Traditional retail and commercial banks spent $1 trillion on digital transformation between 2015 and 2018, yet this has not delivered the anticipated revenue growth. 

Banks are still competing for market share of revenue growth in a slow-growth revenue pool, despite collectively spending over $1 trillion to transform their IT operations in the past three years, strategic consulting firm Accenture said in a report published on Thursday.

The report «Caterpillars, Butterflies, and Unicorns: Does Digital Leadership in Banking Really Matter?» looked at the digital maturity of 160 of the largest commercial and retail banks in 21 countries. It found that while half (50 percent) them are achieving higher profitability, this is the result of lower operating costs and not revenue growth. 

Digital-First Banks

Only 12 percent of banks appear to be fully committed to digital transformation and investing in a digital-first strategy, despite the benefits associated with digital maturity, namely, high market valuations and a better return on capital. This is the only group with a price-to-book ratio above 1x, Accenture said. Another 38 percent of them have embarked on transformation efforts, but have poor or weak strategies. 

«Digital-focused banks have taken the first step in building a future-ready bank, but they need to pivot their focus from efficiency and move to growth if they hope to close the valuation gap with fintech and big tech competitors encroaching on the banking business,» said Alan McIntyre, Accenture senior managing director and head of its global Banking practice, said. 

Widening Gap

The remaining half (50 percent) of banks have not made much visible progress in digital transformation at all and investors are showing a lack of confidence in their future prospects.

«Our research shows that digital leadership drives superior economic performance, and that the gap between ‘the best’ and ‘the rest’ is widening at a pace that should concern banks struggling with digital transformation and overall competitiveness,» Julian Skan, Accenture Strategy senior managing director and global Banking, said.

Recommendations

Digitally enabled cost reduction is only the first step in building a future-ready bank, Accenture said. It recommended banks to focus on the customer journey, create new revenue streams in areas beyond their traditional domains, and to be more strategic about economic outcomes