2020 Foresight: Maximizing Retail Banking Cost Efficiencies

Transcription

1 2020 Foresight: Maximizing Retail Banking Cost Efficiencies Product Code: VR0944MR Published Date: September

2 TABLE OF CONTENTS TABLE OF CONTENTS 1 Executive Summary Retail Banking Market Dynamics and Profitability Outlook Profitability Outlook of Retail Banks Analysis of Market Drivers and Key Challenges Technology Strategies Technology Strategic Framework for Profitability Revenue focus areas Cost focus areas Best Practices Bank of Baroda re-engineered its IT processes to gain operational efficiencies Bank Sohar of Oman integrated its multichannel delivery platform Adoption of modern technology by Capital Bank to counter money laundering Bank Central Asia (BCA) signed up NICE Actimize to improve AML IT infrastructure Product Design and Pricing Strategies Product Design Framework for Profitability Best Practices Citibank in Australia adopts product bundling strategy to strengthen its position Bulbank launched female-friendly branch and products to service its niche customer segment BankAtlantic developed an effective deposit pricing strategy to increase its profit margin Distribution Channels and Consumer Engagement Strategies Distribution Channel Framework for Profitability Revenue generation strategies Cost-reduction strategies Best Practices Danske Bank migrates towards digital banking to cut costs BBVA focusing on self-service channels to reduce operating costs ASB Bank in New Zealand launched a virtual bank for effective customer engagement Maybank customer engagement strategy Union First Market s loyalty program to scale-up business Department store concepts adopted by Mauritius Commercial bank to cross-sell Expense Management Strategies Expense Management Framework for Profitability Revenue generation strategies Cost reduction strategies Best Practices Korea Exchange Bank outsourced its procurement function to achieve cost efficiency Increasing realty cost and innovation led Wells Fargo to launch mini-branch ABN Amro integrated videoconferencing to reduce costs Appendix Methodology Contact Timetric Foresight: Maximizing Retail Banking Cost Efficiencies Page 2

3 TABLE OF CONTENTS 7.3 About Timetric Timetric s Services Disclaimer Foresight: Maximizing Retail Banking Cost Efficiencies Page 3

4 LIST OF FIGURES LIST OF FIGURES Figure 1: Market Drivers and Key Challenges... Error! Bookmark not defined. Figure 2: Key Factors for Technological Investment... Error! Bookmark not defined. Figure 3: Technology Strategic Framework for Profitability... Error! Bookmark not defined. Figure 4: Case Study Bank of Baroda... Error! Bookmark not defined. Figure 5: Case Study Bank Sohar... Error! Bookmark not defined. Figure 6: Case Study Capital Bank Signed Up SAS for AML Solutions... Error! Bookmark not defined. Figure 7: Case Study BCA Deployed AML Solutions From NICE Actimize... Error! Bookmark not defined. Figure 8: Case Study Citibank Australia... Error! Bookmark not defined. Figure 9: Case Study Bulbank Bulgaria... Error! Bookmark not defined. Figure 10: Case Study BankAtlantic... Error! Bookmark not defined. Figure 11: Distribution Channels Best Framework for Profitability... Error! Bookmark not defined. Figure 12: Channel Evolution in Multichannel Banking... Error! Bookmark not defined. Figure 13: Channel Evolution by Products and Services in Multichannel Banking... Error! Bookmark not defined. Figure 14: Next Generation Branch Banking Models... Error! Bookmark not defined. Figure 15: US Bank In-Store Branch... Error! Bookmark not defined. Figure 16: Case Study Danske Bank... Error! Bookmark not defined. Figure 17: Case Study BBVA Bank... Error! Bookmark not defined. Figure 18: Case Study ASB Bank... Error! Bookmark not defined. Figure 19: Snapshot of ASB Virtual Branch on Facebook... Error! Bookmark not defined. Figure 20: Case Study Maybank... Error! Bookmark not defined. Figure 21: Total Relationship Banking Loyalty Program Offered by Union First Market Bank... Error! Bookmark not defined. Figure 22: Case Study Mauritius Commercial Bank... Error! Bookmark not defined. Figure 23: Expense Management Best Practices for Profitability... Error! Bookmark not defined. Figure 24: Case Study Korean Exchange Bank... Error! Bookmark not defined. Figure 25: Case Study Wells Fargo Bank... Error! Bookmark not defined. Figure 26: Case Study ABN Amro Bank... Error! Bookmark not defined. Figure 27: ABN Amro s High-Tech Bankshop Facility... Error! Bookmark not defined Foresight: Maximizing Retail Banking Cost Efficiencies Page 4

5 LIST OF TABLES LIST OF TABLES Table 1: Current and Future Drivers of Retail Banking Profitability... Error! Bookmark not defined. Table 2: Impact of Banking Regulations... Error! Bookmark not defined Foresight: Maximizing Retail Banking Cost Efficiencies Page 5

