By Michal Kissos Hertzog, CEO, 100% digital challenger bank Pepper 

As consumers grow more socially conscious and environmentally aware, they are demanding more from the brands they deal with on a daily basis. Retail, for example, is an industry that has been grabbing many headlines lately with its ‘buy to return’ and on-demand shopping culture. Consumer outrage at ‘fast-fashion’ is driving many retail companies to rethink their approach and business strategies in order to align with customers’ demands and values.

Unlike retail, banking has a limited ‘output’ which means they are not scrutinised in this way. But that doesn’t mean consumers don’t have an opinion on finance institutions’ behaviour when it comes to social and environmental causes.

Half (50%) of Brits say they’d go as far as switching their bank if it wasn’t socially responsible, with 44% of Brits admitting they’d walk if it wasn’t environmentally responsible. So what can banks do with this information and what does it mean for the future of the banking industry?

Get obsessed with your customers 

In a highly competitive market, banks that are customer-obsessed and are listening to what consumers care about will always have the ‘edge’. You only need to look at the rise of fintech to see this. Traditional finance players are often guilty of focusing on a P&L (profit and loss) business model and culture, driving new product sales, but new, agile fintech players have ripped up the rule book – and its working.

Challenger banks like Pepper in Israel and Monzo and Starling in the UK are seeing a rapid uptake because they’re unlike traditional finance institutions in many ways – the most obvious one: they put customers and their needs at the heart of every decision.

In the UK, almost two thirds (63%) of consumers believe banks prioritise those in better financial positions and over a third (36%) say banks don’t prioritise loyal customers at all – that’s a lot of customers that feel underappreciated. With 67% of Brits admitting they feel ill-equipped to make the best decisions for themselves, there’s no wonder they’re looking to the financial institutions for help.

It’s time that all banks operate with one goal – meeting customer demands and making them happy. This is of course no mean feat and includes supporting them to be financially healthy, matching their socio and environmental values and everything else in between. But it starts somewhere…

For starters, banks have the ability to empower customers and the community with technology and help address the financial literacy gap. We’ve seen this from money management apps like goHenry, Cleo and Yolt in the UK who are offering solutions that help consumers better manage their money. This is key, especially as almost half (47%) of Brits believe it’s a bank’s duty to help them make better money decisions.

It’s important for banks to also think about what they can offer the wider community – outside of their customer base. For example, in recent years, The Leumi Group has invested tens of millions of pounds in the community through financial empowerment projects, donations and social sponsorships – which are all evaluated and granted in accordance with predefined criteria. This includes initiatives such as one-on-one customer training sessions across Israel to boost public engagement and confidence in digital banking services, or partnering with NGOs like ‘Aharai!’ which helps develop young leaders and promotes equal opportunity for youths at risk.

Human understanding 

A customer-focused business model and culture isn’t the only ingredient of fintech success. Unlike many incumbents which are bound to clunky legacy systems, most fintechs are built on a flexible and truly digital core. If you were to rip off the layer of a traditional bank it would look like spaghetti – if you did the same to a fintech it would be neat, organised layers like lasagne! As a result of this digital core, fintechs are able to make sense of and use data to provide services and solutions that meet their needs – there’s no guesswork in truly digital banking.

Fintechs understand that every customer is unique, it’s in their culture, but having a digital core helps them act on that mindset as they have the ability to adapt and transform their solution in order to empower customers. As a result they can help customers tackle challenges like an approaching overdrafts, saving for a specific life event – a great first step in banks’ duty of care to society.

Transparency is key 

As mentioned, banking hasn’t been held in the spotlight for its ‘eco-friendliness’ in the same way that retail has, because there’s limited physical output.  However, where possible its key to show steps are being taken to make a bank as green as possible. For example, every year The Leumi Group releases a CSR report highlighting its efforts when it comes to reducing carbon footprint, energy consumption, recycling etc. Putting initiatives in place such as a shuttle service for employees, encouraging cycling to work and building ‘green’ offices are all part of The Leumi Groups environmentally friendly initiatives. We know it’s important to our customers to show this, but more importantly for the world we live in.

Triodos bank is one of the very few openly sustainable banks which operates in the UK. It achieves this by actively screening out companies that are harmful to the planet, exclusively investing in ethical and sustainable companies. While not all banks can and want to operate like Triodos, it’s a great example of a bank making great waves in sustainable banking and in showing other banks that there is a market for it. Going one step further than just reporting environmentally friendly efforts is for banks to have robust measures in place when deciding what companies to invest money in, something which The Leumi Group also supports.

The report findings should serve as a wake-up call for financial institutions who aren’t thinking customer-first – in whatever capacity. Consumers’ expectations are changing and it’s clear that their loyalty to banks requires so much more than having a safe place to stash their cash – it’s one that is also socio and environmentally friendly. Whether customers are asking for services that answer their money management needs or CSR expectations the key to meeting such demands is being customer-obsessed. When this culture and business model is supported banks can truly embody customer values and ultimately, drive loyalty.