Bank Fees are Getting Squeezed in the Face of Regulation & New Competitors, Putting 5% of Revenues at Risk, Accenture Report ...
March 11 2020 - 12:01AM
Business Wire
Eliminating fees, increasing transparency and
helping customers make good financial decisions could stem losses
and help banks increase revenues
Incumbent banks are at risk of losing billions of dollars in
retail revenues in the next three to five years, as new competitors
draw customers with no-fee banking services and regulators in
select markets mandate simple banking fee structures to protect
consumers, according to a new report from Accenture (NYSE:
ACN).
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The report, titled “Purpose-Driven Banking: Can Trust Create
Win-Win Banking Relationships?,” is based on quantitative analysis
of retail banks’ revenue pools across 12 markets in Europe, North
America, South America and Asia-Pacific and was complemented by a
survey of nearly 15,000 banking customers in those markets. It
found that the revenue that traditional banks generate from
overdraft and other fees and from charges for services like
cross-border payments and foreign transactions will erode as a
result of both competitive and regulatory pressures, resulting in
an average revenue loss of 5%.
“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 cannibalize 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.”
The report notes that banks could use innovative technologies,
such as artificial intelligence and predictive analytics, to build
personal relationships with their customers and become trusted
advisors —capturing 9% incremental revenue growth, on average, by
doing so.
For example, to help customers make better financial decisions,
banks could provide advice on what payment options will generate
the most rewards or how best to finance a large purchase. In fact,
more than half (55%) of consumers surveyed said they would be
willing to pay a fee for relevant add-on services from their
bank.
“Banks in markets experiencing high revenue loss, such as the
U.K. and Hong Kong, have an opportunity to reap first-mover
advantage and grow net revenues by building trust through
day-to-day advice and transparency,” said Julian Skan, senior
managing director and European head of Accenture’s Banking
practice. “For most of the countries we analyzed, banks could
increase revenue through a trust-based approach that would more
than compensate for the revenues under threat. However, in
countries like Sweden and France, where customers are more
skeptical, banks would have to find additional ways to defend and
grow their business, perhaps by becoming intermediaries for
non-financial products.”
Accenture’s analysis suggests banks that provide trusted
solutions and advice to their customers — and earn status among the
most trusted brands — will also boost their reputation and brand
image, lower operations risk exposure, and enhance their ability to
attract talent.
Methodology
The report, “Purpose-Driven Retail Banking: Can Trust Create
Win-Win Banking Relationships?,” is based on a quantitative
analysis of retail banking revenue pools “under threat” due to
pressure from digital challengers, regulators and improvements in
consumers’ financial habits across 12 markets: Australia, Brazil,
Canada, France, Germany, Hong Kong S.A.R. of China, Japan, Italy,
Sweden, Spain, the U.K. and the U.S. The analysis included
potential revenue uplift that banks can expect if they implement
initiatives described in the report. The analysis was complemented
by a survey of 14,900 banking customers across the 12 identified
markets in November and December 2019.
About Accenture
Accenture is a leading global professional services company,
providing a broad range of services in strategy and consulting,
interactive, technology and operations, with digital capabilities
across all of these services. We combine unmatched experience and
specialized capabilities across more than 40 industries — powered
by the world’s largest network of Advanced Technology and
Intelligent Operations centers. With 505,000 people serving clients
in more than 120 countries, Accenture brings continuous innovation
to help clients improve their performance and create lasting value
across their enterprises. Visit us at www.accenture.com.
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Melissa Volin Accenture +1 267 216 1815
melissa.volin@accenture.com
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