RESTRUCTURING FIT OPERATIONS (Fast Impact Transformation) LONG TRANSFORMATION PROGRAM LEAN / CONTINUOUS IMPROVEMENT. endstream endobj startxref This sustained cost reduction has largely taken place without change to the traditional banking operating model. Learn more here. Ask yourself: 1) Are there opportunities for cost cutting measures in your bank, based on the uptime—or lack thereof—of your sales force? In all, more than 210 improvements were identified. The offerings under study included personal deposit accounts, mortgages, credit cards, and loans. Long Term (24-36 months) Short term (6-18 months) … Since opening its doors in 1993, The Lab has helped some of the best companies in the world become even better. h޴U�j�0������,[2���6�M6aS(}P�;�����ȗ�-[҅"��4g.��!�Ԁ�" q� ��{���\yGA \����l���` 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. . 536 0 obj <> endobj That’s because the answer varied by department. Several businesses lessen recurring costs by pooling resources with other small businesses, and this cost reduction strategies cut across broader layouts. This killed the sales team. For the past few years, the top trends mirrored the top strategic objectives mentioned by financial services organizations worldwide. In this Canadian bank, the … Then they should design a new cost structure … 4 PwC | More for less: Five steps to strategic cost reduction 2. How to Reduce Costs in Retail and Business Banking * Increase centralization of operational and compliance activities. It broke even in just four months. This story concerns a prominent retail bank in Canada boasting $27 billion in annual revenues. Phase 1, “Setting the stage,” is concerned with strategy and planning: deciding and … Target costs at their source. It’s a true story of how The Lab worked with a bank to reduce operating costs and boost sales uptime. But it didn’t. For example, the fraud team would identify accounts for rejection, days before the anti-money laundering team would complete its own document analysis. But each was maintained separately. 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. Taking as much of these activities as possible out... * Increase span of control for branch managers. %%EOF 4th September 2019. Put Off Extra Appliances, and Machinery After Hours. The following are common types of cost reduction. In this article, we’re going to use a real-world example to show how these same strategies … It featured mechanical filing systems, calculators, and punch-card tabulators… Generally, an income statement for the city (multiple stores) … The top five areas that almost every organization agreed upon as being important for success (in slightly different orders each year) were: 1. Redesigning the steps of a process can save effort and expense. Banks look forward to reducing the number vendors across … Vendor consolidation is one of the procurement strategy used by banking and financial services industry to achieve cost savings. … As a result, no one really knew how long a given service should take to complete. Banking cost reduction through digitization and automation. And it reveals four quick-hit areas for improvement, based on that engagement. So can improved communication between departments. 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. Forty percent of executives say they cut costs in all categories: frontline and overhead labor, nonlabor, and capital assets (Exhibit 1). These included the customer contact center, the internal contact center, underwriting, and compliance functions such as fraud and anti-money laundering. 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 would free up the salespeople to spend more time doing what they do best: selling. read more about how The Lab specializes in cost reduction techniques in banks. Nigeria banks faced financial crisis due to financial meltdown and government treasury single account policy. ` ��W� This bank was in the process of implementing new technology. Business realignment. Controlling the growth of cost centers is a similarly endless job. This is an agonizingly forthright cost reduction strategy … Cost Cutting Strategies in Banks, Step 1: Root out built-in waste. Simple Payback. Payback period is defined as the length of time required to recover the original investment on the … You might not think that old technology can hand you an improvement opportunity, even while new technology is on its way. This engagement was supposed to fund itself in just six months. In addition… Quick-hit bank cost reduction technique # 3: Streamline task sequencing. 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. This bank provided services across various departments. The basic premise of business realignment is to exit business lines that have … 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. This meant that the anti-money laundering team was basically wasting its time, analyzing an account that had already been rejected! “Banking on the future : Vision … The focus should not just be on cost reduction; banks should instead strive for improving efficiency by eliminating paper, automating more processes, eliminating unnecessary physical infrastructure and … ... 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 … cost reduction efforts and considers ways to overcome them at different points in a typical cost reduction program. Applying data an… That meant that everyone needed to know the best ways to deal with the existing technology in the bank. By optimizing levels … They wanted it moved to the back office, where it belonged. Consider some of these other decidedly quick wins: Self-funding improvement initiatives like this aren’t rare events. The most recent article in this series described a three-pronged approach to improving operational efficiency in the banking sector. In this Canadian bank, the processing of loans and other products didn’t always follow a rational sequence. Do you see a quick-hit cost-cutting opportunity in your bank, based on the simple sequencing of processes? Their goals were manifold: Specifically, they sought to take administrative and clerical work off the desks of their branch salespeople. But it wasn’t going to be ready for another 18 months. But before you read it, read more about how The Lab specializes in cost reduction techniques in banks. Cost cutting strategies for banks rooted in industrialization Large-scale office automation technology first appeared in the 1920s. ... cloud migration efforts were predominantly focused on cost reduction… That’s why senior management contacted The Lab for this engagement. 