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09 A neo-normal is emerging
30 References
32 Contacts
Banking disruption
60%
increases from 0.43 to
According to Accenture’s Accenture Research2 Aggressively marketed A more recent example is ‘buy
Disruptability Index1, estimates that, in 2020, tech-driven new entrants like now, pay later’ credit offerings that,
current disruption in 20 percent of all players PayPal’s P2P Venmo service, in the space of the last two years,
banking increased from in the banking and which grew its volume by have gone from being marginal
0.43 (2011) to 0.52 (2019) payments sectors were 73 percent in 2019, scaling products to being used by an
on a scale of 0 to 1, taking less than 15 years old. to over 40 million users3. estimated 1 in 2 US consumers
it from the Vulnerable to and more than 60 percent
the Volatile quadrant. of those aged under 454.
12%
expectations, nimble new industry to play catch-up with the digital leaders In 2020, only
players, powerful new technologies has been spurred by our finding that a
and regulation that has spurred new profit and market valuation gap is emerging
competition, among other factors, has between the digital best and the rest.
put immense pressure on incumbent While digital maturity is not the only
banks to bring meaningful innovation factor that determines a bank’s economic
of traditional
into their established businesses. performance there is clearly now a
banks had truly
signal emerging from the noise—and
A 2020 Accenture survey5 found shareholders are paying attention to it.
embraced digital5
that only 12 percent of traditional
banks had truly embraced digital Before COVID-19 there was an assumption
as the defining architecture of their that we would see a steady but inexorable
business model, while another march toward a world in which challengers
38 percent were somewhere and new entrants embraced new business
along the path toward that goal. models and gained share, while the best
incumbents pivoted towards digital and
maintained a leadership position—with
everyone in the middle being compressed.
15% 13%
0%
-4%
-15%
-30% -36%
-45%
-47%
Note 1: Global view based on the sample set of 449 banks sourced from Capital IQ
Note 2: The index is based on quarterly data sourced from Capital IQ from Q1 2007
to Q3 2020. The data is rebased to 100, base date = Q1 2007.
Note 3: Index is calculated on Q/Q basis.
2018 2020
Despite the pandemic, the number ‘Buy now, pay later’ lender Affirm raised In the US, before it ran foul of the
of fintech unicorns is growing. As of $1.2 billion in an IPO in January 2021, regulators Visa was ready to invest
March 2021, CBInsights reports13 that doubling its stock price on its first day
globally there are of trading. By March it sported a
83 $29 $5.3
private fintechs billion billion in the
valued above market cap 14 acquisition of
$1 billion the data-sharing
fintech Plaid15
Compete Current
Direct competition accounts or
with incumbents credit cards
Distribute Payments
Distribution
of incumbents’
products/services Lending
Provide
Tech provider
Insurance
for incumbents
If they choose to compete with bigtech In order to win in a post-COVID world, Running multiple business models within
it should be with the recognition that banks need to have strategic clarity the same banking institution raises multiple
attempting to resist its encroachment around their positioning in these two
questions, including:
into payments has not proved effective; super-cycles. This includes formulating a
ultimately, banks have needed to partner. detailed vision of the future of banking,
The banking industry is becoming more deciding their role within that scenario, • Their ability to create a single technology and
fragmented and porous, and the central and scoping the changes required for operational foundation that can serve all business
models rather than incur the cost of duplication;
question is the extent to which bigtech them to succeed. For many of the world’s
will intensify disruption on top of the leading banks, their strategy is likely to • The management of channel conflict and
neo-normal super-cycle to siphon be a combination of branded direct-to- revenue cannibalization in the hope of
off business and undermine the consumer / business offerings plus a rise in overall market share;
economics of the sector. a partnership-based ecosystem.
• Data and customer ownership across
business models.
Secondly, banks must decide, for each market, In markets where consolidation and M&A are possible the
metabolism of the process needs to increase. Banks can no
the optimum mix of defensive (managing
longer spend multiple years on complex integrations—they need
cost and disruption) and offensive (customer to build a technical stack that can quickly onboard and migrate
acquisition and revenue growth) strategies, acquired portfolios and customers so the economic value of the
as the global outlook is definitely not uniform. acquisition can be realized swiftly. Only by having an efficient
integration process can banks hope to be serial acquirers in
Analysts forecast a tough year for European and US banks, with consolidating markets.
