Could advances in technology help banks increase their ESG potential?

Big banks once had almost unmatched dominance over the global financial sector. It allowed them to build glittering skyscrapers as their headquarters and helped transform London’s Canary Wharf from disused docks into what is probably Europe’s preeminent financial hub. In recent years, however, that dominance has come under threat from challenger and neo-banks, as well as from innovative fintech startups.

In fact, research released in 2022 shows that as many as 44 percent of UK business banking customers have already switched from a traditional bank to an online one. Almost two-thirds (65 percent) made the switch because they thought the online bank offered a better product. At the same time, the collapse of Silicon Valley Bank and the forced takeover of Credit Suisse by UBS has players across the sector scrabbling to avoid a global banking crisis.

But those aren’t the only challenges faced by banks today. They’re also under growing pressure to be better corporate citizens. More particularly, they’re increasingly expected to lead the way when it comes to meeting environmental, social, and governance (ESG) standards, particularly in their role as financiers. Fortunately, technology can help ensure that they’re in the best possible position to do so.

Understanding why ESG is so important to customers

Before digging into how technology can play that role, it’s important to understand why meeting ESG standards is so important to today’s banking customers.

A good place to start is with the “E” in ESG. According to the results of a YouGov survey released earlier this year, 68 percent of people are worried about climate change and its effects. They’re also increasingly aware that the projects which contribute to the climate crisis require funding, as do the ones that will limit its impact. As such, they want to know that the money they have in their banks is being used for good rather than contributing to projects that are likely to increase their climate anxiety.

Similarly, people can see how the cost-of-living and energy crises are affecting their family, friends, and communities. They want to know that their bank understands those crises and is working to help their customers through them. Beyond that, they want to see those banks operating in a socially responsible way.

Meanwhile, many will, remember how poor governance played a significant role in the 2008 Financial Crisis. In the wake of Silicon Valley Bank’s collapse and the near demise of Credit Suisse, they want to know that the same mistakes aren’t being made again.

In other words, banks can’t just meet ESG standards, they need to demonstrate to their customers that they’re doing so.

Bringing customers along with gamification

Here, technology can be incredibly helpful. More particularly, gamification offers an incredibly efficient, scalable, and sustainable way of improving customer service to ensure customer loyalty. But it can also be for banks to bring customers along with them on their ESG journeys.

A long-established principle, gamification is the application of game mechanics and game logic to enhance systems, services, organizations, and activities in order to motivate and engage users.

Technology has simply made it easier to apply gamification principles to banking apps and other products. That, in turn, can help boost customer engagement, make processes easier to understand, and increase visibility. All of those are vital for any bank trying to bring customers along on its ESG journey. Well executed, it can even make customers feel like they’re contributing to that journey. While applying gamification principles needn’t be complicated, banks shouldn’t be afraid to explore how much potential for innovation there is available in the space.

Those kinds of experiences aren’t pipe dreams. We’ve built them and our clients have seen the very real benefits they bring.

Most recently, we worked with a UK-based financial institution to enhance and upgrade its financial services training platform using gamification. Aimed at eliminating the potential for box-ticking, sloganeering, and greenwashing in the financial service industry, the experience delivers sustainable financial skills training aimed at achieving scalable, impact transformation in the United Kingdom’s banking sector.

By incorporating game-like elements such as progression through challenges and levels, instant feedback, points scoring, and adding a competitive element, gamified training can significantly improve employee performance by turning unengaging rote learning into a fun, interactive experience.

Embrace innovation or risk becoming a fossil

Given the current pressures on the banking sector, it should be clear that operations need updating in order to be relevant for the future. If they want to meet the expectations of their customers (especially when it comes to things like ESG) while fending off the threat of challenger banks and fintechs, they must embrace innovation. Perhaps more importantly, they must embrace the kind of innovation that keeps customers engaged and which allows them to be part of the bank’s evolution towards a future that is greener, more societally conscious, and tightly governed.

Photo credit: Frank11 / Shutterstock

Glenn Gillis is CEO of impact games studio Sea Monster.