Today’s tough choices that will shape tomorrow’s financial services institutions

Today’s tough choices that will shape tomorrow’s financial services institutions

By Jim Christodouleas, Banking & Capital Markets Practice, PwC Australia

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Across every sector of financial services right now, leaders face the same daunting array of challenges. Making some hard decisions now will make the difference between future prosperity and failure.


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We live in extraordinary times. Right now, every leader in every major segment of Australia’s financial services industry is grappling with the same challenges at the exact same time.

While the Royal Commission is rightly commanding attention, the industry also has to simultaneously confront constrained top-line growth; value-chain deconstruction and margin erosion; not to mention onerous capital requirements and falling returns. All that, while driving massive digital transformation and managing cyber and data risk.

No wonder there were a few furrowed brows around the room when financial services leaders came together at our offices in Sydney and Melbourne recently. Everyone has the same task: To do all the things they were doing before – only faster, and better, without error, while fixing the past.

During our Sydney and Melbourne events, I argued that financial services institutions will only flourish in the years to come if their leaders make some extremely hard decisions right now.

Rewriting the operational and cultural map

Over the long term, trust pays. That’s why brands can be so valuable, not to mention banks. That’s also why societies with cultures known for ethical behaviour are wealthier than those that aren’t.

But it’s not enough for a financial institution to be trustworthy. Customers must perceive the organisation as trustworthy too. They need to believe that the business is authentic and not purely driven by self-interest.

Post-Royal Commission, financial services institutions will struggle to convince customers that they deserve such trust. That won’t change until there is a sustained focus on customer expectations and a culture of honesty and openness throughout the business. This must include hiring people whose values mirror that culture – then empowering them to deliver outcomes that are in the best interests of both their employer and their customers.

However, even well-intentioned people can struggle to be credible or reliable in large, complex financial institutions. To build an intimate, trusting relationship with customers, people often have to navigate a maze of systems and wrong turns.

Now is the time to focus and to simplify. Financial services leaders must make radically different choices about the scope of services and products they are prepared to offer. Otherwise complexity will continue to confound any attempts to earn back customers’ trust.

Disciplined choices

Many organisations are already driving new customer-centric strategies, but there is one crucial element that most of them have overlooked: choice.

In our personal lives we understand that we can’t be intimate with everyone. But in business we find it difficult to accept that there are customers who don’t fit, market opportunities not aligned to our core capabilities, or that there are propositions we should leave for someone else.

The financial services leaders I’ve spoken with recently are seeing beyond that short-term thinking. They know that trying to serve too many different needs, customers, and segments makes everyone feel less special.

It’s good to say ‘We put customers at the heart of everything we do’. It’s even better to mean it. But if you fail to make the disciplined choices about which segments to serve and the ways to serve them – and then align all your other choices to be able to credibly talk and reliably deliver, customers will simply never feel it.

Altruism is the natural choice

For all but a very small number of people, working for a financial institution isn’t a calling. It’s a job. People do their jobs for all sorts of reasons. Motivators like money and status are obviously important, and so are others like feeling camaraderie, or celebrating collective success.

Evolutionary biologists say that altruism is in our genes. When an individual contributes to the wider social group, everyone benefits – including the individual. So we have a natural tendency to be altruistic, while being self-oriented too.

Making ‘altruistic’ choices that benefit customers today will build trust in a business for tomorrow. Such choices must go beyond mere legal and regulatory compliance. Charging fees-for-no-service may be illegal, for example, and stricter enforcement in future may address that. But what about the fee for a service that no longer costs anything to provide? Is that fair? What if it were frequently waived – but only for customers who demanded it? Still fair? It might be legal, but how much would you trust an organisation that charged you a fee for years, only to waive it once you learned that your neighbour had it waived?

To become trusted, financial institutions must become simpler, focused and more deeply connected with their customers. That means finance leaders must make some extremely tough decisions – because trust isn’t just an imperative, it's also an enormous opportunity.


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Jim Christodouleas

Jim Christodouleas

Banking and Capital Markets Solutions and Capability Leader, PwC Australia

Tel: +61 3 8603 2065

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