Few banks have yet emerged from the global banking crisis and the resultant recession unscathed, especially the top-tier. With interest rate cuts, sharp increases in unemployment, wage deflation across continents, further sharp falls in asset prices, the recession is showing no signs of recession in the near future.
All banks are today looking at reducing costs, be it IT budgets, Travel, Human Resources; in short from cap-ex to op-ex. The question is - Does this alone solve the challenges that are faced, if only they did!
If doing more with less was Bank s mantra in 2008 then 2009 is time to edit it a little "Doing Much more with Even less" is the key. Fighting and surviving the crisis while registering growth in troubled times is a bank s near-term vision.
Banking on the more dependable fee income and other sure and recurring revenues are some immediate steps in the right direction of tackling the challenge faced by the banks. While banks continue to center on fee based income the heat on increasing deposits should not be turned off. Balance based charging, balance offsetting and offering earnings credit to worthy customers should be the hymn.
No more efficiency gaps for banks, not any more seepage, no more taping over the cracks. Automating and centralizing pricing and billing and tackling the revenue leakage challenge, finding and retaining profitable customers is the enabler.
Expense reduction is the other foundation. Banks need to at this point in time consolidate redundant systems, streamline processes and automate for minimum manual intervention. The pricing patterns need to be re-looked at, taking into consideration behavioral influencers. Charging a high price for costly products/services like branch usage, other bank ATM usage and low price for less costly items on the menu like internet/mobile banking should help. Advanced costing models also need to be put in place. Outsourcing non-core activities need to be looked at with much more gravity.
As put by a leading analyst, business Intelligence will be the cornerstone of competitive success for financial institutions in 2009 - Understanding client expectations about products and channels and delivering on that promise will determine the leaders in financial services. Making sure that banks promise what they can deliver and delivering what they promise will be the key. For this a single customer view becomes imperative. Analysis of usage pattern, forecasting customer behavior, finding the optimal price for the customer/segment, better customer segmentation and offering personalized products/pricing should be the focus.
Needless to say 2009 will be the year of innovations, innovations especially in the arena of customer acquisition and retention Strategies. Investments need to focus on new customer acquisition, cross and up-selling, risk-based pricing and aggressively pushing web channels.
Some things go without saying, but are best when said, competition for instance. Competition to say the least will be heavy, not just from traditional players but from the non-traditional (In 2007, 47% of the top 100 non-financial services brands had in-house capabilities to provide financial services to customers this is expected to reach 90% in 2011!) ones too, scoring brownies while banks are in troubled times and reducing time-to-market.
As I mentioned before bank budgets cut are real and absolute, but scope for selected spending should not be cut, because that move could slash into the bone, resulting in more loss than gain in the long run. Spend on risk analytics (especially interconnected nature of risk), Centralized Pricing and Billing and MIS should be continued if not heightened as the demand for better intelligence and efficiency from within the enterprise and better customer experience and wallet share from outside the enterprise is going to be the tune the banks will need to play in 2009 and ahead.
Jebin George
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