The Key to Real Industrialization in Banking Ensight Management Consulting Study: four key success factors

Ensight Management Consulting, affiliated member of Eurogroup Consulting network, performed the European study Key to Real Industrialization in Banking. The study identifies ways to enhance efficiency in the banking sector through an industrialization strategy which implies being organised to handle large volumes.

The main objectives for such a strategy refer to: searching for productivity through continuous process optimisation, minimizing costs, and striving  for a permanent zero-defect production.

 

For several years, banks are facing three main challenges: cost reduction, critical mass changes, and the rise of digitalisation. In this context, the study is meant to answer the following question raised by top management: ”how can I cut costs intelligently and efficiently?” Designing an industrialised banking model is the answer around which a lot of energy has been spent by a number of banking groups and financial operators.

 

Eastern Europe countries are concerned with the industrialisation issue from another perspective, being the target place for operational plants. This is due primarily to low labour cost, still significantly lower than in Western Europe, and in general to a greater flexibility in dimensioning the number of FTEs per process, which helps to optimise operations.

 

Referring to industrialization results, an encouraging example in the past decade is represented by the French banks. Major national players are a step ahead of mutual banks, especially in terms of IT rationalisation. Internal multi-brand banking factories are now common in larger bank enterprises. These are increasingly offering services to external clients, with an aim to change from cost centres to profit centres.

 

Building on its in-depth knowledge of the European banking sector, and using cases studies in Western and Central Europe, the study identifiesfour key success factors for an industrialisation strategy:

 

1. A rigorous and long term oriented management of product portfolios, covering the full life cycle of banking products. This is the best way to avoid hidden non-profitable product offerings and optimise processes in a more industrialised way.

Industrialization has been a topic for German banks for a long time already. Not only big players, but also smaller banks have created factories in areas like securities settlement, payments or credit services. Manual processes have also been reduced over the years.

 

2. An ability to combine the client’s drive towards personalisation and the industrialisation of banking processes and resources. Creating the ability to differentiate from a customer perspective, as opposed to an operational efficiency perspective, has become a real competitive advantage.

 

3. Managing information to meet client demands for a rapid, quality serviceas part of the move towards a digital, multi-channel banking sector. Banks need to consider the fact that in this new world they have become one of the most important information providers. They must face this new challenge, not only towards the institutional side, but also in the daily transactional life of a consumer.

 

In UK,major financial institutions have started consolidating their IT function on a single platform, while some smaller institutions have replaced their legacy processing systems with a new core solution. These changes enable greater transparency in data flows, a more informed understanding of back office processes and control points and greater agility in responding to a rapidly changing technological environment.

 

4. Anticipating and controlling the requirements of changing andincreasing regulations.

 

In addition to these four key success factors, bank management teams will need to increasingly focus on implementing a model that avoids creating organisational silos. This will require managers to build bridges between departments and business unitswithin banking groups.

 

About Ensight Management Consulting:

Ensight Management Consulting is the local leader of the Romanian management consulting market by revenue and number of consultants. Ensight has a multinational management team of experienced Partners who have worked in large-scale transformation projects across a variety of industries in strategic, tactical and operational assignments.

www.ensight.ro

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