Global Retail Banking 2022: meaning and sustainability
Regardless of size or industry, in today’s marketplace, engaging with customers and other stakeholders on ESG issues becomes strictly. Fortunately, the banks are starting from a healthy position. They have strong relationships with their customers, who want their banks to feel like a “good friend” to whom they can turn for honest advice and a “school” where they can get financial advice. And while customer needs vary widely across markets, there are plenty of opportunities for banks to provide high-impact services at very basic levels, such as promoting sustainable behaviors or coaching financial. BCG research shows that in all major markets, banks offer innovative solutions that cover most, if not all, customer value streams.
Going further, banks must look for places in new markets where they have unique advantages and can create offers and build business models to exploit them. For example, banks have many opportunities to innovate sustainable practices and products throughout the customer lifecycle. The drive to limit temperature increases will drive a massive transformation of the global economy, requiring huge investments, including from consumers (think loans for renewable energy sources and electric vehicles) and small companies, which will have to deal with a variety of emissions. Banks can also use the day-to-day banking relationship as well as their personalized engagement capabilities to support customers in living an environmentally responsible and ethical lifestyle.
We expect big banks to also create offering platforms that help consumers live more sustainably and encourage small businesses to adopt good ESG practices. This is one of the reasons major retail banks are making ESG a priority area for their digital transformation initiatives. Banks have the potential to serve as orchestrators of green ecosystems, bringing together groups of suppliers capable of meeting customer needs in value streams such as reducing emissions from homes and buildings or the supply chain . They can also provide a “one-stop green shop” that offers products and services including a knowledge center and tools, qualified and pre-qualified suppliers, cost estimates and simplified information request processes, options funding support, etc.
BCG’s recent analysis of changing retail banking profit pools indicates that ESG-related products in core businesses could generate substantial revenue streams. It is difficult to predict how quickly this will happen, as growth will follow underlying market trends. But more important than a debate about speed is the fact that the share of banking ESG products will increase and eventually replace almost all non-ESG activities. This presents a great opportunity. For example, an ESG-related share of 20% in new retail banking revenue over the next five years would translate to a share of around 10% of total retail banking revenue, or around $300 billion by 2025. product lines will be best positioned to achieve above-market growth in the years to come.
Environmental and social challenges transcend generations and set societies and their institutions, such as government and business, on new paths. Many banks may need to create new enablers, including green products and tools, budget and life planning tools, data and AI tools and policies, and fair pricing structures. When they do not have in-house capacities, or these take too long or cost to build, they may also need to seek out relevant partnerships.
We explore all of these changes and their ramifications in our 2022 Global Retail Banking Report.