Banks across the world are at a critical moment.
On one level the sector is booming. As McKinsey notes in its 2024 Banking Report: “The past two years have been the best for banking since before the global financial of 2007–09, with healthy profitability, capital, and liquidity.”
With more than a $1tn total profit a year, banking is the world’s most profitable sector. So, what do they have to be worried about?
In simple terms, much of that recent success is a factor of high interest rates. Rates are falling across the world: the European Central Bank is nearing the end of its rapid rate-cut cycle and the Bank of England has recently reduced rates to 4.25%. As a result, banks will in the next 12 months need to address fundamental issues of who they are, who they’re for, and the value they bring.
This identity crisis has been building for some time, as the digital revolution calls into question the branch network that’s underpinned retail banking for decades, trust erodes in institutions across society including established banks, and a new generation of challenger banks have emerged.
Fundamentally banks need to find a way to reconcile people’s need for efficient day-to-day banking with their need for more profound financial services which require relationships based on trust. Heritage banks need to recognise the valuable asset beyond their balance sheets: authentic customer relationships. With thoughtful brand strategy and experience design, they can emerge as trusted life partners rather than utilities.
Getting this right is not easy, but it can be done, and it presents a significant opportunity. Banks can recast themselves as – rather than pushers of financial products – providers of life support so that people can live as they want and aspire to. They can find ways to play a role in ‘new’ parts of customers’ lives (not automatically associated with just money) and remain ‘relationship-relevant’ as people’s priorities change through their lives.
At the heart of this is to get beyond the screen of what banking seems to be, to what the true potential life-value of it can be. The life-value to customers is also where the commercial value to banks is – the latent secondary needs beneath the surface of what people might initially approach a traditional (or ‘heritage’) bank with.
In the often dry, rational, and unemotional world of banking, we have found that exciting inspiration can be created using our unique Life Map. This helps shift attention away from the obvious areas of engagement around the bank’s own products and services, and towards a customer's complete life picture. That’s where ideas and innovation can be sparked. We can find new possibilities for meeting people where they are in their lives, building dialogue around what they’re doing and want to do, rather than ‘selling’ the products banks want them to ‘buy’.
