Banking efficiency is NOT equal to cost cutting
Many roads lead to banking efficiency and each bank must choose its own path. Improvement of process efficiency is a no-brainer – while legacy-engined banks must bite the transformation bullet, even those with modern systems can revisit processes to bring down error incidence, improve reliability or remove redundancy. Raising productivity is another imperative – rather than fire, banks can choose to redeploy personnel or utilise them better by allocating cross-functional responsibilities. Another good idea would be to identify those activities conducted as a routine, without a significant decision making component and try to automate those pieces. And then where decisions need to be taken, processes must be streamlined, attached to a workflow, monitored and tied to an SLA – thus you get tighter control and greater productivity. Some more examples: Marketing budgets last longer when spent on cost effective media such as web 2.0. Cash can be made more productive by maintaining lower inventories at ATMs and branches. And a single integrated IT platform can do the work of many applications that currently operate in silos.
Banks can re-visit their product and channel mix to fortify the profitable elements and do away with loss leaders. It’s not always necessary to build one’s products. Sometimes a buy or ally decision makes better business sense - the success of bancassurance is ample proof of that. The customer mix can also be made more productive by retiring those in the bottom tiers creating no value but on the contrary eating into the profit pool.
Those banks that have stayed within the traditional mould must open their eyes to new business models. Outsourcing of non-core operations can deliver higher employee productivity and lowered overheads. The shared services route is worth exploring for smaller banks. Entering a new market with a low cost direct banking model curtails both initial expenditure and risk.
Clearly, banking efficiency improvement calls for a well-rounded approach. It’s not necessary to cut back on coffee and paper napkins, after all!
Comments
Many a times efficiencies are brought about by pure external outlook than just inward looking ideas.
There are examples, to take one - There exists opportunities for banks to cross sell into Automobile sector, not just as a retail financier, but also as an active sales channel (Ex:- Helping the customer select a right model to suit his needs). Not just would they increase revenue opportunities for themselves, they would take the focus out of pure Internal Cost Cutting in these times by increase in revenue share. After all there are limitations to what you can cut. More so, they would bring in efficiencies in other industries. Any takers among banks to think on these lines?
Posted by: Udaya Shankar | August 24, 2009 11:00 AM
Uday, I also think banks should rather look at expansion in the channel space bringing down operational costs as a result. One of the things that can be explored is a “Partner Portal” which will be a seamless gateway through which partners will connect to the bank and conduct business for the bank. The bank will be present on the desktop of the automobile retailer, and the moment a customer requests for a loan, it will be seamlessly processed for the customer, with decisioning being instant. This will save a lot of back office costs, and at the same time bring in customer satisfaction. It would also make the auto retailer’s business that much easier. This way banks ‘expand reach outwards’ and can convert every retail opportunity into a banking opportunity.
Regards and Thanks,
Chandramouli
Posted by: Chandramouli Kundagrami | August 26, 2009 8:32 AM