. This is an agonizingly forthright cost reduction strategy … You might not think that old technology can hand you an improvement opportunity, even while new technology is on its way. At many branches, transaction volume is down. Banking cost reduction through digitization and automation. In view of the depression in oil market, costs have been cut by most E&P companies and related services providers to levels no one would have imagined before. (iii) short-term cost reduction efforts should be balanced with long-term strategies for improvement in banks’ performance. The bank is planning to roll out a special customer value tool to help with this. It’s a true story of how The Lab worked with a bank to reduce operating costs and boost sales uptime. That’s how many improvements were uncovered, and that’s how valuable they were, taken together. %PDF-1.5 %���� That meant that everyone needed to know the best ways to deal with the existing technology in the bank. h�bbd``b`��@�1 ĭ,���B �$b�$�g ��@������i9H#n���#� �� 0 These included the customer contact center, the internal contact center, underwriting, and compliance functions such as fraud and anti-money laundering. In this Canadian bank, the processing of loans and other products didn’t always follow a rational sequence. Generally, an income statement for the city (multiple stores) … They wanted it moved to the back office, where it belonged. Today’s banking executives talk so much about “digitization,” you’d think it was some kind of magic bullet for bank cost cutting. For the banking industry, the economic consequences of the pandemic are not on the same scale as those during the Global Financial Crisis of 2008–10 (GFC), but they are still notable. In addition… The workarounds that they developed were then shared across the company, making it as efficient as possible while the new technology was still being installed. Improving the customer journey 2. If it does, you’ve got a quick-hit opportunity for a cost reduction technique in your bank. In contrast, a financial institution in Central and Eastern Europe is still focusing mainly on a risk-based approach, although an increasing number of banks in the region are now starting to develop a more customer-centric strategy. endstream endobj startxref Simple Payback. Cost Cutting Strategies in Banks, Step 1: Root out built-in waste. ... cloud migration efforts were predominantly focused on cost reduction… But each was maintained separately. The costs cut are mainly in the form of CAPEX, headcount reduction… Business realignment. This article, by contrast, is a case study. Nigeria banks faced financial crisis due to financial meltdown and government treasury single account policy. Deep Digitization in Utilities Operations. And 2) Would new technology (and its expense) really be the solution? 547 0 obj <>/Filter/FlateDecode/ID[<9B17B83609D94942BB5357D57587FDD4>]/Index[536 20]/Info 535 0 R/Length 69/Prev 471437/Root 537 0 R/Size 556/Type/XRef/W[1 2 1]>>stream Cost cutting strategies for banks rooted in industrialization Large-scale office automation technology first appeared in the 1920s. Target costs at their source. It required careful analysis of the situation. But that’s not all. In this Canadian bank, the … . The order in which activities take place is crucial to containing costs in your bank. Minimize Cost of Cash Cash is, ultimately, the inventory of financial institutes, and as in all industries, effective management of cost of inventory results in decreased costs. Not only are our engagements self-funding. It featured mechanical filing systems, calculators, and punch-card tabulators… The study revealed that the percentage of time that a given salesperson spent face-to-face with actual customers was low. Consider some of these other decidedly quick wins: Self-funding improvement initiatives like this aren’t rare events. In this case, The Lab spent eight weeks analyzing every aspect of the processing of a product or service in the bank’s retail branches. The order in which activities take place is crucial to containing costs in your bank. Cost cutting was one of the most frequently cited goals of … And the departments weren’t communicating well. By optimizing levels … Most likely, your answers are 1) Yes, and 2) No. The predominant motivation for cost reduction of any kind was to lower variable costs … As a result, further cost reductions are more likely to impact customer experience, resiliency and regulatory compliance… cost reduction. Put Off Extra Appliances, and Machinery After Hours. At The Lab, we do them all the time. Simplifying these processes, however, wasn’t so simple. Our last article traced the connection between reducing bank operating expenses and standardization of processes. Quick-hit bank cost reduction technique # 3: Streamline task sequencing. Long Term (24-36 months) Short term (6-18 months) … The offerings under study included personal deposit accounts, mortgages, credit cards, and loans. In all, more than 210 improvements were identified. 10 à 20%. Support areas were scrutinized, too. Automate Paycheck Protection Program Loans, Lean Six Sigma Projects for Finance and Accounting, Robotic Process Automation in Credit Unions, Robotic Process Automation in Finance and Accounting, Robotic Process Automation in Financial Services, Robotic Process Automation in Health Insurance, Robotic Process Automation in Investment and Asset Management, Robotic Process Automation Insurance Claims, what are retail banks doing to control costs and improve efficiency. Do you see a quick-hit cost-cutting opportunity in your bank, based on the simple sequencing of processes? %%EOF Cost-reduction strategies Economies-of-scope refers to the changes in average costs resulting from the changes in the output mix between two or more products. This sustained cost reduction has largely taken place without change to the traditional banking operating model. Banks should apply a bottom-up, zero-based budgeting approach to challenge existing cost and service levels. So can improved communication between departments. This bank provided services across various departments. This is one of the simplest and widely recognized methods of cost/benefit analysis. Process automation is increasing the portion of banks’ costs that are fixed… Ask yourself: 1) Are there opportunities for cost cutting measures in your bank, based on the uptime—or lack thereof—of your sales force? For example, the fraud team would identify accounts for rejection, days before the anti-money laundering team would complete its own document analysis. Several businesses lessen recurring costs by pooling resources with other small businesses, and this cost reduction strategies cut across broader layouts. They couldn’t provide their customers with accurate estimates to basic questions such as “When will my loan be processed?” And the salespeople’s time was further wasted trying to get updates from the other departments in the bank. Redesigning the steps of a process can save effort and expense. As a result, no one really knew how long a given service should take to complete. In particular, Accenture (2008) argued that cost reduction should be approached … Phase 1, “Setting the stage,” is concerned with strategy and planning: deciding and … But before you read it, read more about how The Lab specializes in cost reduction techniques in banks. But it didn’t. … It broke even in just four months. Use M&A and partnerships to build scale. Cost-cutting Strategy: Geographic The third strategy focuses on a specific geographic area or physical location such as a branch. Facing continuing pressure from investors to reduce expenses in a slow-growth environment, the temptation for many bank executives is to cut costs indiscriminately, for example, 10% across all departments. 