Other parts of this series:
For banks, embracing purpose and the financial wellbeing of their customers is more than good PR. As Mohamed Khalil from the Commonwealth Bank of Australia explained during his talk at Sibos in 2020, it can be a powerful way to grow the business.
“We discovered that improving wellbeing by 1% correlated to a risk adjusted revenue increase of 1-5 times that amount, while an equivalent decline correlated to a 3-6 times effect,” Khalil said of CBA’s efforts in this area.
This aligns with Accenture’s analysis of the relationship between banking performance and purpose. We’ve found that earning customer trust and putting purpose at the heart of your bank can raise retail revenue by 9% per year and our recent Purpose-Driven Banking research shows that purpose-driven banking leaders have achieved double the revenue growth of their peers over the last four years.
But what does embracing purpose look like in action?
We explored some of the common habits of purpose-driven banks in the previous post in this series. Today, we’re going to take a deep dive into the journey of one major incumbent European bank that realized it could stand out in the market and grow its business by embracing a simple, powerful purpose: understanding customers’ behaviors in order to help them improve their financial wellbeing with tailored advice and relevant product offerings.
Let’s take a closer look at this case study and the frontline experience of Accenture’s purpose-driven banking team, which worked with the bank on its journey.
Going beyond guesstimates
When banks model customer behavior, they are often forced to rely on guesstimates about what the customer wants, needs, and expects. The bank we worked with wanted to dispel the haze of uncertainty around customers’ authentic needs. It also wanted to use behavioral analysis to ensure that it would make the biggest possible difference to their customers’ financial wellbeing. Our data-driven approach, paired with ethnographic customer research, allowed the bank to better understand its customers’ nuanced behaviors and use this to better serve them going forward.
Using anonymized data from real customers, our team was able to validate new behavior analysis models that could identify the habits, preferences, and traits to help the bank determine the right interventions for different customers at different times in their unique financial journeys.
Some behaviors identified included:
- Payday millionaire—this describes the extent to which a customer who earns a regular income, like a monthly salary, tends to splurge on discretionary purchases shortly after payday. (I suspect we all act like payday millionaires at one point or another.) This can leave them cash-poor until the next payday arrives and often causes financial anxiety. By understanding this behavior and the likelihood of it occurring, banks can support customers to make better decisions and spread their spending more evenly throughout the month.
- Lifestyle creep effect —this describes an increase in discretionary spending in tandem with changes in the customer’s income, turning former “nice-to-have” purchases into staple expenditures month after month. Even as someone’s career advances and they earn more money, lifestyle creep stops them from feeling any richer because their spending grows along with their income. Simply making people aware of these tendencies can help them make different choices about their money and set them up for future financial success and increase resilience.
These and other customer characteristics identified by our team empowered the bank to make decisions that drive higher-order customer outcomes, like fostering a healthy relationship with money, building consistent savings habits, improving financial literacy and confidence, and encouraging better long-term financial habits rather than short-term impulses.
Banking industry veterans might be wondering at this point how a European bank could receive regulatory approval to use tools like this given data protection regulations. There may also be questions around how to turn insights into effective customer interventions. This is another exciting part of our team’s work with the bank.
Drawing on diverse data sources including consumer research and factoring in the latest regulatory developments in personalization and banking across multiple jurisdictions, we used the latest thinking to anticipate a future regulatory environment against which to test our design. This let the bank move its wellbeing agenda forward with greater confidence.
Let’s get specific
With these behavioral models and other insights innovations, our team helped the bank take its financial wellbeing ambitions to new heights.
For example, many financial tools make recommendations to customers based on self-reported data. But with our analysis, the bank can go beyond the generalized money tips produced by standard tools. For instance, understanding how much discretionary spend is elastic vs inelastic, based on previous behaviors, can show customers where they are most likely to have the biggest impact on their spending with minimal effort. Or using behavioral analysis to understand when a customer’s context changes can help banks open a dialogue at just the right time with customers about their needs and ambitions and, similarly, their worries and fears. Our approach encourages a two-way relationship between banks and their customers, rather than generic interactions based on the outdated demographic segmentation which is still common today.
We also worked with the bank to create a custom financial wellbeing capability framework, which assessed the bank’s current capabilities against its ambitions. This let us identify the tools the bank needs and already has, those it is in the process of acquiring, and those it should start developing. This is important to future-proof a financial wellbeing solution so it’s both a success today and also evolves with customers’ needs in the future.
In the final post in this series, we’ll look at common barriers to embracing purpose in banking—and how to overcome them.
To learn more about our latest report on purpose-driven banking visit the Accenture website.
With thanks to Sara Harrison, Kenneth McKenzie and Thomas O’Reilly for their contributions to this article.