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Banking Solutions - Banking Efficiency Beyond Cost Cutting

Banking Solutions - Banking Efficiency Beyond Cost Cutting

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Published by Infosys
It may only be a slight exaggeration to say that the financial crisis has divided the corporate world into two groups - companies that have gone belly-up and others that are striving to survive. For over a year now, business news has featured little else besides organizations’ attempts to trim costs - through lay-offs, cutbacks, downsizing and other means.
Read the whitepaper to know for any such drive to be successful, it must have the full support of the organization. It is the responsibility of the top management to inculcate a sense of accountability among their subordinates. More than ever, the buck stops here!
It may only be a slight exaggeration to say that the financial crisis has divided the corporate world into two groups - companies that have gone belly-up and others that are striving to survive. For over a year now, business news has featured little else besides organizations’ attempts to trim costs - through lay-offs, cutbacks, downsizing and other means.
Read the whitepaper to know for any such drive to be successful, it must have the full support of the organization. It is the responsibility of the top management to inculcate a sense of accountability among their subordinates. More than ever, the buck stops here!

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Categories:Business/Law, Finance
Published by: Infosys on May 30, 2012
Copyright:Attribution Non-commercial

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10/31/2013

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Banking Efficiency Beyond
 
Cost Cutting
 
Universal Banking Solution System Integration Consulting Business Process Outsourcing
 
 
It may only be a slight exaggeration to say thatthe financial crisis has divided the corporateworld into two groups - companies that havegone belly-up and others that are striving tosurvive. For over a year now, business news hasfeatured little else bes
ides organizations‟
attempts to trim costs - through lay-offs,cutbacks, downsizing and other means.
 
For the banking industry, which finds itself in theeye of the storm, the need to raise efficiency hasperhaps never been more crucial. Although costcutting is the first thing that comes to mind,impulsive slashing of expenditure across theboard could actually do more harm than good.While there are several ways to trim the fat, notall of them are appropriate for all banks. Bankinginstitutions need to realize that there is no onesize-fits-all solution to cost cutting; they need todo a great deal of analysis to arrive at the onethat works best for them.
 
A successful banking efficiency optimization planmust look beyond mere cost cutting and drawupon a combination of the following strategies:
 
Raise cost consciousness:
 
Cost consciousness cannot be driven by thebean counters alone; rather, the entire bankingorganization needs to orient itself towards thisgoal. It is also time that banks looked beyondcutting costs in isolated pockets; for the needleto move, the philosophy of cost consciousnessmust pervade all activities at all levels. Topmanagement must play a lead role in securingthe buy-in of other employees, who must beencouraged to come up with innovative costcutting possibilities in their sphere of work.
 
Increase process efficiency:
 
In recent years, Business Process Re-engineering(BPR) has been a choice mantra of banks seeking totransform themselves. Since banking is so processdriven, the slightest inefficiency in processes canseriously dent the bottom-line. Therefore, bankinginstitutions need to get their processes right.Unfortunately, a number of banks continue to strugglewith legacy processes
 –
designed at a time whenmarkets were less competitive and customers lessdemanding
 –
which
 
are simply not efficient enough in the currentcontext. These banks may need to consider acomprehensive transformation strategy to re-examine their processes, from design toorchestration, and overhaul them if necessary.
 
That being said, even non-legacy banks can findseveral avenues to improve process efficiency.The reduction of error incidence is an obvioustarget. Efficiency also increases when processesare rendered capable and robust enough tohandle very large volumes of transactionswithout breaking down. Exception handling mustbe separated from routine processes in order toavoid operational bottlenecks.
 
Over time, cost inefficiencies may creep intobanking processes by way of excessive overheads.An example is the use of the maker-checkerprinciple, wherein one person is hired to perform anoperation, and another to verify or authorize it.While this is justified for operations highlysusceptible to security risk, when extended toroutine or non-core processes, it only serves todrain resources. A key point is that excessiveservice level targets could also create processoverheads. If customers are not to be kept waiting,the bank needs to maintain a larger service staff.During slack times, the overheads can begin tohurt. However, it is a tough call for banks to lowerservice levels in order to improve cost efficiency,since that runs a high risk of alienating customers.
 
