The crisis has struck hard and old and new challenges are not likely to recede in the next couple of years. Besides major regulatory pressure, clients’ and employees’ behaviours have markedly changed, particularly in the face of digitalisation. This position paper calls attention to the challenging environment financial institutions are now facing and will face in the near future. The fight for profitability is already in full swing and is bound to get fiercer as our calculation model demonstrates.
However the good news is that there are ways to brace oneself for the battle for profitability, six of which are presented in the study “Banks in 2020. Guidelines for upcoming challenges”, conducted by EUROGROUP CONSULTING with support provided by Ensight Management Consulting.
Mobilisation is first and foremost. Banks are advised to engage their employees, uniting them to face together the tremendous task of controlling revenues and costs in the future. A mobilised workforce is needed to take up the challenges and opportunities of digitalisation, industrialisation, pricing, IT complexity and new markets. Mobilisation is not only one of the levers, it is an overarching concept that enables all subsequent levers.
Pricing, too, has to be reconsidered. Clients’ willingness to pay for everyday services and the desire for more transparency calls for innovative pricing models, e.g. clearly linked to the client’s profile.
Digitalisation is inexorably progressing into the banking market and banks must shake off their digital paralysis. They can for instance start to include their customers into the product development processes to stay up-to-date. Digitalisation also offers a chance to significantly save costs by reorganising the branch network, e.g. by setting up flagship branches or coupling existing ones with other businesses. Even the entry into a new product or service line is not unthinkable anymore – non-banks are intruding into the traditional banking business, so why not develop into new markets as a bank?
Industrialisation is a topic long discussed, however, hardly any bank has truly pulled it off as of today – there is still a great potential to be exploited and costs to be saved by doing it right.
The rigid and oversized IT landscapes of many a bank can turn into another cost saver through careful management of the existing complexity. A three-pronged approach establishing an IT architecture, delivery and governance to reach a state of so-called “controlled complexity”.
All these levers are described in more detail in this study. The study gives you a clear look at what can be done to stand out in the battle for profitability and provides real-life examples to prove the points made.
