New York, NY,
USA
September 28, 2001
Top 10 CEO-Level
Concerns in Banking
Retail Banking
1) Competition from non-banks. With increased competition from brokerages,
insurers, non-banks and global players, banks are focused on finding ways
to attract and retain profitable customers. This may include new marketing
efforts, branding changes, modification to existing products and/or
pricing structures, improving customer service, expanding product reach,
partnering where appropriate to offer value-added services, etc.
Efforts may also include identifying profitable segments of customers,
specifically high net worth individuals, in order to provide higher levels
of service to ensure that they retain and expand these relationships. More
drastic steps may also be taken in the form of, for example, acquiring
other banks to increase market share or create economies of scale.
2) Integrated channel delivery. Banks typically have a confusing array
of delivery platforms to service customers at the branch, teller platform,
ATM/kiosk, Web site, call center, telephone bank, etc. There are
inevitably numerous databases and systems in place to support these
activities. Banks are investing in consolidating their delivery platforms
to create a more cohesive solution that better serves customers and makes
maintenance easier from an internal perspective.
3) Product silo integration. Historically, banks have multiple silos
that operate essentially independently, with little knowledge of what
other silos are working on. Frequently, banks cannot identify what
products/services their customer own/use at an aggregate level. Banks are
working furiously to develop systems that allow them to see customers'
entire relationship in order to service them better and target them with
complementary products/services.
4) Improving automation. Banks have the opportunity to reduce costs and
improve the bottom line through changes to underlying technology and
workflow enhancement. These improvements may be either internal or
external. Internally, banks may streamline numerous tasks, including
procurement, expense reporting, data sharing, etc. Externally, banks are
putting self-service solutions into place that may automate many
processes. For example, online applications that feed data directly into
back-office systems can streamline the process, obviating the need for
re-keying of information.
5) Creating a sales-oriented culture. Often banks pass up excellent
opportunities to expand customer relationships and sign on new customers.
Each of the delivery channels can be used to take better advantage of
these opportunities. For example, customer service representatives should
be attempting to cross-sell products and services on incoming calls, not
only outgoing ones. Banks that have a full view of their customers'
wallets should use this information to target customers online with
complementary products. Leads coming in from the Internet, or other
channels, must also be effectively distributed to the appropriate group
within the bank. Even branch and teller personnel would benefit from
having better customer information, by being able to sell more
effectively. In addition to the contact management and analysis systems
needed for this enterprise-wide sales approach, these changes will require
altering the existing culture and providing training.
6) Global influence. With increasing globalization, banks are faced
with more threats from outside competition, but also have additional
opportunities. They must seek to enter new markets, creating localized
products and services in each. Banks may also consider the
benefits/drawbacks of co-opetition. Through joint ventures and
partnerships, banks may look to third parties to provide additional
distribution avenues and reduce costs on the technical side through shared
resources.
7) E-commerce strategy. Closely tied to integrating product silos and
channel delivery, banks continue to evaluate their e-commerce strategies.
Understanding the potential of the Internet and harnessing it to create
positive ROI streams are two very different things. Banks must develop new
strategies and continue to develop ways to use the Internet and wireless
channels either to reduce costs, to increase revenues, to improve
productivity or provide some other value proposition.
8) Economic impact on credit portfolios. Banks worry about the impact any economic downturn
will have on their bottom line. Within retail banking, this includes
managing their outstanding credit portfolios. Clearly, banks will have to
deal with increasing defaults by customers. They may consider tightening
existing lending policies.
Under this issue also falls strategies to attract and retain customers,
especially mass affluent customers, as described above.
9) Contingency plans. Contingency plans have always been an important
aspect for banks. However, they are now re-examining existing policies,
procedures, and systems that they have in place. Banks will invest in new
disaster recovery and back-up systems as necessary and redefine procedures
to ensure they are adequately positioned in case of new types of
emergencies. This is one form of managing risk.
10) Security and privacy. Banks are eager to strengthen their position
of trust with their customers through educating them about new privacy
policies, but more importantly through offering improved security. Banks
are likely to improve security measures for those transactions initiated
via the Internet and wireless devices. This effort extends not only to
positively identifying the end user, but also ensuring that all bank
systems, both Internet-related and not, are invulnerable to attack.
