Community
I had outlined in my previous post the fall in revenue that banks are witnessing across their service lines (you can read it here). The move towards overcoming this drop in revenue needs to go beyond the tried and tested models of cost reduction and margin improvement. Such a move cannot be restricted to the superficial layer of operations, but needs to go in depth to address multiple levels of the banking organization.
A quick look at the banking landscape shows that the organizational models adopted by banks to overcome the new reality can be categorized on two fronts – one that is focused on the technology aspect, and the other focusing on the business side. The technology focus brings together both traditional approaches driving operational efficiency as well as new age technologies including the likes of machine learning, artificial intelligence, analytics and data. The business side brings together extensive focus on revenue or cost or an optimum mix of both these factors.
Technology Focus
Majority of banks are trying to build the relevant technology capability to gain an edge over their counterparts as well as the Fintechs. Four major approaches categorize the technology transformation efforts of banks, as outlined below.
Business focus
A straight forward categorization in terms of whether the bank is focusing extensively on revenue or cost may not be possible. A look at some of the initiatives and outlook provided by the banks indicate the probable focus the bank has. Barclays has been deploying digital technologies aimed at bringing down costs and also reducing headcount through investment in new technologies and automation. The bank at various instances has also been mentioning that its single focus was to reduce costs. On the other hand, Santander has highlighted in multiple avenues that its number 1 priority was market share growth and has invested in customer analytics to increase revenue from target offerings.
The above examples showcase a clear demarcation in focus between being cost-driven and revenue-driven. At the same time, we can also find banks that have an optimum focus between these objectives. Commonwealth Bank of Australia launches mobile apps and contactless terminals to reduce cost of operations on one hand, and on the other, drives innovation centers to outline ground breaking ideas with customers and enhance customer experience.
We find that banks have been adopting multiple business and technology models based on what works best for their stream of operations and customer base. A model that works for one may not be the right fit for the other. Ultimately, all models serve to achieve the common objective – scout for additional avenues for revenue growth and profitability against the backdrop of falling incomes levels and margins.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Kathiravan Rajendran Associate Director of Marketing Operations at Macro Global
10 December
Scott Dawson CEO at DECTA
Roman Eloshvili Founder and CEO at XData Group
06 December
Daniel Meyer CTO at Camunda
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