How banks’ long-term value strategies can enhance customer value

Long-term value is closely aligned with the environmental, social and governance (ESG) movement, but also acknowledges that companies need to earn profits. Focusing on the well-being of customers, workers and the community can help foster a healthier, more confident socioeconomic landscape and higher levels of stakeholder trust — both important drivers of sustainable growth.

While many banks think of support for social priorities in philanthropic terms, leading institutions make it core to their business models and day-to-day operations by building the cultures, mechanisms and products to help stakeholders achieve success.

Long-term value can include:

• Incorporating the effects of climate change into loan underwriting decisions.
• Adopting flexible workplace policies.
• Boosting transparency around topics that are priorities for stakeholders or leveraging data analytics to create more personalized and relevant customer experiences.

Once, these were viewed as admirable actions for companies to take. Today, long-term value is a matter of long-term survival.

Investors are among the primary advocates and beneficiaries: A growing body of evidence shows that taking proactive steps, such as lowering a company’s carbon footprint or committing to greater workplace diversity, community engagement and better-governance practices, can enhance a firm’s financial results.¹ European studies have found similar results specific to banks.²

Banks that make stakeholder needs and ESG principles core to strategy are sending a message to customers and investors about their values and long-term priorities. These banks are creating new markets and behaviors by modifying their business models and incentives, fostering alignment around a shared purpose, and enhancing their brands.

Long-term value approaches have gained momentum in Europe, where regulatory frameworks emphasize climate change and other ESG priorities. In the US, only a handful of large banks differentiate themselves by making long-term value core to strategy.

For example, Citigroup’s 2025 Sustainable Progress Strategy commits $1 trillion to investments in environmental, affordable housing and diversity efforts, while also changing governance, employment policies and products to support ESG goals.³ Those efforts have helped Citi earn an “A” ESG rating from MSCI, a ratings agency.⁴

The rest of the industry is scattered along a broad continuum. A few have integrated long-term value into their core business strategies to help create purpose and deliver value to all stakeholders but have yet to make a full commitment.

Others have embraced ESG and customer-centric principles at the business-line level but are leaving many benefits on the table by not making it central to enterprise strategy. Most banks are putting themselves at a disadvantage by treating ESG as a check-the-box compliance exercise or waiting to see how things evolve with bigger institutions.

While all the long-term value pillars are important, bolstering relationships with customers is critical for banks that hope to differentiate themselves and find growth in a competitive marketplace. 

Banks can fortify the customer pillar in three ways:

1. Strengthen trust and loyalty

Banks lost customer trust in the wake of the 2008 financial crisis but saw a rebound during the COVID-19 pandemic. Even so, financial institutions still rank near the bottom compared to other industries, above only social media among 16 industry categories.⁵

That relative lack of trust stands in contrast to nimble FinTech competitors, many of which boast solutions designed to enhance inclusion and access. In the EY 2021 NextWave Consumer Financial Services research, more consumers named a FinTech firm as their most-trusted financial brand than a bank.

Enhancing transparency around the bank’s approach to climate and social challenges and using data analytics to proactively identify and meet customer expectations can help enhance trust. For example, Citizens Financial’s Green Deposits program allows corporate clients to direct their cash reserves to companies and projects that create positive environmental impacts.⁶ Supporting customers’ values and helping them achieve sustainability goals can strengthen loyalty.

2. Improve financial inclusion and access

According to the Federal Deposit Insurance Corporation,⁷ the percentage of unbanked households stood at 5.4% in 2019. The number reflects a steady decline over the last decade but also illustrates the potential opportunities for banks that can find a way to bring those customers into the system. About 42 million Americans were classified as “financially vulnerable,” struggling to manage their financial lives.⁸

Promoting greater inclusion lies at the heart of banks’ efforts to address social inequities and build trust. Finding better ways to serve those customers also can improve the health of the economy and create more growth opportunities.

The key is giving those efforts teeth. For example, a large multinational bank has announced plans to invest $10 billion over the next decade to address gender and racial biases experienced by Black women.⁹ Investing to improve access to health care, housing opportunities, jobs and other social goods can strengthen the brand and create a healthier customer base.

3. Better serve small- and medium-sized enterprises (SMEs)

Supporting small, local businesses is viewed now, more than ever, as supporting sustainability and the community. Many active lenders under the Paycheck Protection Program saw big increases in SME loans — a new business leveraged into long-term relationships.

Banks can offer more capital, advice and resources to the segment to better serve SMEs. For example, Comerica has committed $5 billion to small-business lending and its bankers provide technical expertise and financial advice to SMEs through virtual and in-person “bootcamps.”¹⁰

Summary

Banks have been slow to respond to changing definitions of success. Pursuing a long-term value strategy that prioritizes the interests of customers and other stakeholders can be critical to building the trust, agility and resilience needed to compete in an uncertain future.