NEW YORK (Reuters) – The $1 trillion invested by traditional banks globally over the past three years to improve their technology has not yet delivered the revenue growth that had been expected, according to an Accenture report released on Thursday.
FILE PHOTO: The Canary Wharf financial district is seen above a residential rooftop in London, Britain, May 7, 2019. REUTERS/Hannah McKay/File Photo
The consultancy analyzed more than 160 of the largest retail and commercial banks in 21 countries to determine whether those making the most progress on technology were achieving better financial performance.
It found that banks that had advanced the most on digital were the most profitable and highly valuable, but that the higher profitability was driven by having reduced costs rather than revenue growth.
Banks had hoped that by creating better digital products and experiences for customers they would have achieved the same fast user and revenue growth as new tech-savvy competitors or large technology firms, Alan McIntyre, a senior managing director at Accenture and head of its global banking practice, said in an interview.
“Having a good digital offering is not enough to move customers,” McIntyre said. “If it doesn’t change, the industry is going to end up looking more like a utility.”
The study comes as incumbent banks continue to dedicate vast amounts of funding to overhaul their old technology systems and offer more digital services to customers.
Banks are seeking to meet the higher expectations of customers who have grown accustomed to the user-friendly products and services offered by consumer technology companies and new financial services entrants.
Accenture did not discount investments in technology, but noted that reducing costs was only the first step banks needed to make to become more competitive in the changing landscape.
The move to digital is likely to reduce banks’ income from fees, such as those customers pay for advice or transactions, according to the report.
It recommends that moving forward banks focus on making more income from taking risks linked with running the balance sheet, such as interest rate and credit, or by creating new revenue streams in areas not in their traditional domain.
Reporting by Anna Irrera; editing by Diane Craft