Over many decades banks and financial institutions have invariably focused on shareholder interest - they have considered 'Volume is King' as a success mantra but they now need to think beyond that. Banks are increasingly under the pump to respond to growing demands from customers and communities to think beyond profitability and come up with initiatives for the well-being of the society. This is where it makes sense for banks to hop on to the 'Doing Well By Doing Good'bandwagon. Banks are cognizant of the fact that merely helping customers take smart financial decisions cannot be their only prime focus in the long run. The global banking space is evolving at a fast clip, and want to bank with organizations that not just operate with the highest integrity but also infuse substantial socially responsive investments.
Realization has dawned among banks that their business strategy must revolve around setting and attaining societal goals by driving convergence between their business performance and the larger interests of the society. Such an approach can help banks emerge as socially responsible organizations. 'Doing Well by Doing Good' isn't about banks doing the right things for the customer and the society - such purpose-led banking initiatives can enable banks to unlock substantial value and competitive advantage besides helping them secure their continued existense in an uncertain future.
The importance of 'Doing Well by Doing Good' is not lost on banks but it cannot be denied that banks have made tardy progress in walking down the 'Doing Well by Doing Good' road. This is largely owing to their overwhelming focus on delivering shareholder interest. It is crucial to note that banks while adopting a purpose-driven banking approach need to rewire its entire business and there is a degree of reluctance among banks to take this route since it involves a large strategic transformation, espeically during pandemic times. According to a Deloitte survey, 87% of executives believe companies perform best over time if their purpose goes beyond profitability. Another research study revealed that 72% of consumers are more likely to be loyal to companies that lead with purpose.
Banks are indeed taking purpose-driven banking seriously. Swedish automaker Volvo announced that it will phase out all petrol diesel, and hybrid options and only sell electric cars by 2030 in its quest to reduce greenhouse gas emissions. Oversea-Chinese Banking Corporation (OCBC) framed a policy to stop funding coal-fired power plants owing to climate concerns and improve the society by donating money to philantrophies every year. Capital One, Ally Bank, and Alliant Credit Union waived overdraft fees - a move that is sense a huge sigh of relief for customers already bogged down pandemic-related challenges. Mascoma Bank also resorted to purpose-driven banking and provided its employees paid time-off for voluntering.
Banks must not merely straitjacket themselves toward delivering financial services and must demonstrate committment to make a positive impact on the customers. Banks can do well by doing good by leveraging customer data and act as trusted advisors of their clients on budgeting and spending, helping them skirt detrimental spending habits and protecting them from bad actors. Of course, all of these can be achieved by banks by harnessing the power of Artificial Intelligence, Machine Learning, and cloud services. These emerging technologies aid banks to understand customer behavior and help them take smarter and safer financial decisions at all times, while providing cushion against any financial crime.
The bottom line is banks must put their thinking cap beyond profitability and carve out initiatives for the betterment of the society. And by doing so banks can strengthen customer loyalty and accelerate their ROI.
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