Bank revenues for the future

As banks emerge from COVID-19, sooner than later, they will have to think of revenue and profitability. The traditional business avenues of lending and fees, will be in short supply, given the economic uncertainty all over. Banks will have to move away from just being the seller of financial products and services and start behaving like a trusted financial advisor (or may be a financial planner to start with). And what better time than today, when the unsurety is palpable.

Being a trusted advisor would start from being a trusted brand across all the touch points. This is the consistent delivery of brand promise across the customer interactions and behaviour. This is where banks would reach out to their customers with a focussed and personalised or contextualised service delivery.

Today is the time when customer needs support and guidance on how to wade through these times. This can be a starting point to gradually move the customer towards day to day financial planning to life cycle based financial planning. This can be done through simple goals based banking products and services, where banks can allow simple day-to-day spend based goals, like for daily expenses, to move future based goals like “travel to Hawaii”, in 6 months, to “down payment” for that dream house. Many banks already have such products and services, like we see in Australia. However, what we see in Australia is just a starting point, this needs to be taken further towards an end-to-end financial advisory to the customer. From goals for the individual, this needs to be taken up as the goals for the family, especially, when goals are pivoted around the family, like “purchase of the house” or “child’s education”. For such big investments/expenses, funds across the family are anyway pooled in. So, why not the goals? This can be a good source of funds and cross-sell/up-sell avenues for the banks and drive usage across products and services.

One thing that everyone is observing right now and are certain to hasten even further going forward, is the customer move to everything digital. With the demand for digital services going up significantly and customer experiences from other industries, in particular the digital native tech leaders like Google, Amazon, Nexflix, Facebook, Apple, etc, of the world, customers will expect similar experiences from their banks. This is where banks will have to think like these tech giants and adopt and adapt business models that support delivery of such curated experiences.

These business models will revolve around owning the end-to-end customer experience by orchestrating ecosystems. These ecosystems will be built by the banks where non-financial product and service manufacturers will co-exist and be part of the holistic customer experience distribution framework. The Open Banking paradigms that have been regulatory driven in most countries, and are being considered or evaluated at many others, are being purely looked at from the regulatory compliance lens. This is where banks will have to challenge the status quo and think beyond banking.

The regulatory regimes for open banking, where banks have opened the bank through APIs for the use by the 3^rd parties, can be used to build and orchestrate such ecosystems. Through these ecosystems, banks will earn revenue through non-financial products and services and increased customer contact and customer journeys. Customer contacts will increase by creating new customer propositions across customer journeys, more curated experiences. Such ecosystems can also help banks increase the conversion rates, by hyper-personalisation, to the extent of segment of one.

Imagine, if banks can build ecosystem for travel journey of the customer. Right from advising travel locations (based on customer preferences), to booking air tickets, hotels, local transportation, local eateries, to travel insurance, to travel card or forex, is all taken care of, and delivered by the bank, through the ecosystem that they have built. Each of these services in the travel journey of the customer, is provided to, by the bank’s partner, which becomes part of the bank’s ecosystem. To further personalise such experience (and increase the conversion rate), bank allows the choice of multiple partners in the ecosystem, which can render the required service in the journey. Customer can make the relevant choices based on her preference. This is where, banks become relevant to the customer and deliver the right experience, at the right time, and at the right channel.

Similarly, banks can look to build specialised ecosystems for specific needs. For e.g. an ecosystem for start-ups, or for specific industries like agriculture. Much would depend on where does one’s strengths lie and how much leverage one has in the marketplace. Bank’s can look to build ecosystem for SMEs, encompassing – taxation, accounting, payrolling, etc. services built in along with say transaction account from the bank.

Another way to “cast a wide net”, is to become part of the ecosystem of the large fintech players. These large fintech companies have a huge captive customer base, which would need financial products and services to meet their needs, or even to procure necessary service from the fintech. Bank can sell their products and services on these fintech platforms and enjoy the benefits of the expansive reach of these fintech. This increases the customer contact and increases the chances of a purchase tremendously. Banks can also become part of the purchase cycle at these fintech. For e.g., for a purchase of goods at Amazon, bank partners with Amazon, to offer a credit card, or even a loan to finish the purchase.

Banks can also leverage the digital services that they have built, for e.g.: digital identification, digital KYC, etc, which can be monetized when being used by the 3rd party partners or even these fintech. This is the model that banks must leverage in this open banking and open economy world, where banks would be seen as true enablers of the digital experience of the customers.