Wholesale Banking
1) Globalization. Competition within a domestic market is no longer
enough for most aspiring banks. European banks have been the most
aggressive on this front, especially lately, with a wave of acquisitions
in the US market. Expansion of products and services into foreign markets
has become unavoidable as advancements in communication technology have
eliminated numerous barriers to international competition in the wholesale
banking business.
2) Risk Management. Somewhat related to the first issue, as a bank
expands its territorial reach and provides an ever-increasing number of
products and services worldwide, to ensure healthy growth it must always
be vigilant regarding its risk levels. Risk management must occur across
product lines and departments, and not be isolated to independently
operating silos.
3) Straight-Through Processing. Similar to the
securities
market, there is a growing emphasis on straight-through processing of
payment and other wholesale banking transactions. Achieving STP will
eliminate the need for manual processing and re-entry of transactions,
which in turn will reduce potential for errors and credit risk.
4) Integrated services. As leading banks become increasingly global in
their scope, providing corporate customers with an integrated suite of
electronic banking services that combine cash management, foreign exchange
and potentially trading and custody services into one seamless offering,
will become a major competitive differentiator.
5) Small business banking. By utilizing new media (e.g., Internet,
wireless, etc.) for distribution and communication, banks can go beyond
their traditional large corporate clients and provide a comprehensive line
of products and services specifically designed for small businesses.
Historically, the small business segment has been largely ignored by large
banks and typically treated as retail clients. This fairly lucrative
segment can now be reached and serviced far more easily.
6) Countering the threat of
disintermediation. The development of
electronic commerce is bringing not only new opportunities, but also new
competitive threats to banking institutions. As commercial transactions
move to the Internet in increasing volume, banks will have to be vigilant
against threats to their traditional central role in the corporate
transaction chain. For example, new non-bank companies are emerging to
provide payment clearance services for electronic marketplaces and
exchanges. In the area of international trade, Internet-based trade
finance services are being developed that will compete with banks at every
stage of the trade finance process, from the extension of credit, to
documentary services, to secondary trading of assets. Similar e-commerce
initiatives will emerge in corporate finance, debt finance, loan
syndication and similar high-stakes corporate banking fields. Banks will
be challenged to develop innovative strategies of their own to counter
these emerging competitive threats.
7) Employee portals. As organizations become increasingly global,
the need for efficient internal communication becomes more vital. The
establishment of employee portals enables employees to share common
corporate information regardless of where they are, strengthening
corporate identity. Employee portals are composed of knowledge management
systems, content management, business intelligence, and collaborative
workspaces, which can be used to drastically improve productivity within
an organization. In addition, employee portals extend outside the
organization, allowing collaboration between employees and business
partners. For example, this is particularly important in a mergers &
acquisitions deal, when document sharing becomes a vital part of the
process.
8) Security and privacy. Banks are eager to strengthen their position
of trust with their customers through educating them about new privacy
policies, but more importantly through offering improved security. Banks
are likely to improve security measures for those transactions initiated
via the Internet and wireless devices. This is especially necessary for
the high-value transactions that pass through corporate banking systems.
This effort extends not only to positively identifying the end user, but
also ensuring that all bank systems, both Internet-related and not, are
invulnerable to attack.
9) Improving automation. Banks have the opportunity to reduce costs and
improve the bottom line through changes to underlying technology and
workflow enhancement. These improvements may be either internal or
external. Internally, banks may streamline numerous tasks, including
procurement, expense reporting, data sharing, etc. Externally, banks are
putting self-service solutions into place that may automate many
processes. For example, online applications that feed data directly into
back-office systems streamline the process, obviating the need for
re-keying of information.
10) Creation of an e-commerce strategy
group. The days of secretive
in-house technology innovations are long gone. It simply does not make
sense for banks to commit the capital and man-power to keep up with the
rapid commercialization of cutting-edge technology. Instead, most firms
have resorted to creating a separate group responsible for creating and
supporting company-wide e-commerce related initiatives throughout the
organization. Product-specific or department-specific technology
development does not make economic sense for large wholesale banks.
Instead, all product lines and departments must work together so that a
newly developed technology solution in one area can be fully leveraged to
support the services of other areas. These e-commerce groups will also
cooperate with other firms, even competitors, to identify and nurture
certain products and services produced by third party software/hardware
vendors so that the cost of developing cutting-edge technology can be
spread across the industry evenly.
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