Now that the economy is on the mend, banks may take their foot off the accelerator with regard to cost cuts. But while doing so, they must guard against letting inefficiencies creep into their operations.  I am clear that efficiency and cost cutting are two different things, and we must hang on to the former even if we let go of the latter.

First stop: processes. Forget legacy banks, even re-engineered institutions can target efficiency by making their processes more reliable at higher volume, bringing down error rates and segregating exception handling to prevent bottlenecks. I know of some overzealous banks which aspire to unreal service level targets, which are not justified by the costs required to support them. While service is a vital tool to retain customers, it’s not the only one. Automation and Straight Through Processing are as important.

Bump up productivity: It’s possible to stretch every resource to do more, and we’ve seen banks do just that by redeploying people; jettisoning paid advertising on TV and print to make room for earned advertising as favourable word of mouth in social media; negotiating better purchases; cutting inventory, even that of cash; and encouraging self-service by popularising online channels. But, customer productivity? Hmm. Customers in the bottom 30% actually eat into the profits contributed by those at the top. Yet, few banks bite the bullet to let them go. There’s a similar emotional attachment to unproductive products which do little other than glorify the product portfolio. Why not enter into an alliance with other manufacturers instead?

Channelize efficiency: Banks must resolve that their branches will do nothing that can be done on another channel, and see how that goes. Actually, they may find that their customers are all for it! Since consumers have gone digital, their needs have changed to include aspirations of self-service, personalisation and co-creation. Ride the wave, move as many operations as possible online and onto social media. Explore direct banking to enter new markets and expand old ones.

Get someone else to do it: Is the next wave of outsourcing about divesting core processes? A reliable partner eco-system may be a good alternative to an in-house sales and servicing team. Without the costs.

Who said anything about cutbacks? If you know of an innovative way to build efficiency without slashing and burning, why don’t you share it with us?