Successful Strategies for Controlling Costs and Staying Profitable

Kathleen Khirallah
Managing Director & Banking Practice Lead
TowerGroup

The big issue right now for banks is how to react in the current economic environment. Those institutions with a strong capital base can see some real opportunities for niche growth, but most banks will simply be in defensive mode in 2008 and into 2009. The pressures on profitability mean that virtually all banks will be looking for ways to take costs out of their operations. And, for some banks this will entail reducing personnel in all areas – the branch, back office and call center, as personnel costs are the largest single expense that banks face. Others will sharply curtail their IT spending, and some will do both.

A few institutions will invest in technology that leads to long-term improvements and position themselves for growth as we come out of this economic downturn. They will be searching for ways to find efficiencies, eliminate redundancies, and improve their operational processes. For example, they may consider improving and consolidating their loan processes over their various lending platforms – auto, personal, mortgage, etc. – since many banks have separate lending systems in place.

Similarly, it may be time to take a hard look at their delivery infrastructure and seek better integration among their various channels. Online banking has proven to be a popular delivery channel for an increasing number of consumers; in this fast moving world it could be time for a refresh of online banking features and functionality. And, as mobile banking is drawing a great deal of attention now, some banks may want to invest in the mobile channel, especially those targeting the Gen X/Y consumers.

Sophisticated business analytics packages also hold appeal during a volatile economy, as do applications that optimize budgeting and planning. Systems that help with customer problem resolution and case management workflow will also be on the radar of many institutions since these packages can help with retaining valuable existing customers. Of course CRM packages that can make ‘next best’ product offers are much needed, but Business Intelligence must be much broader than basic CRM. The goal should be to have a pervasive performance management system in place that delivers internal insights into pricing, relationships and employee efficiencies that augment the performance of the bank’s CRM capabilities.