17. 4 PwC | More for less: Five steps to strategic cost reduction 2. Accenture Strategy research reveals that banks are facing three cost-related challenges: Banking executives must link cost reduction and value creation to succeed Although banks have shown a willingness to undertake cost reduction … To achieve high performance, banks need the right balance between short-term tactical cost decreases such as headcount reductions, and longer-term strategic cost initiatives such as streamlining … This story concerns a prominent retail bank in Canada boasting $27 billion in annual revenues. Copyright © Lab Consulting Partnership, 2021 | All rights reserved, Cut Banking Costs Now: Achieve “The New Normal” for Productivity “Big Rock” 1 of 3: The retail branch network. This would free up the salespeople to spend more time doing what they do best: selling. 붤Dd?�)�MV� We identified employees and areas that were demonstrating internal best practices for using the existing system. endstream endobj 537 0 obj <>/Metadata 65 0 R/Pages 534 0 R/StructTreeRoot 117 0 R/Type/Catalog>> endobj 538 0 obj <>/MediaBox[0 0 612 792]/Parent 534 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 539 0 obj <>stream This bank was in the process of implementing new technology. The following are common types of cost reduction. Payback period is defined as the length of time required to recover the original investment on the … Casualisation: An operational cost reduction strategy to survive in the banking industry. For the past few years, the top trends mirrored the top strategic objectives mentioned by financial services organizations worldwide. This engagement was supposed to fund itself in just six months. 536 0 obj <> endobj Their goals were manifold: Specifically, they sought to take administrative and clerical work off the desks of their branch salespeople. Why? The problem is that such traditional cost reduction … The basic premise of business realignment is to exit business lines that have … Taking as much of these activities as possible out... * Increase span of control for branch managers. ��s����-�q�m���#�fcK)�,��[�[�)9�6��6��(�ٍma����k l^�n6�N��$�C"R�Sޛ�eY��b� It refers to the potential … It pointed out ways to find employee under-utilization issues hiding in plain sight. But that’s exactly what happened here. 555 0 obj <>stream Every year, the Digital Banking Report does research on the Trends and Predictionsfor the upcoming year. Our work is money-back guaranteed. How to Increase Operational Efficiency in the Banking Sector. But it wasn’t going to be ready for another 18 months. In this article, we’re going to use a real-world example to show how these same strategies … Slash Health Payer Operations Costs & Mult... How to survive the banking core-system-pro... Twelve-month ROI on the engagement was tenfold. The most recent article in this series described a three-pronged approach to improving operational efficiency in the banking sector. And it reveals four quick-hit areas for improvement, based on that engagement. Cost reduction is the process of identifying and implementing ways to reduce the opex and capex of a business. Banks look forward to reducing the number vendors across … In some industries, cost per unit falls on a quarterly basis and firms must continually find cost reductions to remain competitive. Learn more here. How did The Lab help? Vendor consolidation is one of the procurement strategy used by banking and financial services industry to achieve cost savings. ... casualization of employment has been seen as an appropriate strategy for cost reduction in the banking industry, which seems to be justifiable since reduced cost … RESTRUCTURING FIT OPERATIONS (Fast Impact Transformation) LONG TRANSFORMATION PROGRAM LEAN / CONTINUOUS IMPROVEMENT. “Banking on the future : Vision … h޴U�j�0������,[2���6�M6aS(}P�;�����ȗ�-[҅"��4g.��!�Ԁ�" q� ��{���\yGA \����l���` Unfortunately, the out-of-sync processes at this Canadian bank are all too common in banks worldwide. How to Reduce Costs in Retail and Business Banking * Increase centralization of operational and compliance activities. That’s why senior management contacted The Lab for this engagement. When The Lab studied this bank’s branch operations, and compared them to our proprietary templates, we identified … ` ��W� Then they should design a new cost structure … 4th September 2019. cost reduction efforts and considers ways to overcome them at different points in a typical cost reduction program. Their time was being wasted on the complex processing of documents and compliance tasks. cost to the end customer, it causes huge disruption in the banking environment, possibly leading to a realignment of players in the market as we look ahead to the year 2020. �������-̩C��l��ᗟ�} ՠY��誚=t#���G��g�� h�B�(�)�U�`>�%�N��}����:�)!��3���0������p���S)��t�gk�q4ٰ���(N�:�} �>��. Controlling the growth of cost centers is a similarly endless job. Align costs to strategy: Look across the whole organisation and differentiate the strategically-critical ‘good costs’ from the non-essential ‘bad costs’. Cost cutting is a matter of commitment from the top management. Things were good, but they could’ve been better. That’s because the answer varied by department. This killed the sales team. Does this scenario feel uncomfortably familiar to you? In our next article, we’ll share more insights about process improvement ideas in banking. $ 27 billion in annual revenues might not think that old technology can hand you an improvement,! Some of these activities as possible out... * Increase span of control branch. Banking sector by optimizing levels … cost cutting strategies in banks two or more products these included the customer center! A special customer value tool to help with this techniques in banks.. Out ways to reduce the opex and capex of a process can save and. Office, where it belonged the processing of documents and compliance functions such as fraud and anti-money laundering team complete. Rational sequence the offerings under study included personal deposit accounts, mortgages credit! 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