revenues rising only slightly in 2021. The outlook for Asia-Pacific
A lesson learned from the rapid evolution of banking as a service
banks is much more positive. Based on these two scenarios,
is that smaller banks can be a source of revenue as well as
strategies, priorities and challenges differ. For example, the need
competition for their larger counterparts. In the US a whole host
for consolidation and M&A will be greater for European and
of specialist players—like Cross River, The Bancorp, and Summit
US banks, while disruption and innovation will be higher
—have emerged to provide banking services to fintechs and non-
priorities in Asia-Pacific.
financial corporations. As Westpac has shown in Australia through
One driver of the offensive / defensive mix is also regulatory its partnership with Afterpay, there is no reason why established
attitudes and whether, as in a market like the UK, it is stated financial institutions can’t also play that enabling partner role if
public policy to reduce the market shares of the major banks. their technology and product systems are able to provide the
In contrast, regulators in markets like Canada and the US have right type of products and services.
been protective of traditional banks, making it harder for new
entrants to gain traction across the full value chain.
The winners in this new battleground will be those that explore the art of the
possible, and that achieve greater clarity on what their next business model will be.
Rather than continue to make incremental Most organizations will need to take a portfolio
improvements to their digital capabilities, they approach, adopting different models for their
will grapple with and adapt to the opportunities home and international operations and from
unearthed by the new digital pioneers. Although one business sector to another. If banks decide
this transition will be painful for many, it will to partner in an Open Banking model, they will
undoubtedly close the digital gap and make the need to answer key questions with regard to their
incumbents more competitive, agile and future-fit. role (vendor or distributor) and who will ‘own’
the customer; whether they have positioned
One way in which incumbents are hoping to themselves to take advantage of M&A, given the
accelerate their transition is through enterprise disruption by neobanks especially; and whether
cloud partnerships with Azure, AWS and GCP. they have achieved the right cost structure, given
Recent announcements by banks like CBA in the future challenges and opportunities that
Australia21 and Deutsche in Europe22 are intended are likely to emerge. We see this type of active
to accelerate digital transformation and migration portfolio thinking driving decision making at BBVA,
to cloud through top-to-top partnerships with Santander and Unicredit, and increasingly at banks
technology leaders that can both enable and like Westpac, JPMC, and National Bank of Canada.
invest in the bank’s change journey.
Our analysis shows digital-focused banks have a higher Figure 5. Banks that lead the market in digitalization
attract higher valuations.
price-to-book value, indicating more confidence in their
Source: Accenture research on S&P Capital IQ data
future prospects (Figure 5). Traditional banks still need
to prioritize the shift to digital but, instead of rushing
toward it, the real focus must be on how to get a tangible Price-to-book-value ratio
competitive advantage out of it. 1.19
1.05 1.03
0.99 1.01
Having a good mobile banking app, for example, does little more than give 0.94
them a ticket to the game. They will need to make the vital shift from using 0.83 0.81
digital mainly for cost impact to using it for differentiation, revenue, and 0.75
new customer acquisition. A number of banks and credit unions in the US
—including Citi, BMO Harris and Sterling National—have taken this route
by partnering with Google on its Plex wallet banking offering23.
Banks also need to ensure they mitigate the brand and customer experience
risks that can come from operating digitally. After all, as banking becomes
more digital, it also becomes more remote. The danger then is that it weakens
the personal and emotional connections that help banks build and maintain 2011 2019 2020
However, recent research also shows the Figure 6. Banks that lead in both purpose and digitalization
value of being purpose-driven, and that it is the significantly outperform their peers.
combination of great technology and a strong Return on equity and price-to-book-value ratios.
purpose that really differentiates the superior Source: Accenture Purpose-Driven Banking Intensity Index
performers in the banking industry.
Employees
Values and culture | Fair treatment
Rest of ROE 8.5% ROE 11.1%
industry P/BV 0.7 P/BV 1.3 Product offering
Transparency | Best advice | Compliant
Rest of Strong
industry purpose
The winners will make smart decisions about where they intend to
make their technology investments. Our Technology Vision survey24
shows that competing on technology architecture will be key for
banks to generate value.
89%
of banking executives
30%
of banks
agree that their organization’s ability to have confidence in being able to
generate business value will increasingly deal with complex customer issues
be based on the limitations and opportunities in any channel except the branch
of their technology architecture. network, according to our recent
Empathetic Banking research25.
This is at least partly because
70 percent find it hard to read
customer emotions and intent
in digital channels.
