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.
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.