Automation of processes can reduce both errorsand overheads. An efficient process design triesto minimize manual intervention and enableStraight Through Processing (STP). Besidesneeding to employ fewer people to perform thesame operations, banks can save time andreduce wastage.
 
Unfortunately, a number of banks defer or abandontheir IT investment plans when faced with toughmarket conditions. This is detrimental in the longrun, when most judicious technology investmentsstart to pay back by way of higher cost savings.
 
Improve productivity:
 
Being colossal entities, banks need a huge amountof resources to keep them going. On the flip side,
 
Banking Efficiency Beyond
 
Cost Cutting
 
 
there are many opportunities to chop and trim
 –
 ranging from staffing to marketing to procurement.
 
The first port of call in the journey of productivityimprovement is the utilization of human resources,since staffing costs form a large part of operatingexpenses. Large scale layoffs are not the onlyanswer; banks can consider improving staffutilization by allocating cross-functional tasks orpursuing a flexible hiring policy.
 
Marketing budgets are usually the earliest casualtyduring tough times. Rather than do away with theactivity altogether, banks can restrict theirpromotion to low cost media such as email or SMS.The use of social media, powered by Web 2.0technology, is another inexpensive option for banksto interact closely with their customers.
 
The centralization of the procurement functioncan bring higher cost efficiency through betternegotiated prices and rationalized orderquantities. The use of cheaper alternatives isalso worthy of consideration.
 
Productivity improvement can also be broughtabout through elimination of redundancy andsmarter inventory management in less obviousareas. For example, many banks use a plethora ofIT applications, performing similar functions, but
working in silos. Banks don‟t just end up paying big
money to maintain several applications
 –
they needto spend even more to integrate and support them.An integrateduniversal banking solution can help banks overcome these and several other issues. Inaddition to pursuing low cost deposits to reduceinterest expenses, banks can generate hugesavings by managing their cash smartly. Thereduction of cash inventory at branches and ATMs,and automation of cash handling are a couple ofways to do so.
 
The flow of information can also be made moreproductive by enabling self-help and automation,and consequently lowering the need for manualsupport. Tools such as information repositories,FAQ registers and process documentation canbe used to make information more accessible toemployees, whereas unassisted channels suchas kiosks andInternet banking help customers become more self-reliant.
 
Although the sales team brings home the bacon,they too must do so at reasonable cost. Unqualifiedleads and lengthy sales closure add significantly tothe cost of doing business. Clearly, sales activitiesmust be underpinned by process excellence inorder to yield maximum value.
 
Banks must also maximize customerproductivity. While it is recognized that the top 20percent customers contribute 80 percent ofprofits, what is less known is that the bottom 30percent eat into the same. If productivity is to bemaximized, banks must have a strategy to retiretheir nonpaying customers.
 
Migrate transactions to electronic channels:
 
Branches are banks‟ most resource draining
channel, and hence, their capacity must bereserved for processing complex, high valuetransactions. Routine activities such as fundstransfer, cash withdrawal or account opening arebest handled online or at an ATM. Customers mustbe encouraged to transact on unassisted channelsas far as possible. Given the savings that couldaccrue through the migration of transactions toalternative channels, the provision of incentives inthe form of reward points or better rates tocustomers is also justified.
 
Once again, banks must train their eyes onchannel productivity, and do away withredundant or non-performing channel elements.
 
Right-source:
 
The outsourcing of non-core processes to third partyvendors can deliver the twin benefits of loweremployee overheads and higher productivity amongbank employees who can now focus their energies onthe core business. Banks with smaller operations canalso go down the shared services route.
 
Clearly, banks have found value in thisapproach. Two years ago, a study of 50 retailbanks worldwide revealed that over three-fourthsof the banks outsourced at least one functionrelated to IT, support or back office. The studyalso showed that outsourcing of back officeprocesses was most intensive in the payments,life insurance and mortgage segments.
 
Banking Efficiency Beyond
 
Cost Cutting
 

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