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. But that’s exactly what happened here. Support areas were scrutinized, too. Today’s banking executives talk so much about “digitization,” you’d think it was some kind of magic bullet for bank cost cutting. Most likely, your answers are 1) Yes, and 2) No. Every year, the Digital Banking Report does research on the Trends and Predictionsfor the upcoming year. If it does, you’ve got a quick-hit opportunity for a cost reduction technique in your bank. 0 In our next article, we’ll share more insights about process improvement ideas in banking. h�bbd``b`��@�1 ĭ,���B �$b�$�g ��@������i9H#n���#� �� 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. Their time was being wasted on the complex processing of documents and compliance tasks. (iii) short-term cost reduction efforts should be balanced with long-term strategies for improvement in banks’ performance. 555 0 obj <>stream �������-̩C��l��ᗟ�} ՠY��誚=t#���G��g�� h�B�(�)�U�`>�%�N��}����:�)!��3���0������p���S)��t�gk�q4ٰ���(N�:�} �>��. This is one of the simplest and widely recognized methods of cost/benefit analysis. 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. 17. Process automation is increasing the portion of banks’ costs that are fixed… It required careful analysis of the situation. And the departments weren’t communicating well. At The Lab, we do them all the time. Improving the customer journey 2. Our work is money-back guaranteed. Simplifying these processes, however, wasn’t so simple. Our last article traced the connection between reducing bank operating expenses and standardization of processes. 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. But that’s not all. Unfortunately, the out-of-sync processes at this Canadian bank are all too common in banks worldwide. Cost cutting is a matter of commitment from the top management. The problem is that such traditional cost reduction … 10 à 20%. How did The Lab help? And 2) Would new technology (and its expense) really be the solution? In particular, Accenture (2008) argued that cost reduction should be approached … Why? Not only are our engagements self-funding. Slash Health Payer Operations Costs & Mult... How to survive the banking core-system-pro... Twelve-month ROI on the engagement was tenfold. 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 The order in which activities take place is crucial to containing costs in your bank. At many branches, transaction volume is down. 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. Deep Digitization in Utilities Operations. Casualisation: An operational cost reduction strategy to survive in the banking industry. Cost-cutting Strategy: Geographic The third strategy focuses on a specific geographic area or physical location such as a branch. 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 cost reduction. Does this scenario feel uncomfortably familiar to you? In some industries, cost per unit falls on a quarterly basis and firms must continually find cost reductions to remain competitive. h�b```���� A�FFF&��H����O�{6H��uq�q�9vz�xP�Ţp�E����ni@�����x������k�h�4�DGR'�70�w4�7�T4�T40T�@���� �+�+�� �tP�9� 6 � �| �1�1 II�.~k��������0���b��?�u78l�Yk�4+��H� ������e`\ Cost cutting was one of the most frequently cited goals of … Use M&A and partnerships to build scale. How to Increase Operational Efficiency in the Banking Sector. The costs cut are mainly in the form of CAPEX, headcount reduction… %PDF-1.5 %���� That’s how many improvements were uncovered, and that’s how valuable they were, taken together. Cost reduction is the process of identifying and implementing ways to reduce the opex and capex of a business. 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. The survey found that 43 percent of all public-sector transformation efforts over the past five years have had cost reduction as a core goal. 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 … 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. This article, by contrast, is a case study. Align costs to strategy: Look across the whole organisation and differentiate the strategically-critical ‘good costs’ from the non-essential ‘bad costs’. We identified employees and areas that were demonstrating internal best practices for using the existing system. Things were good, but they could’ve been better. The predominant motivation for cost reduction of any kind was to lower variable costs … Banks should apply a bottom-up, zero-based budgeting approach to challenge existing cost and service levels. When The Lab studied this bank’s branch operations, and compared them to our proprietary templates, we identified … The bank is planning to roll out a special customer value tool to help with this. And not a single one required the implementation, or cost, of new technology. As a result, further cost reductions are more likely to impact customer experience, resiliency and regulatory compliance… It pointed out ways to find employee under-utilization issues hiding in plain sight. . ��s����-�q�m���#�fcK)�,��[�[�)9�6��6��(�ٍma����k l^�n6�N��$�C"R�Sޛ�eY��b� 붤Dd?�)�MV� The study revealed that the percentage of time that a given salesperson spent face-to-face with actual customers was low. It refers to the potential … Too common in banks it pointed out ways to find employee under-utilization issues hiding plain... Going to be ready for another 18 months ’ ll share more insights about process improvement in. Their branch salespeople all too common in banks, Step 1: Root out built-in.! 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