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Purpose-Driven Banking Explained | GoCardless Skip to content
Purpose-Driven Banking Explained
Written by GoCardless The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless.
The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each.
The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio Last editedAug 2022 — 2 min read
Explorating the meaning and practice of purpose-driven banking begins with how most customers regard banks. Put simply, many customers are wary of banks, feeling that their banks don’t operate with their interests at heart. Purpose-driven banking describes a way of operating which attempts to change this perception. It describes a business model which prioritises helping customers to manage their finances in a way which may not drive revenue to the bank itself.
Advantages of purpose-driven banking For the customer, the advantages of purpose-driven banking are clear – their finances are handled in a trustworthy and transparent manner. For the bank, they can enjoy improved customer retention and with it, better business growth .
Delivering purpose-driven banking The main priority of purpose-driven banking is to put customers’ requirements front and centre, irrespective of whether this is advantageous to the bank itself. The traditional model of banking is that customers trust their bank to handle their transactions and deal with their data. However, problems can arise when customers mis-handle their finances, dropping into an unplanned overdraft for example. In some cases, customers with difficulty managing their finances feel that banks penalise them, rather than helping them with their problems.
What is driving the need for purpose-driven banking? The post-pandemic economic landscape is one where many small to medium-sized businesses (SMEs) struggle to adapt to shifts in customer demand, spending patterns and sources of income. However, a collapse in business activity can have a hugely negative impact on the whole economy. Traditional banking structures mean that struggling SMEs often find it difficult to source lines of credit to help them survive difficult periods.
A similar problem is faced by charities, social enterprises and other not-for-profit organisations. An economic downturn creates conditions where such bodies may see restricted funding from government and donors.
If these funding restrictions lead to organisations having to either close entirely or severely curtail their operations, it could have a significant negative impact on the wider community, and in particular the more vulnerable parts of that community.
Purpose-driven banking means that financial institutions realise their role: to bolster the wider community and help customers such as SMEs and charities when times are hard.
Breaking down purpose-driven banking In order to deliver purpose-driven banking, financial institutions need to do the following:
Change their business models The business models which banks operate need to deliver better customer experiences more efficiently. The long-term driver of this transformation is access to a growing share of the market.
Shift the strategy The strategy of the purpose-driven bank must be based upon expanding their services to customer-friendly offerings such as tailored financial advice.
Work from the bottom up Purpose-driven banking should exist throughout a financial institution from the bottom up. This means encouraging employees to help change the culture, making the shift to purpose driven-banking genuine and effective.
Be authentic Every financial institution must find a way of delivering purpose-driven banking which reflects the way they do business and the core competencies they offer. They need to think about what they offer and how to make it more customer-facing.
We can help GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments .
Over 100,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today. Interested in automating the way you get paid? GoCardless can help Contact us Seen 'GoCardless Ltd' on your bank statement? Learn more
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