The banking industry has reached a crossroads. Continue business as usual and risk becoming obsolete, or embrace innovation to adapt to the changing needs of clients and flourish on a new path.
For the past five years banks have been fighting the good fight trying to save themselves to prosperity. With an internal focus, organizations have been busy scrubbing balance sheets, slashing costs and adapting to the parade of new regulations. With so many other priorities, banks have been unable to dedicate any energy towards growing top line revenue.
This problem has been masked by the nearly 70% gain in net income the banking industry as a whole has posted since 2009. However, this gain is no more than an illusion since in 2010 and 2011 alone, nearly half of the net income gain was attributable to allowances for loan loss provisions and aggressive cost cutting. Therefore, even the banks that appear to have come out of the credit crisis healthy, are still not growing their topline revenue and it’s only going to get worse.
With so much at stake, relying on cost cutting and loan loss provisions to be profitable is not enough. According to a recent KPMG report, 2014 has become the year that banks must make a fundamental shift from defense to offense and focus on growing themselves to profitability.
In making this shift or “pivot” as KPMG put it, banks will need to be strategically focused on innovative ways to connect with their clients. Some of the key steps to making this transition include:
1. Reconnect with Clients through Specialization
The first step to successfully increasing top-line revenue begins by building relationships with potential borrowers. Sounds basic on its face, however it’s not as easy as it sounds for a generation of bankers who grew up during the transactional years of the real estate boom and are accustomed to new products that push clients away from personal interaction such as online banking and remote deposit capture. Clients need bankers to come to the table with ideas. In order to have ideas they must have a deep understanding of clients and their needs, which currently does not exist in many institutions.
Similarly to CPAs, bankers need to hone their specialized knowledge base to become true trusted advisors. Otherwise institutions are left with nothing except to compete price, just like any other commodity. In order to become more connected to clients, bankers need to put feet on the street to strengthen communication and build relationships one step at a time.
2. Adopt Innovative Cloud-Based Technologies
This year, we all have to do things faster, quicker and better. In order to meet the ever increasing customer expectations, banks need to embrace innovation and technology. History is full of once strong companies that didn’t welcome progress, and suffered dearly. For example, Kodak didn’t move quickly enough, and now digital photography mediums have taken over the market. Barnes & Noble didn’t board the technology train fast enough, and Amazon took over the book business. Blockbuster couldn’t adapt to meet the customers’ changing needs, and now Netflix holds reign on the movie rental arena. Now more than ever banks need to fight for their customers by adapting to their needs.
The next step in building revenue is to focus on gaining new clients and augmenting that process with new technologies. So how do we bridge the gap between integrating technology and remaining customer-centric?
One of the keys is using automation to manage and leverage data, reduce risks, and accelerate the rate and efficiency. There’s an array of new software programs that are creating holistic banking processes by providing financial advisors the ability to analyze data from new angles and provide unique solutions to help businesses succeed and grow.
By being able to view financials every month, bankers are able to consolidate that data and make projections for the future. Bankers are quasi-CFOs that have to come to the table with ideas, growth strategies and use current data to make key decisions.
3. Use Analytics and Data to Become More Client-Centric
As an industry, banks have more information about their clients and prospects than any other. The problem is most of the information is not available to those in client facing roles. What’s worse, is that bank’s internal systems are so cumbersome that they haven’t really leveraged the data they have to grow client relationships in a meaningful way.
With insurance companies, the postal service and even cell phone providers attempting to enter the banking industry – companies must embrace data and analytics in order to salvage relationships and succeed. The technology today is too advanced not to know where your clients are, what they need and how you can help them. It’s up to the bankers to step out of their branches and truly differentiate themselves.
Refreshing banking practices is essential to getting our economy back to where it needs to be. Banks provide the capital to businesses that create the products, services and jobs that fuel our country. By focusing on adopting new technologies, streamlining processes and building relationships – this flash point sheds light on the path to success in this opaque industry.