Our research26 also shows a high Figure 7. There is a high correlation in the banking industry
correlation between technology adoption between technology adoption and growth.
and revenue growth. This is further Source: Accenture Future Systems Survey, 2019
Leaders clearly show
corroborated by our Future Systems Survey stronger revenue growth
(Figure 7)27 which found that the Future $22 bn Leaders than Laggards:
Systems Leaders in the banking industry growth rate
$22 bn
9%
(the top 10 percent of our respondents) were still to be lost in
significantly more likely than their peers to the next 5 years
have increased their IT budget between $18 bn Gap = 45%
Leaders
2015 and 2018, equipping themselves for the
new digital battleground in banking. Again, $3 bn
already forgone
winners will need to look at technology not
Laggards
4%
only as a vehicle for cost and efficiency $14 bn
growth rate
benefits, but also as an enabler of growth,
differentiation, and great partnerships. Laggards
$10 bn
2015 2017 2019 2021 2023 Innovation
at scale
Future Systems score:
Leaders - top 10 percent of companies
Middlers - 40 to 60 percent
Laggards - bottom 25 percent of companies
Leaders’ expected growth is represented by the upper reddish line and Laggards’ by
the lower purple line (self-reported). This illustrative model shows the opportunity cost
of not evolving to Future Systems using a company with $10 billion in revenue in 2015. Banking Industry Narrative 26
4 Prioritize technological enablement
The first step to achieving this could be to improve the board’s Prior to the pandemic, few banks had undertaken
understanding of the potential of technology—our recent full-throated cloud migration. Early 2020 saw a
handful of high-profile tie-ups between banks
survey28 of 107 of the world’s largest banks found that only and leading cloud service providers. The typical
1 in 10 directors have tech expertise. major bank had, at most, 10 - 20 percent
The next is ensuring that the bank’s Within Accenture’s client base, of its workload in the public cloud and around
IT strategy is perfectly aligned with a great example of a bank making bold 30 percent in its own private-cloud data centers32.
and subservient to its growth strategy. moves on technology is Siam Commercial
This includes identifying the critical Bank in Thailand30, which has completely
Of Accenture’s top 20 banking clients,
data elements and priority use cases rethought its technical approach to
that will deliver the greatest impact enable a host of new business models.
60 percent have a multi-cloud
in customer acquisition, new product Another good example is Commonwealth strategy, and only 15 percent remain
development, advisory services etc. Bank of Australia31, which has embarked wedded to a single cloud service provider33.
on a true transformation of its enterprise
While the array of technologies worth technology in partnership with AWS.
considering continues to expand, The emerging standard is that banks will opt for
our Technology Vision Survey29 a principal public-cloud partner while hedging
confirmed that cloud and AI, followed their bets and keeping a competitor active
by cybersecurity, are likely to have in the organization.
the most far-reaching impact.
1 Accenture Disruptability Index, 2019. 7 Accenture Banking Consumer Study, 2020. 12 Accenture, Technology Vision Survey, 2021.
https://www.accenture.com/us-en/insights/ https://www.accenture.com/gb-en/insights/ https://www.accenture.com/ca-en/insights/
consulting/business-disruption-innovation banking/consumer-study-making-digital- technology/technology-trends-2021
banking-more-human
2 Accenture Research analysis of global 13 CBInsights, “The Complete List of Unicorn
banking market structure 8 Newzoo, “Top Countries by Smartphone Usage”, Companies”, May 2021. https://www.cbinsights.
2020. https://newzoo.com/insights/rankings/ com/research-unicorn-companies
3 CNBC, “Venmo has 40 million users,
top-countries-by-smartphone-penetration-
PayPal reveals for first time”, 24 April, 2019. 14 Bloomberg, “Affirm Shares Almost Double
and-users/
https://www.cnbc.com/2019/04/24/venmo-has- on Debut After $1.2 Billion US IPO”, 13 January,
40-million-users-paypal-reveals-for-first-time.html 9 StarTribune, “U.S. Bank to close another 400 2021. https://www.bloomberg.com/news/
branches, or 15% of locations, by early next articles/2021-01-13/affirm-shares-almost-double-
4 Fool.com, “Study: Buy Now, Pay Later Services
year”, 14 October, 2020. https://www.startribune. in-debut-after-1-2-billion-u-s-ipo
Continue Explosive Growth”, 22 March, 2021.
com/u-s-bank-to-close-another-400-branches-
https://www.fool.com/the-ascent/research/ 15 Forbes, “Why Visa Is Buying Fintech Plaid For
or-15-of-locations-by-early-2021/572738071/
buy-now-pay-later-statistics/ $5.3 Billion”, 13 January, 2020. https://www.
