Banks today are facing tremendous pressures from changing customer expectations, shrinking margins, slow deposit growth, new digital competitors, and stronger competition from large financial institutions. To compete in this environment, successful banks must find new ways to improve performance, adapt strategies, streamline processes, make better use of technology, and generally strengthen their overall organizations.
Rethinking bank strategies
For the banking industry, one of the most far-reaching consequences of the past few decades’ revolutionary advances is a fundamental change in the way customers interact with their financial institutions. As author Brett King observed in the title of one of his recent books, “banking is no longer somewhere you go, but something you do.”1
The impact of technology can be seen in the steady annual declines in check processing volumes as reported by the Federal Reserve. In 2000, the Fed processed nearly 17 billion commercial checks, with a total value of $13.8 trillion. By 2018, check volumes had declined to 4.7 billion, and total values were down to $8.5 trillion.2
Studies by banking technology providers show comparable trends. For example, the annual FIS Pace Findings by FIS Global report that nearly three-quarters (73%) of today’s consumer banking interactions are digital in nature. Of the various channels that customers use to interact with their banks, only mobile banking has shown growth in recent years, nearly doubling (from 22% to 42%) from 2015 to 2019. During the same period, ATM, branch, and telephone banking usage remained nearly flat, showing no incremental growth.3
Banks’ fundamental operating models are changing in response to these trends. Beyond rethinking the role of the branch, banks also must address a variety of other process, system, and human resource issues, such as improving the customer experience in online and mobile platforms and streamlining commercial lending. These changes, in turn, require operational improvements in the way workflows are managed, and restructuring of core systems to enable greater flexibility. Real-time transaction processing and fraud detection capabilities are also critical.
Among the many specific strategies banks are pursuing, the following stand out as prominent examples:
- Channel optimization. Most banks today recognize they need to address the legacy costs associated with their branch networks in terms of both real estate and human resources. In addition to consolidation, redeployment, physical downsizing, and outright sales of branch facilities, banks also are reevaluating how call centers and digital platforms can be further integrated into the customer experience.
- Digital transformation. In addition to shifting resources from physical to digital channels, this transformation also involves dramatic improvements in how operational workflows are automated and how data analytics are used to enhance decisions and processes.
- Digital marketing. Industry-leading banks are increasingly turning to digital strategies including social media to build their brands, generate customer interest, and drive new accounts.
- Improving the basics. Despite the dramatic changes driven by digital platforms, basic sales and service capabilities are still critical. Successful banks practice customer service fundamentals such as contacting customers regularly and actively looking for opportunities to provide solutions.
- Relationship management. Developing specialized capabilities such as relationship management teams, commercial relationship managers, and treasury management specialists allows banks to focus on building stronger relationships with targeted customer segments.
- Enhanced customer experience. Rethinking processes to improve customer perceptions of interactions using techniques such as customer journey mapping can help banks understand customer impacts and identify ways to improve that experience.
- Competitive parity. Maintaining competitive market position typically involves making investments in online account opening, person-to-person payment systems, online loan offerings, contact or call center technology, and other similar tools needed to remain competitive.
- Fintech collaboration. Some banks have found it advantageous to build relationships with financial technology companies that enable them to offer better online or digital experiences and specific digital services or capabilities.
Changing roles, responsibilities, and mindsets
Of the three commonly recognized performance improvement domains – people, process, and technology – implementing and managing changes involving people is typically the most difficult. For example, when bank executives participating in a recent Crowe webinar were asked about their greatest concerns about improving performance, the leading response was a “lack of willingness to change” on the part of bank personnel. As the exhibit illustrates, responses related to strategic, process, or technology issues scored markedly lower.