Revenue Management & Business Assurance is strategic to success at all times

How often do we hear from the banks that business climate is tough and hence, lack of growth? How often we see the central banks commenting on the liquidity situation locally and globally? You may ask, why globally for a central bank? Well, no economy today is separated from what is happening in the Middle East or how the US or the Euro zone react to the interest rates and affect the financial markets globally. Some Arab Spring in the Middle East may lead to a regional turmoil, which affects the global crude oil output, thus, pushing the crude oil prices to unprecedented levels. Or the US Fed announcing the pruning of the QE program, sending the global financial markets into a tizzy. And locally, of course, there are multiple factors at work, which may put financial markets at risk of losing control and growth.

Top up these challenges with the most critical of them all – customer. The customer expectations of a bank have completely changed and they are increasingly being compared with other organisations they interact with – retail, telecom, for example. The ease with which a customer can change banks has increased tremendously. With just a click of a mouse or a phone call, everything can be done. It has become as simple as that. In such a challenging environment, increasing customer value is not only the key to growth, but for survival too.

Again, keeping the customer at the fulcrum of all decision making is becoming essential. For banks and financial services organisations, increasing customer centricity means creating and offering innovative products and pricing strategies – the ones that suit the customer needs and keep him to bank with you.

Convergence of business domains, business models, brings in another complexity to the banking world. Today, telecom operators are also providing banking services, albeit very basic ones. But, it will be only time that they start behaving and offering what a universal bank will. Consumer retail is another example which is tinkering with offering banking services like payments, etc Then convergence of technology is also happening these days, the technology used for high speed phone networks is being used as a core feature in banking infrastructure. Banks are also increasingly becoming real-time, gradually, reaching a stage where they see other industries being already there.

Consumers whether in banking or otherwise, are increasingly demanding remote channels to transact. This digitisation produces disruptive business models that require swift responses. This also means capturing new revenue streams and optimising these digital channels. And all this is to be done in tandem with proactively managing risk, maximising operational agility and maintaining the margin controls.

All this can be achieved by putting in place a comprehensive Revenue Management & Business Assurance solution. A solution which not allows you to managed and get the best revenues, but also helps you to manage your business risk, maintaining compliance and managing operational risks alike. This solution should be seen as something which will help increase enterprise profitability, promote sustainability and meet the challenges of a demanding business environment.

Revenue Management is a holistic and strategic approach to product management and optimisation of revenue, profit and customer value.  It involves accurate, timely and effective pricing of products and services and Omni-channel delivery of customer experience.

It encompasses a set of core business and system processes, from increasing the wallet share through customer retention and loyalty programmes and product cross-selling and up-selling, to capturing of new revenue streams through quick roll-out of product variations and offers.

It is essentially customer centricity – generating and selling personalised offers. An offer with right product at right price through right channel, at the right time, and all at the optimal / right profit margin, thereby, leading to enhanced customer experience leading to better engagement and loyalty.

It also entails using the entire value chain within the customer ecosystem to capture the full possibilities from it. It could be proving flexible settlement structures to facilitate revenue sharing and transfer pricing, or delivering the capability to determine the exact value contribution of the partners.

It is the way to look at offering a package to the customer at an optimised price to meet all his and your requirements at the same time.  It is a way to incentivise your customer and drive his behaviour accordingly. Discounts can be given on deposit fees during off-peak hours and this helps you to manage risk and load at the same time. Similarly, interest rate discounts on home loans can be offered based on the relationship of the customer, his total product usage, risk profile, etc. All such offerings, go a long way in driving customer delight and helping you maintain your margins at the same time.

Revenue Management is a way to be customer centric and be inside-out, rather than being outside-in. Offer what the customer needs, instead of selling to him something from outside, which he may or may not need. This approach improves the customer experience extensively and leads to customer stickiness and increased wallet share.

On the same lines, Business Assurance becomes another key component for sustainability, growth and performance. A comprehensive business assurance in a nut shell is management of enterprise wide risk by a comprehensive single customer views, product profitability and potential risks.

Business Assurance is a set of systems and processes to ensure structures, processes, systems for revenue management work together to manage risks, eliminate revenue leakage, maximise margins and deliver analytics to meet regulatory and compliance requirements. It allows data collection at individual transactions, helping to manage compliance to regulatory controls such as anti-money laundering.

It offers the capability for smooth integration of internal external systems, driving complete transparency, leading to operational optimisation and agility to drive informed decision making at all organisational levels. It can also allow managing the margins by allowing threshold pricing to achieve the margin targets.

Such a comprehensive Revenue Management & Business Assurance has to be a part of the strategic plans of the banks and financial institutions to maximise returns in such a complex and demanding environment.