Pasadena, CA 91101 Everyone agrees: To cut costs, and to simply survive, banks must transform their digital initiatives. The bank said it wanted to slash another €1bn in costs this year and was targeting an adjusted cost base of €21.8bn at the end of this year, compared with the previous goal of €22bn. These provide clients with a number of suggestions that contribute to making effective decisions about cost reductions. Industrialization. While a lot has been written, and will continue to be written, about … If there’s less time for customers to wait on the phone through your call center then there are more available agents able to help. Banks have been digitizing their products, services, and processes over the past decade—a shift that was expected to reduce operating costs. It featured mechanical filing systems, calculators, and punch-card tabulators. Cost cutting strategies for banks rooted in industrialization. Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. His work was brilliant. Additionally, the technology function should play a critical role in banks’ structural cost transformation efforts. Large-scale office automation technology first appeared in the 1920s. Cost cutting measures may include laying … SocGen CEO Frédéric Oudéa said the Covid-19 pandemic had accelerated changes in the retail banking sector. Finding a balance between customer centricity and cost efficiency will help to be more streamlined. Cost cutting and Convenient: For years, banks have been using paper for transactions, like the monthly bank statements that were sent through mails or the use of a cheque book. U.S. Bancorp recently announced that it is planning to accelerate branch closures as digital banking … As we wrote in our last piece, there is a certain mindset in the banking industry that still runs contrary to value creation. 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. Financial Guaranty Insurance Brokers But the executives of the era refused. The global banking sector is highly fragmented and comprises of retail, corporate, and investment banking, and asset and wealth management companies. The key priority in strategic cost reduction is targeting resources where they can earn the best return, rather than just cutting costs in itself. Expediting the Operational Efficiency Bank cost cutting: A lesson from the past. Second, to cut costs, banks should reexamine the build-buy-outsource/offshore model for technology projects. Resource requirements are determined by multiple factors like service levels. Before you consider completely hacking things off that you may need to keep, like your financial institutions insurance policy , you should map out an efficient and considerate plan for cost-cutting. How did he do it? Faced with a slow-growth economy and shrinking revenues, bank managers are pulling the only lever they have left: expense control. How might an “industrial redesign” look—and how might it slash costs—in today’s bank or credit union? But it was hardly a breakthrough when it came to productivity or cost reduction. It would compel them to standardize, in order to use the new equipment. Staff productivity. Additionally, customer centricity is the main focus for financial institutions during normal economic times, therefore service level targets are usually set very aggressively, but companies should be smart when lowering service levels, as the impact on your bottom-line could be drastic. Email: fgib@fgib.com, Copyright ©2021 But progress toward digitization—toward Babbage’s dream of a “knowledge work assembly line”—stalled. Data entry was often redundant, manual, and error-prone. In the meantime, learn more about how The Lab helps with cost cutting in the banking sector. Let’s not leave Charles Babbage in the pages of history. JPMorgan Chase and Bank of America have been conducting massive layoffs recently and will see more layoffs over time. Even then, automation required standardization. All Rights Reserved, Non Bank Lender Management Professional Liability, Steps to Improving Banking Security and Authentication, Reimagining Banking in the Age of COVID-19, Directors and Officers Liability Insurance. 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. The first step is to apply the principles of industrialization—borrowed straight from the factory floor—to any digital transition. Misaligned incentives still reign in the banking industry, turning cost cutting into a hot potato passed around divisions. Next, benchmark how your organization’s spending compares to your peers’. As a CIO, your first priority should be to make all IT-related activity costs transparent. Whether it’s hard times for the economy or just some ups and downs for your own financial institution, having a tried and true system to cut costs and be more efficient is always key. Making a payment when you don’t have sufficient funds still costs around $33 per incident in the U.S., netting the top three banks $1.5 to $2 billion each. We promised a follow-up on how value is destroyed in relation to disposals and acquisitions. The tech vendors simply changed their sales pitch. Here are a few things you can start with. Banks’ rising costs can be attributed to … From going over staff size to looking at expenses, cutting costs is not an easy task, especially with so much information and data to go over. a more strategic approach by viewing cost-cutting as part of a broader efficiency effort. And the opportunities to reduce cost in banking can be simply staggering. It was a breakthrough for sales materials. 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