a bigger role in the global effort towards sustainability, for so long banks struggled to make their contribution in this space recognized and appraised in full.

Nevertheless, banking is in a place like no other to turn the sustainability ambition into a reality. Just think of the power of credit as a motivation lever able to re-orient companies’ investment towards green technologies and a reshuffle of their operating models.

And what’s happening as an outcome of the current pandemic is just reinforcing this awareness. As governments are now committed towards investing funds (e.g. EU funds) to pave the way for a green new future, banks will play an unparalleled role in the execution, helping authorities to identify, reward, and sustain relevant actors at a local level that will shape a brand-new sustainability-driven economy. And among those actors we will hopefully spot the unicorns of tomorrow, with banks propelling them to be visible and attractive in a market where the capital flows will be more and more influenced by how sustainable a company’s future path is.

But credit is just one piece of the full picture. Sustainability is pushing banks to rethink their internal operations and processes as well, with a direct impact on their employee and customer experience, every day. Reducing or eliminating the use of paper at a headquarter or branch level is a powerful signal of banks embracing digitization with a broader, more meaningful purpose.

To be sure, this requires effort. Redesigning credit schemes, reviewing internal operations, finding new ways to position one’s self in the market is the outcome of many interventions across the entire organization and takes time. But the good news is that we see a far greater commitment from C-levels across the industry and an increasing presence of this relevant topic in banks’ investor relations, with a positive impact on the ability to foster investments in this space and overcome potential organizational barriers.

In summary, we may say that when it comes to a topic like sustainability, there’s no industry distinction. Agendas are converging and managerial focus is growing. Moreover, there are many studies showing correlations between sustainability and bottom line results, showing it is not a secondary aspect at all. The more these analyses spread out and reach consensus, the more we’ll see banks and companies jumping onboard this fascinating and no-regret journey.

The report also talks about how customers are choosing brands based on shared values. From the projects that are dedicated to customer centricity, are we seeing a bigger emphasis placed on values and demonstrating these clearly to customers?

A few months ago, I read an interesting analysis from Forrester showing how experiences offered by retail banks were missing a key differentiation factor: the emotional bond with customers. This is quite relevant and is supported by a couple of concepts we developed recently.

We started with the Human Brand Experience, a concept built upon the simple yet paramount belief that we’re human long before we are customers or consumers. All of us have fears, dreams, and ambitions. And we choose brands with the same logic that make us get along with people sharing our own views and values. We pick, purchase and re-purchase from brands that support our vision and deeper beliefs. Without this emotional bond, we won’t continue to do business with certain companies, especially in cases where traditional factors like pricing or clear functional proficiency are not actual differentiators.

An extension of our Human Brand Experience analysis came the Relevance concept. In a context where people have lost their traditional points of reference – think of historical political disruption – they’re now looking for other sources of personal relevance. If a party or a religion are no longer making people feel relevant and part of something, people are looking for brands to take over this role.

The mission for companies is huge. But it represents an unmatched opportunity at the same time. And we’re witnessing many players going along this path.

When it comes to banking, the bottom line can be even better. In a market where price plays a certain role, sharing values with customers can be the fastest and preferred way to let them skip the comparison phase whenever they need a banking solution. Because feeling part of a bank that commits to shared goals can be as remunerating as getting a few basis points discounted when purchasing a mortgage.

A number of quantitative analyses are emerging in this regard and they all support this evidence, giving this topic a more pragmatic and actionable nuance.

There are many examples in this report that come from outside the financial services industry. Is purpose-led innovation a cross-industry global trend?

For sure the boldest and most “advertised” examples of purpose-led innovation started to arise mainly from outside financial services. It all began with the moves of trailblazers that paved the way for a giant movement to come. Globally.

We could see examples even before Greta conquered global media attention and the UN or EU decided to take a stand for something bigger than economic KPIs. Patagonia for instance has been a pioneer in sustainability as a backbone for a broader competitive positioning, inspiring many other – even more mainstream – brands from all around the world. Every day we hear of shoes and t-shirts produced from recyclable materials, but they’re all a by-product of the brave first move by Patagonia and a few others. And they didn’t act like this to fix a reputation issue. Patagonia’s story and success are all built upon the passionate vision of people who picked a purpose and turned it into everyday strategies and decisions.

But purpose does not mean ESG. In fact, ESG can be just one of the many nuances of a deliberated purpose.

