Cost optimization of communication services at your bank

The fall in profits due to Covid-19 has forced banks around the world to pay attention to the issue of cost reduction. KPMG conducted a survey among 200 CEOs of the world's largest banks at the end of 2020. It showed that bankers expect to reduce the ratio of operating costs to operating income by 10 percentage points or more. According to KPMG analysts, they will have to rethink their operating model and undertake the digital transformation that the pandemic has necessitated in order to achieve this goal. Almost a third of top managers — 28% — are ready to do this within 3 years.

What will banks do?

• Banks intend to double spending on cost management and increase their cost reduction targets to 10%, according 61% of respondents. Another 19% of respondents plan to reduce costs by more than 10% (while 15% of them expect to do this within a year, another 66% — within 3 years).
• To achieve these goals, bankers rely on leadership whose results will be tied to performance indicators to reduce costs (91% of respondents said this), a strong corporate culture aimed at optimizing costs (89% of respondents), as well as accountability for progress in cost reduction expenses (also 89%).
• Almost 60% said they plan to cut costs through digitalization; just over 50% through staff reductions, including after the reorganization of the bank and the replacement of outdated IT systems. Banks also want to communicate less frequently for advisory services: 49% of respondents will save on this. Many see potential in the use of artificial intelligence: 42% are going to reduce costs through its use, and approximately the same number said they intended to close branches.

Banks have been engaged in cost optimization issues for many years, and 78% of respondents note that efforts have brought results in three years. But in a more detailed survey, they admit that in certain areas the results are very "modest" and "limited", especially when it comes to digitizing key functions, tying optimization plans to customer results, and reducing functions that don't generate revenue.

In this study, we will describe in detail what steps the bank should take to optimize costs, which will hopefully help you think in advance about which ways are most applicable to your situation. In addition, you will learn how to reduce communication services costs in your bank — this will help you increase the number of customers, reduce service time and boost efficiency.

General ways to optimize costs at your bank

Insufficient attention is paid to the problems of optimizing the costs of banks since the problems of profitability, liquidity, and solvency are considered priorities. However, in light of the problems caused by the banking system’s low capitalization and risks associated with a constant increase in costs, banks have significantly increased their interest in managing, optimizing, and minimizing any issues.

It is believed that optimization is more important than just minimizing costs, as it implies a qualitative reduction calculated for the future. These are the main methods of bank cost optimization:

• Cost planning;
• Tariff policy management;
• Direct cost reduction;
• Banking monitoring.