The Purpose Mandate: Redefining Relevance in Financial Services
Introduction
Last month, I wrote about the delicate balance between Horizontal Efficiency (the ‘how’) and Vertical Innovation (the ‘why’). For leaders in financial services, the focus of that balance is shifting from discussion to declaration. Vertical Innovation must be aimed at a clear and compelling purpose, raising the fundamental questions: "What is our purpose?", "Is it relevant to the next generation?", and "How do we use technology to live that purpose?"
To remain relevant in this landscape, financial institutions must evolve beyond legacy operations to become purpose-driven organizations. This month, I want to explore how purpose is becoming the essential strategic filter for decision-making in the modern financial landscape.
Redefining Value for a New Generation
To understand the new purpose of finance, we must first understand the changing priorities of its next customers. Unlike previous generations, they are not defined by traditional wealth-building assets. Evidence shows a clear shift away from legacy credit, with data indicating that less than 40% of this demographic own a credit card, while debit cards drive most of their transactions. This trend extends to major long-term debt, with the average age of first-home buyers climbing to the mid-30s and car loan uptake declining as this generation favours ridesharing over vehicle ownership. However, this aversion to traditional debt is paired with a massive appetite for modern alternatives, as over 60% of this group has embraced Buy Now, Pay Later (BNPL) services. These shifts signal a clear preference for financial flexibility and access over ownership; for them, a bank's relevance is not measured by the products it sells, but by the life it helps them build.
The 'Why' of Unbreakable Trust
Given this new landscape, trust is no longer a passive feature; it is an active mission. The next generation demands proactive integrity, not just security. They expect a proactive ‘shield of trust’ built from integrated services that safeguard their financial lives. In an era of deep digital integration, this shield is forged from transparent data stewardship. It is about not only complying with regulations like the Consumer Data Right (CDR) but embracing their spirit—proving through action that the institution is a responsible guardian of its customers' most sensitive information. This is why deploying AI to detect fraud in real-time is not merely a function of Horizontal Efficiency. It is Vertical Innovation delivering on the promise to protect what customers have built—a tangible statement of institutional integrity.
The 'Why' of Democratized Empowerment
For generations, expert financial advice was a privilege. The purpose of modern finance is to make it a right. The opportunity lies in using AI-driven robo-advisors and personalized planning tools to dismantle old, exclusionary models. Through these technologies, an institution can transform from a passive custodian into an active coach, guiding millions toward financial independence.
The 'Why' of Seamless Partnership
Next-generation customers expect seamless, intuitive experiences. The purpose of innovation, therefore, shifts from simply launching new apps to designing experiences that anticipate needs. The true value is in leveraging predictive analytics and smart automation to become an indispensable partner, present not just when money moves, but when lives change.
The 'Why' of Principled Progress
The next generation of banking clients expects the institutions they engage with to reflect their values. The integration of Environmental, Social, and Governance (ESG) principles into core strategy is the ultimate expression of this purpose. A bank’s investment in green financing and community development becomes powerful proof that its mission is bigger than its bottom line.
The 'Why' of True Personalization
With the prevalence of data and analytics, the purpose of personalization is to demonstrate genuine empathy, not just to cross-sell products. The strategic challenge is to leverage data responsibly to craft meaningful solutions tailored to an individual’s unique circumstances. This requires moving beyond passive privacy policies to offering active data controls. When a customer can easily see and manage how their data is used for their benefit, personalization transforms from something that happens to them into a service they participate in. This is what ensures every touchpoint is a moment of trust.
The 'Why' of a Borderless World
As the world has become decidedly mobile, finance must follow. The purpose of global banking is to make the world feel more accessible. Relevance will be defined by an institution’s capacity to bridge distances and time zones, providing low-cost, real-time international services that empower a global mindset. In this interconnected world, relevance demands a global reach; a purely local focus is no longer a viable option.
The 'Why' of Enduring Stability
The purpose and relevance of financial institutions is being redefined. The organizations that thrive will be those that lead with purpose, balancing technological advancement with genuine human connection.
What does this mean for leaders? It means that "purpose" has graduated from a mission statement on the wall to a hard-edged competitive advantage. It is the most powerful strategic filter for navigating the noise of technological change.
The practical application is to use this filter relentlessly. It provides the clarity to invest in the right innovations—the ones that amplify your ‘why’—and the courage to defund the ones that don’t. The essential question for any major initiative is no longer just "What is the ROI?" but "What is its purpose?" Answering this with conviction is how you allocate capital, inspire your teams, and ultimately, earn your relevance for the next generation.
Yet, as we apply this purpose filter, a more challenging question emerges. The cost of truly serving this new, hyper-personalized generation is skyrocketing, driven by immense regulatory burdens and razor-thin margins. Does this make retail banking an unsustainable core for the modern financial institution? And does our best path to profitability and purpose now lie not in winning the retail battle, but in shifting our focus to the higher-margin worlds of business and corporate banking?
Resilience is the foundation upon which purpose is built. In turbulent times, customers expect an unwavering anchor. This requires strategic investment in agile infrastructure and a relentless focus on risk management. This foundational stability, powered by Horizontal Efficiency, is what gives an institution the freedom to confidently pursue its greater ‘why’.