Airbnb is a bright example here. They accompanied the launch of their “Belo” logo with a clear message to travelers: we want you to belong to the places you visit. Such a nice stand that might have stopped at a communication level. But they wanted to go further, introducing a broad range of experiences that travelers could explore once they had landed at a specific destination.

Of course, banking had its trailblazers too. We can’t forget for instance the great example of USAA. Few players have ever had such consistency when taking a stand for someone (military people and their family in this case) and the determination to translate this into actual choices and actions at all levels: from employee training in military bootcamps to innovations at the product feature level. Think of their offering that freezes car insurance during a military service abroad: a very incremental innovation (introduced before any other competitor) but tremendously in line with the values of a player committed to addressing the needs of a very specific niche.

As of today, this trend no longer clearly belongs to just one industry and the current debates at the economic and political level are going to fuel a bigger sharing of information and best practices, giving all players useful “toolkits” and inspiration to find their own way to a purpose.

It seems like an important challenge for banks is getting closer to their everyday customers and generating more engagement. How are they approaching this challenge, especially when there is such fierce competition for customers’ attention every day?

The first time this challenge emerged, there was a general consensus around the role played by technology as barrier. The good news is that right now the technology is there, waiting for banks to find a smart way to leverage it. The first one I can name is PFM. There are several institutions that implemented PFM but the average adoption is quite low. Some observers in the very beginning used to point out customer readiness as the main cause, but the reality seems easier: as long as PFM is a hidden feature within internet banking pages, a huge discovery effort from customers will be required, thus reducing adoption dramatically.

On the contrary, we see many banks using PFM technology to build full-fledged financial coaching solutions, able to sustain the (old but gold) vision of banks as life companions, right in customer pockets. Having a sort of “intelligent genius” in your mobile enables banks – of course under a proper level of consent – to know how, how much and where you’re spending, identifying in real time the best advice or financial solution able to make your in- and out-flows stable and under constant control. We’re starting to witness more and more of these solutions among the Efma-Accenture Banking Innovation Awards submissions we get every year, indicating this is a solid path industry players are starting to undertake.

Of course, this won’t solve the issue of a crowded “competition for attention” arena. This is another chapter of customer engagement strategy books. Technology still plays a bold role, but there’s something more needed also from an organizational perspective. The buzzword here is “personalization”. Communication and interactions are moving more and more to digital and when the pandemic is gone this trend will likely only get stronger. The major madtech tools will help banks craft personalized messages at scale, across all formats. But even the timeliest DEM or push notification won’t engage enough if the bank is not actually talking to peoples’ guts, creating a constant fil-rouge with actions, needs and the way people used to approach finances. Since technology is not an obstacle, the effort should go towards getting organized like all major publishing companies do, with the right mix of (even non-ordinary) skills and brand-new interaction rules among all departments involved.

This second chapter is not entirely explored, at least not at full scale and speed, but we can say this kind of need is growing and starts to get increasing visibility across many debates and conversations we have with banking institutions.

Very recently Sberbank announced it became Sber and that it is no longer a financial brand but a “brand uniting a universe of services.” What do you think of this development? Is this a way to become a purpose-led innovation company? And do you think we will see more banks adopting this strategy of becoming more than just a financial brand?

The idea of having a bank moving beyond the territory of a pure financial brand is growing across all geographies. And open banking has been such a unique accelerator for this, enabling an integration among services and providers with no disruptive IT impacts any longer. Concepts like the interesting one from Sberbank or the moves we spot very frequently in the “marketplace banking” arena are very powerful and promise to change the way financial brands are perceived.

Moreover, it’s all built upon a clear need of leveraging the external ecosystem to get faster innovation and, as a consequence, bolder results, within a frame where the “collaboration vs competition” dilemma with the fintech world is almost surpassed (with few exceptions, of course).

The only “sanity check” we see as fundamental, especially if we adopt the lense of purpose, is understanding with a “scientific approach” how much these new (non-financial) territories being explored have a clear link with a brand, its values, and the purpose it has embraced since the very beginning.

Accessing new services from a brand that people have an emotional bond with ensures, once again, that they may skip the comparison phase when entering the purchasing funnel. This does not depend on how many services a specific player offers (a marketplace has no intersections with bazaar as business concept) but how strong a customers’ trust is and how deep a role these new services play in supporting the overall banks’ promise to customers. This is to underline one more time that the process has to definitely start from picking or crafting a purpose, and then move towards shaping its manifestations across all the bank’s internal and external touchpoints.

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