6 EXECUTIVE SUMMARY 1 Executive Summary Banks across the world are revisiting their operational strategies, branch banking models, distribution channels and expansion strategies to achieve cost efficiencies and increase profits. To increase profitability, focus is on selling high-margin profitable products and services, and scaling down unprofitable operations. Technology to become core driver for profitability There has been increased emphasis on utilizing technology to improve profitability and achieve cost efficiencies; the role of technology has changed from being a process driver to a revenue generator. Retail banks are using technology to increase profitability by utilizing customer relationship management (CRM) systems and consumer analytics to identify new customer groups and offer customized products and services to targeted customers. In addition, key measures adopted by retail banks to improve operational efficiencies include an increase in information technology (IT) spending and upgrading IT systems. Migration towards low-cost channels will help banks achieve cost efficiencies An increase in real estate prices, labor costs, regulatory pressures and changes in customer preferences have caused banks to redesign their distribution strategies. The cost of a banking transaction made in-branch is significantly higher than a similar transaction made on online and mobile banking platforms. Web-based technology advancements, increases in internet and smartphone penetration, and changing consumer preferences have enabled the growth of online and mobile internet banking channels, and banks are focusing on these channels to reduce operating costs and improve profitability. As part of these initiatives, banks are launching loyalty programs to drive adoption of mobile platforms and social media sites. Overall, there is a fundamental shift in product and marketing strategies. While mobile, internet and social media represent low-cost channels, branches continue to play a significant role in offering services and dealing with high-margin products. Over the forecast period, Timetric expects a realignment of product portfolio based on profitability and service-level expectations across channels. High-growth markets and localized strategy will be critical success factors Global banks are currently seeking opportunities to enter high-growth emerging markets to drive revenues. This is expected to intensify over the next five years, as competition to enter lucrative markets increases. However, driving profitable growth will remain challenging. Global banks intend to adopt localized strategies to drive profitability across emerging markets, and are expected to adopt a high-volume, low-margin business model to target the unbanked population. As a result, strategies involving low-cost channels such as mobile banking will gain importance. At the same time, there will be a large middle and elite class which demands superior services and opportunities to invest globally. The challenge will be to create customer segment-specific strategies to remain profitable. Timetric expects decentralization in terms of decision-making processes by global banks to execute strategies for local markets. Increased M&A and partnership initiatives Banks are divesting unprofitable business segments, product offerings and customer groups that are not part of their core business strategy. Timetric expects an increase in the number of banks scaling down operations which are not profitable. This may include the complete closure of operations within a country, or selling off certain parts of a product portfolio, driving mergers and acquisitions. The effectiveness of marketing to targeted customer segments will be a critical success factor in driving profitability. The key challenge will be developing a sustainable expense-management system across channels and banking operations Foresight: Maximizing Retail Banking Cost Efficiencies Page 6

7 APPENDIX 2 Appendix 2.1 Methodology Timetric s dedicated research and analysis teams consist of experienced professionals with industry backgrounds in marketing, market research, consulting and advanced statistical expertise. Timetric adheres to the Codes of Practice of the Market Research Society ( and the Society of Competitive Intelligence Professionals ( All Timetric databases are continuously updated and revised. 2.2 Contact Timetric If you have any queries about this report, or would like any further information, please contact info@timetric.com. 2.3 About Timetric Timetric is a leading provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and comment. Timetric helps over 1,500 financial services institutions and their partner companies around the world benefit from better, timelier decisions. Timetric provides: High-quality data including proprietary, specialized industry data, survey-based research, social media monitoring, macroeconomic data and forecasts Expert analysis from experienced economists and analysts, who use robust proprietary models, indices and forecasts Powerful proprietary visualization and workflow technologies developed over years of extensive investment Timetric has office locations in London, New York, San Francisco, Hyderabad, Seoul, Singapore and Sydney. It employs 500 people, including 150 analysts and economists, and 200 professional researchers. 2.4 Timetric s Services Intelligence Centers Timetric s industry intelligence centers are premium web-based services that provide access to interactive tools, comprehensive research and expert analysis in key sectors. They provide invaluable decision support presented in an easily digestible format and grounded in deep research. Timetric offers Intelligence Centers covering the following industries: Banking Insurance Wealth Construction Travel and Tourism 2020 Foresight: Maximizing Retail Banking Cost Efficiencies Page 7

8 APPENDIX Briefing Services Timetric offers a range of briefing services, which offer cutting-edge thought leadership and expert commentary on and for the financial services industries. Driven by influential and respected editorial teams with years of experience in their respective fields, these services deliver need-to-know insight and analysis to decision makers across the financial services value chain. Timetric offers briefing services covering the following financial sectors: Accountancy Asset Finance Banking Cards and Payments Insurance Consultancy Timetric specializes in the development and delivery of innovative research solutions designed to provide competitive advantage and profitability to clients. Dedicated industry analysts and economists provide expert advice and actionable recommendations underpinned by Timetric s market and country knowledge, experience and proprietary databases, panels and research infrastructure. For projects requiring quantitative data, Timetric undertakes special research projects using its in-house panels and survey technology. These provide ready access to an extensive source of specialist business executives and consumers. Core capabilities include: Economic Research and Consulting Highly experienced economists provide a number of bespoke research services covering subjects ranging from macroeconomic forecasting to sector outlooks, business presentations and workshops. Industry Analysis and Consulting Information analysis, independent expert opinion and advice, facilitated decision or strategic support, are provided by Timetric s extensive body of proprietary data and analysis models. It provides expertise-based consulting to deliver solutions that best suit its clients requirements. Quantitative Research Timetric connects with thousands of potential customers for various markets every day. Using sophisticated, interactive and highly engaging graphical surveys, research speed is increased and costs reduced, while ensuring that respondents deliver the insight needed. Qualitative Research Timetric s Qualitative Research service helps customers understand the emotional and cultural behaviors of a target audience. Timetric provides unique access through market-leading publications and information services to decision makers specifically brought together to discuss topics that are important to the client. Technology Solutions Timetric has built a unique technological platform to collect and visualize data, and employs some of the world s leading experts on data collection and visualization. Through technology and software consulting services, Timetric can provide clients with the means to gather and visualize the data the client has, or wants to collect Foresight: Maximizing Retail Banking Cost Efficiencies Page 8

9 APPENDIX 2.5 Disclaimer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Timetric. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Timetric delivers will be based on information gathered in good faith from both primary and secondary sources, the accuracy of which Timetric is not always in a position to guarantee. Timetric will accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect Foresight: Maximizing Retail Banking Cost Efficiencies Page 9