Is an ESG focus helping banks maintain a role in the community?

Published : 2 months ago, on 29/07/2024

The go greener agenda is gaining traction across every industry, as we all consider how to generate more sustainable ways of working for the future. The financial services industry is no exception, and it is not only influencing how customers are served banking solutions, but also consumer attitudes towards their provider and their overall brand affinity. With this desire to have a greater alignment between personal environmental values and those of the bank you choose, is there potential for environmental, social and governance (ESG) strategies to support a financial services’ community positioning?

Creating accessibility for all

One of the most topical debates around services is where they are offered. Although the rate of bank branch closures appears to be slowing down slightly in some countries, physical access to services is still a key priority as we shape the future of banking.

There have been many discussions and ongoing community concerns around the reduction of, or limited access to, cash or bank branches within a reasonable proximity. With this in mind, we are seeing many governments step in to take action and safeguard the landscape of physical services and cash solutions. These physical services could take different formats, ranging from video interaction to face to face in-branch meetings. In Sweden, an ATM must be provided within a 25km radius of every person, and this is similar in the Netherlands, which governs a 5km radius. In the UK we have also seen legislation introduced to protect access to cash and the delivery of physical services for both those who want and need it.

Accessibility can also be viewed beyond the actual provision of banking services, if we consider how the solutions are offered. For example, are pop-up branches offered with convenient opening hours? Can you complete a variety of transactions at the pop-up branch or ATM? Or is the ATM even available when you come to use it? Reducing the number of touchpoints available to the end-user drives a greater focus on the availability, effectiveness and usability of remaining services.

When viewed through this lens, you can appreciate the important roles that fit for purpose and reliable solutions play within the community. This can impact more vulnerable customers and those less able to travel and influence the choice and convenience available for all consumers.

Building sustainability from the product up

Achieving the delicate balance between cost discipline and driving opportunities for revenue expansion is an ongoing challenge. With the spotlight on highly available, highly effective solutions for all, innovation and technology become even more important to an organisation’s approach to ESG, as well as its long-term profit strategy.

Firstly, the efficiency of services and products is crucial. Reducing the manufacturing carbon footprint, optimising energy consumption, and using recycled and recyclable parts should all be part of the sustainably mix for new technology. This not only reduces the initial impact of service implementation, but also the continuing environmental footprint of the banking solution. For example, powering down technology when not in use and utilising energy saving modes can facilitate both greener solutions, as well as delivering sizeable cost savings.

Secondly, implementing adaptable services is crucial. Flexible and modular designs of hardware often give increased flexibility to be nimble within a dynamic market. Changes within consumer preferences are accelerating faster than ever before and the financial services sector is increasingly expected to keep pace. Moving away from ‘one size fits all’ product portfolios, consumer offerings now need to shift and align with an evolving market. Recent research supports this, showing that banks could boost revenue from their primary customers by building stronger and more meaningful connections.

In addition, a foundation of adaptable software is a key building block on the path to more efficient and effective solutions. For many in the industry, we are seeing a shift away from customised software and greater favour towards more standardised and compliant offerings. Typically, easier to integrate, standardised solutions not only save financial institutions time and money, hence satisfying efficiency goals, but also offer the flexibility needed to be responsive in the market and deliver the adaptable services consumers expect.

Maintaining Consumer Connections

Assuming the implementation of the right services in the right place, how can physical banking services actually help financial institutions build and maintain consumer connections? Research shows that having access to physical and digital options sit within the top five criteria for selecting a bank, highlighting the significance of branches and self-service touchpoints within the channel mix.

Despite the rise in digital offerings, many consumers place significant value on the ability to access cash services, complete supporting banking transactions or gain advice from a banking associate face to face. With this in mind, we are seeing how physical services are presented to consumers changing. For example, some branch concepts have shifted to be purely cash hubs. Popping up in convenient locations, they offer fast, secure and dedicated access to cash services.

In other examples we are seeing some branches reformat and shift to be client relationship hubs, offering financial information and advice to support the ongoing depth of one-to-one consumer relationships.

When viewed with a consumer mindset, there is no doubt that these kinds of services are helping banks to keep close ties with local communities. However, when refocusing on the need for cost discipline, the importance of offering such solutions in a sustainable way becomes almost non-negotiable. Financial services need to be effective, efficient and crucially available. Focusing solely on ESG priorities while ignoring consumer needs is counterproductive, just as basing services exclusively on consumer requirements prevents financial institutions from fulfilling their ESG goals and maintaining their community-based brand identity. Therefore, it is essential that these two elements work hand-in-hand to create services that are not only effective, but also pave the way for a more sustainable industry in the future.