Bank business models must evolve to regain customers
Banks and credit unions face immense challenges that threaten existing business models. Falling fee income, declining mortgage volumes and eroding consumer trust undermine financial performance. However, financial institutions can evolve to boost engagement and accompany customers throughout their financial lives.
Banks face a perfect storm of headwinds. Fee revenue is dropping steadily, with this deterioration in non-interest income proving difficult to replace as regulators crack down on certain charges. At the same time, new customer acquisition has become more challenging as competition grows and consumers demand simplified account opening and improved value. Adding to these trends, mortgage originations have fallen 50% from peak volumes in 2015, with declines projected to continue amid higher interest rates and slowing housing market activity.
To overcome these headwinds, financial institutions must transform into agile, customer value-driven enterprises initiating strategies that increase their relevance and their role as primary financial provider in consumers’ lives. This will require a doubling down in data and artificial intelligence capabilities that can deliver personalized financial operating systems, accompanying customers across their financial journeys, thereby strengthening trust and loyalty. This scenario comes from new research from EY.
With continued economic uncertainty challenging the financial health of every consumer and business, banks and credit unions must focus relentlessly on understanding and delivering on customer needs, adapting business models to drive sustainable performance.
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