Why Bank and Utility CEOs Could Soon Have a lot More in Common

Utilities CEOs are valued for efficiently developing and maintaining portfolios of staid assets that typically provide investors with safe, yet unexciting regulated returns. Bank CEOs could soon be left touting the same skill set, a major consultancy group has suggested—and it's all due to the forces of digital disruption.

Institutions such as JPMorgan Chase and Wells Fargo under attack from fintech startups, many of them based in Silicon Valley, aren’t just losing the odd punter. They’re bleeding customers.

A new survey of more than 137,000 customers in 21 countries by Bain & Co. found respondents bought new banking products from a competitor rather than their primary bank one-half to one-fifth of the time. These “hidden defections” were weighted to high-margin lending products and typically went to competitors—including other traditional banks—that offered better digital marketing, sales and services.

“As fintechs and technology companies siphon off customers seeking high-value products and services—such as credit cards, loans, insurance and investments—traditional banks run the risk of becoming just another big, regulated utility.

“Retail banks face an unattractive future,” Bain reported. “As fintechs and technology companies siphon off customers seeking high-value products and services—such as credit cards, loans, insurance and investments—traditional banks run the risk of becoming just another big, regulated utility.”

Primary banks still accounted for nearly two-thirds of all purchases on average, but those were mostly for low-value deposit accounts, of which they won 77%. For lending purchases, which are almost twice as likely to be made digitally, they only won 31%.

The survey comes just as fintech companies scored a big regulatory win.

On Friday, the Office of the Comptroller of the Currency said start-up and technology companies that act like banks could get a special charter allowing them to more easily operate across state lines. The new rules would give them more credibility with customers but also expose them to tougher consumer protection and anti-money laundering regulations. “Technology-based products and services are the future of banking and the economy,” OCC director Thomas Curry said.

Big banking CEOs have recognized the threat. Last October, JPMorgan Chase launched its own mobile payments service, Chase Pay, for example. “A lot of things they do, we can do; a lot of things they do, we want to do,” CEO Jamie Dimon told a recent conference.

Bain agrees that all is not yet lost for traditional bank CEOs, with the more tech savvy having beefed up their digital strategies early to fight back against disruptors. In the UK, for example, it points out that Santander slimmed down its current-account product suite to just five or six products from nearly 200 to make buying and selling simpler. It also was one of the first traditional banks to develop digital sales channels, allowing customers to refinance a mortgage online.

“By now, the digital disruption in banking should come as no surprise, and most banks clearly understand the importance of digital migration,” said the report’s lead author Gerard du Toit. “The bigger challenge lies in how to organize the transition and instill the necessary changes, both at the frontline and in the back office, to improve how consumers do their banking.”


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.