3. How fast can—and should—we drive costs?
Those who believe the industry's current challenges are cyclical will drive out some costs while maintaining the same operating model. But for those who believe, as we do, that a secular shift is under way, a more aggressive approach is necessary.
Investing in new capabilities will be expensive, and funding will have to come from wringing costs out of the operation. Financial institutions must continuously focus on expense control—on how work gets done as well as what work to do—using lean, technology-enabled process redesign to build more flexible, responsive operating models.
In the process, financial institutions should use emerging technologies to drive out complexity and improve the customer experience while also reducing costs—recognizing that these seemingly divergent objectives can now be simultaneously achieved.
Financial institutions must become nimbler and reduce bureaucracy in decision making by optimizing their organizational structure through a re-examination of roles, spans of control, and management layers.
4. How can we get short-term revenue?
Given the challenging revenue climate, many financial institutions are tempted to raise fees on customers to compensate for the shortfall. But imposing new or higher fees without extreme care is a recipe for trouble.
First, and perhaps most obviously, higher fees risk alienating customers. Large banks’ attempt to raise debit card fees offers indisputable proof of this danger. The outcry was intense, from both consumers and politicians.
The inclination to raise fees can also reveal a narrow, transactional view of the interaction that too often fails to take into account the value to consumers. Additionally, it overlooks existing and emerging ways financial institutions can—and will—need to make money in coming years.
Financial institutions need to evaluate ways to create new revenue streams by leveraging their existing information, expertise, and distribution capabilities and assets.
Companies ranging from Amazon to American Express have converted capabilities originally built to drive core businesses into new revenue sources. In these times, every financial institution should do the same.
5. How do we sustain the change?
The Booz report cites four “pillars” to sustainable transformation:
Click here for more information on Booz & Co.'s 2012 Financial Services—Retail Banking Industry Perspective.