Cost reduction strategies in banking BPM

Banks are conservative organisations, resistant to change in their entrenched processes. Yet, during the pandemic, even small banking institutions were forced to adopt base-level digitalisation to survive the crisis.

As we stand on the brink of a global recession, banks are resorting to the longstanding cost-reduction strategies of bonus cuts and layoffs. Workforce downsizing, however, is not a sustainable approach, as it may result in employee dissatisfaction and a loss of essential talent.

Additionally, labour spend constitutes only a portion of banking business costs. Banks spend close to $1.4 trillion annually across operations, IT support, front office tasks, and corporate functions. Effective banking cost reduction requires an integrated approach that involves strategically restructuring technology, workforce, and third-party elements.

Sustainable cost reduction strategies in banking

Cost management in banking should be a deliberate and continuous process aimed at driving sustainability and strategic benefits. Below are six ways banks can reduce costs while staying relevant and competitive in a shifting financial landscape:

  • Embrace the cloud
  • A 2022 study of nearly 100 banks revealed that banks have moved 15% of their non-core workload to the cloud, including IT systems, human resources, and marketing functions. Core functions, however, remain entrenched in legacy systems that defy efficiency and scalability.

    With fintechs and non-banking players aggressively foraying into the financial products and services market, banking must undergo a core transformation to stay relevant, agile, and competitive.

    Moving operations and core processes to the cloud will enable banks to leverage advanced digital technologies such as automation, generative AI, data analytics, and fraud detection to drive efficiency and productivity.

    By transitioning to cloud-based solutions, banks can automate workflows and minimise IT support and maintenance costs. Most cloud vendors offer the pay-as-you-go facility, which significantly lowers the upfront costs of technology deployment and enables greater scalability.

  • Invest in digital technology
  • Customer-centric models are at the heart of revenue generation and cost management strategies.

    Millennial customers expect high-quality digital experiences through online banking channels and apps. With competitors offering these at a click, banks must now offer a seamless omnichannel customer experience and personalisation to stay on top.
    Besides enabling a customer-centric model, digital processes such as robotic process automation (RPA), generative AI tools, and big data analytics can -

    • automate and optimise workflows
    • identify areas of revenue leakage
    • enable embedded finance and Banking as a Service (BaaS)
    • facilitate product cross-selling and upselling
    • facilitate targeted marketing strategies
    • enable customer segmentation and personalisation 

    Although technology incurs upfront initial costs, it is cost-effective in the long run.

  • Improve workplace productivity
  • Maximising productivity is key to cost reduction in banking. A productivity consultant can help you reimagine roles, restructure departments, establish short- and long-term goals, and eliminate redundant processes.

    Performance management tools such as goal-setting, reminders, rewards and recognition, and productivity apps are invaluable in fostering a sense of purpose and boosting employee morale.

  • Build a leaner portfolio
  • Banks often introduce new products and services without discontinuing older ones with overlapping features. This leads to an expansive portfolio that adds no value or profit to the organisation.

    Eliminating redundant offerings can help banks reduce the costs of managing a vast portfolio and focus on relevant products, improving the customer experience and generating more return on investment (ROI).

  • Downsize physical workspaces
  • Brick-and-mortar workspaces incur significant overhead expenses, including rent, infrastructure, and maintenance. Like other sectors, banks must now normalise the hybrid working model. Post-pandemic, flexible work options figure among the highest-rated strategies for cost-reduction and employee satisfaction.

  • Outsource Business Process Management (BPM)
  • Many outperforming banks outsource non-core functions such as IT support and customer service to specialised providers, driving significant savings on operational costs. Business process outsourcing (BPO) can help banks streamline operations, stay focused on strategic activities, and improve their quality of service.

How can Infosys BPM help with banking cost reduction?

Infosys BPM’s services for the bpm for banking industry can help banks transform their operating models, streamline processes, reduce banking costs, and deliver value through digital tools and technologies. Our team of over 10,000 skilled professionals and value-added services can support core and non-core banking functions and find innovative solutions to business challenges.

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