Over the last year, chaotic disruptions have upended traditional operating models at financial institutions (FIs) worldwide, and many are only now stepping back from "fire drill" mode. As for the leaders of these institutions, their task is to now scale up and rebuild operating models - ones adapted to their current (and future) post-pandemic environment.
After a period of such intense disruption, here are three ways to check and double-check the blueprint when rebuilding an FI's business models.
1. Location, Location…Location?
Branch strategy is one of the most complex questions confronting financial institutions these days.
Even before the pandemic, physical locations were losing ground to the virtual branch as consumers began using digital channels out of convenience. The lockdowns and social distancing of 2020 only accelerated this trend, adding necessity and safety to the list of reasons to do one's banking online. This has led to louder "death of the branch" predictions but, if this was the case, why do the major banking brands continue to open new, high-visibility brick-and-mortar locations?
Recent research from BAI confirms that some fundamental attitudes have not changed. For instance, most consumers still want the comfort of a nearby location, even if they don't use it regularly. Branches also remain a critical source of cross-selling leads. Even for FIs that developed location strategies as recently as 2019, the landscape has changed enough to warrant a fresh look. At the same time, the pandemic served as an unexpected proof-of-concept for remote working models.
When deciding how to set your branch strategy, first re-assess which activities best suit branches, remote workers, contact centers, and other back-office facilities.
2. A Product Portfolio for Every Environment
Like location strategy, an FI's product portfolio also requires remodeling in this new economic environment. Most institutions aim to achieve parity with larger competitors' offerings, but the odds are that these have also leveled up their digital services – at scale. Meanwhile, non-bank competitors have entered the fray.
Although there may be opportunities to pare back the product set, a portfolio review more often leads to feature enhancements and additions. Some tactical initiatives like process re-engineering and intelligent automation can free up the necessary bandwidth to tackle new product enhancement projects.
One way to start adjusting an FI’s product portfolio is by conducting a business health check. This process should identify product gaps, highlight priority areas, protect against risks, and accumulate benchmarks.
3. Demand Changes Supplier Contracts
As FIs continue renovating their operating model, their supplier contracts will require renewal as well. In times of shortages and uncertain conditions, knowledge of "with whom" and "how much" has taken on a new urgency - especially when renegotiating contract terms.
To even the odds, in the months approaching a contract expiration date, an expert-assisted vendor assessment often leads to the most direct path for addressing feature gaps. Reviewing an FI's critical supplier contracts and invoices before renegotiation can also uncover overpayments or redundant services.
Properly managed, win-win contract renegotiations can result in seven-figure savings and additional revenue – unlocking funds to support other business areas.
The Bottom Line
Banks and credit unions were already re-engineering their digital offerings and operating models heading into 2020, but the past year's events have raised the stakes for their:
- Branch Planning & Location Strategy
- Product Portfolio Mix
- Supplier Management
The financial services industry has overcome tremendous odds to sustain uninterrupted operations throughout the trials of 2020. Now is the time to establish scalable operating models that will thrive in a post-pandemic environment.
For more building blocks for strategic and tactical changes, download our newest white paper, Seven Pillars for Operational Excellence in Banking.
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