10 NS Banking, “Svenska Handelsbanken forbes.com/sites/jeffkauflin/2020/01/13/why-
5 Accenture, “Caterpillars, Butterflies and
To Close 180 Branches, Axe 1,000 Jobs”, visa-is-buying-fintech-startup-plaid-for-53-
Unicorns: Does Digital Leadership in Banking
17 September, 2020. https://www.nsbanking. billion/?sh=5854ae262a8b
Really Matter?”, 2019. https://www.accenture.
com/News/Svenska-Handelsbanken-Closing-
com/_acnmedia/pdf-102/accenture-banking-does-
Down-Nearly-180-Branches-With-1000-Job-
digital-leadership-matter.pdf
Losses
6 Accenture Research analysis based on
11 Bank of England, “Cash in the Time of Covid”,
Capital IQ; analyst consensus for the sample
24 November, 2020. https://www.bankofengland.
of a set of 449 banks.
co.uk/quarterly-bulletin/2020/2020-q4/
cash-in-the-time-of-covid
16 Forbes, “Google Plex: the Mobile Banking 22 Finextra, “Deutsche Bank and Google Cloud 28 Accenture, “Boosting the Bank Board’s
App Every Bank Wants,” 30 November, 2020. Agree Multi-Year Deal”, 7 July, 2020. https://www. Technology Expertise”, 2020. https://www.
https://www.forbes.com/sites/ronshevlin/ finextra.com/newsarticle/36165/deutsche-bank- accenture.com/gr-en/insights/banking/
2020/11/30/google-plex-the-mobile-banking- and-google-cloud-agree-multi-year-deal boost-boardroom-technology-expertise
app-every-bank-wants
23 Finovate, “Google Teams With 11 Banks to 29 Accenture, Technology Vision Survey, 2021.
17 The Straits Times, “Singapore to Have Four Launch Plex Bank Accounts”, 18 November, https://www.accenture.com/ca-en/insights/
Digital Banks, With Grab-Singtel and Sea Getting 2020. https://finovate.com/google-teams- technology/technology-trends-2021
Digital Full Bank Licences”, 4 December, 2020. with-11-banks-to-launch-plex-bank-accounts/
30 Accenture Newsroom, “Accenture and Digital
https://www.straitstimes.com/business/banking/
24 Accenture, Technology Vision Survey, 2021. Ventures Co-Develop and Launch First-of-its-Kind
mas-awards-digital-full-bank-licences-to-grab-
https://www.accenture.com/ca-en/insights/ Blockchain Solution in Thailand”, 16 October, 2018.
singtel-and-sea-ant-gets-digital
technology/technology-trends-2021 https://newsroom.accenture.com/news/accenture-
18 Accenture Banking Consumer Study, 2021. and-digital-ventures-co-develop-and-launch-first-
25 Accenture, “Banking on Empathy”, 5 April, 2021.
https://www.accenture.com/gb-en/insights/ of-its-kind-blockchain-solution-in-thailand.htm
https://www.accenture.com/us-en/insights/
banking/consumer-study-making-digital-
banking/prioritizing-customer-empathy 31 Businesswire, “AWS Announces Plans to
banking-more-human
Open Second Region in Australia”, 7 December,
26 Accenture, “Caterpillars, Butterflies and
19 Ibid 2020. https://www.businesswire.com/news/
Unicorns: Does Digital Leadership in Banking
home/20201207005969/en/AWS-Announces-
20 Ibid Really Matter?”, 2019. https://www.accenture.
Plans-to-Open-Second-Region-in-Australia
com/_acnmedia/pdf-102/accenture-banking-
21 Microsoft News, “Microsoft Partners
does-digital-leadership-matter.pdf 32 Accenture, “Banking Cloud Altimeter”, May 2021.
With Commonwealth Bank’s X15 Ventures,
https://bankingblog.accenture.com/
Accelerates Innovation”, 4 February, 2020. 27 Accenture, “Future Systems Survey,” 2019.
thealtimeter-magazine/volume-1-what-does-
https://news.microsoft.com/en-au/features/ https://www.accenture.com/us-en/insights/
banking-cloud-mean
microsoft-partners-with-commonwealth-banks- future-systems/future-ready-enterprise-systems
x15-ventures-accelerates-innovation-2/ 33 Accenture Research analysis of banking clients.
Mike Abbott Fabrice Asvazadourian Fergus Gordon Daniel Laniado Alan McIntyre
Senior Managing Director – Senior Managing Director – Managing Director – anaging Director –
M Senior Industry Director –
Global Banking Lead Banking, Europe Banking, Growth Markets Banking, Latin America Banking
m.abbott@accenture.com f.asvazadourian@accenture.com fergus.gordon@accenture.com daniel.laniado@accenture.com a.mcintyre@accenture.com
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