Real life examples of challenges in banking industry & strategies adopted for success
Along with the banking industry’s digital transformation, comes significant challenges in the operational model as well as customer and business strategy to remain competitive. Given in this article are few of the real-life challenges faced by banks, and the strategies adopted by the banks to succeed in the coming year and mitigate the risk posed by these challenges. Overcoming these challenges is not easy and the transition from legacy systems to innovative solutions requires various coordinated steps to survive but thrive in the current landscape.
The banking industry is undergoing a radical shift fueled by ever-changing technology, competitive landscape driven by new FinTechs, evolving business models, mounting regulation and compliance pressures, and new disruptive technologies. Given in the article are some of the real problems faced by banks and how they worked through them.
Project 1 - Value Proposition Segmentation
Project Description
The purpose of this project is to identify a single segment within the mass market with the intent of creating a specific value proposition (s) relating to either the current account or personal loan product.
The effort should assist the business in helping to acquire a greater number of new clients by more effectively designing, developing, and marketing the product offerings and value proposition.
Project Deliverables & Timeline
- Background and project orientation
- Key observations and questions
- Segment selection and criteria for selection
- Product selection and key requirements
- High-level marketing plan
Project 2 - Marketing Spend Effectiveness (MSE) Evaluation
What is the current business challenge?
As Marketers are increasingly being asked to maximize their budgets, there is a desire to correlate various marketing expenditures with business metrics to demonstrate relative efficiency and effectiveness in ability to drive profitable growth.
Cutting costs is critical to navigating the slowdown. In the absence of clear MSE methodology marketers run the risk to not being able to protect critical investments. Bank has not been able to generate such analysis internally due to its multi-variate nature, and is currently reliant on econometric models provided by media agencies.
What is the goal of this project?
This project will identify alternate best practices for correlating marketing spend to business results. The project team will
- identify market best practices amongst the industry or external suppliers, and
- evaluate the available options on a cost/benefit matrix,
- ultimately recommending a marketing expenditure evaluation tool that represents the best value
Project 3 - Segment based risk strategy
What is the current business challenge?
Consumer business completed a detailed client segmentation and profitability study. Business strategy is being formed around the segment approach. Channel strategy, service levels, value props, product offering, and risk approach are about to align with the new strategy.
What is the goal of this project?
The project team will consist of representatives from Risk, Pricing, Marketing, and Retail sales and product teams. The project team will
- Review the output of the segmentation study from the perspective of risk parameters by segments
- Identify the opportunities targeting customers more precisely to improve risk efficiency
- Propose quick and doable solutions on how to change the current process/ approach to treat affluent mortgage customers differently (shorter cycle time but improving expected delinquency)
- Set the main elements of the segment based risk strategy (including collection)
Project 4 - Term Deposit (TD) Pricing Strategy
What is the current business challenge?
TDs are a very popular way to save. Whilst they represent large commercial benefits to banks, the margins are generally very low. 40% of the Bank's deposit balances are held on TD products. Most banks take a very simple approach to price TDs by offering a rate (which may be tiered) for a specific term. On maturity, it is rolled over into a similar term at the prevailing rate unless the customer specifies otherwise. This approach does not take into account individual circumstances, price sensitivity, etc.
What is the goal of this project?
Develop new approaches for TD pricing/product development, which enable banks to retain more balances, improve overall margins, and also to attract new customers. The project team will
- Review the current approach to TD pricing
- Document the current competitive landscape, and other bank’s offerings, including an overview of competitive value propositions, product features/benefits, pricing. margins, rollover rates, etc.
- Screen best practices around the globe from other banks
- Make recommendations to improve the profitability of these products for new customer recruitment, and retaining / rollover balances
- Define the commercial benefits to any recommendation
Project 5 - Developing Early-Warning Systems in Risk-Based Controls
Project Deliverables & Timeline
- Understanding the risky transaction, control, and reporting concepts; being aware of existing capabilities.
- Preparing a detailed project plan/project abstract
- Gathering all necessary data and information
- Creating early-warning systems and linking them with the existing database
- Finalizing the report and the presentation
Project 6 - Increasing Online Sales efficiency in personal loans and time deposits
What is the current business challenge?
The share of the online channel among overall sales of term deposit and personal loans is below the penetration rate of Online Channel usage among the bank.
What is the goal of this project?
- Increase the share of Online Channel within the overall sales.
- The goal is to increase the number and the volume of time deposit and personal loans sold on delivery channels
- Identify sales strategies of these specific products for Online Channel
- This strategy needs to be in line with current innovative and market leader (in online banking) position
The deliverables include:
- Review and apply brand-new applications and perspectives (like e-auctions)
- Channel-specific product development and marketing strategy of these new products
- Develop online sales & marketing strategy for current time deposit and personal loan products along with new products/applications developed within the project.
- Develop a Marketing Plan for current time deposit and personal loan products along with new products/applications developed within the project.
- Interactive Marketing Planning should also be included in the marketing plan (i.e. How to use social media, how to use online/mobile channels effectively)
Project 7 - Preparing Online Company Information Cards
What is the current business challenge?
Our target is to reach all the needed data in one report for each company. Also, we need this data to update itself automatically.
What is the goal of this project?
The project group will:
- Gather all the necessary information associated with customers in one database
- Link them to our Bank’s server in order for the data to update itself automatically.
- Create a one-page access report for each company containing all the necessary data
- Clearly understand Corporate Banking, its customers and the main data held in the Bank system associated with them
- Create an access database. Gather all the data associated with customers from the database. Also, link the data to our server.
- Finalize the required company card reports. Prepare the report out and presentation
Banking Domain Knowledge - Resources
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