Innovative approaches and optimisation strategies in bank management

Managing the operational performance of banks

Today, bank management has to make many decisions while adapting to changing market conditions, macro-environment conditions, changing user needs and habits. These changes are necessary to maintain the health of the financial institution and continue the drive for success.

More often than not, bankers start by cutting costs. Optimisation may concern branch network costs, operations and productivity improvements. Management often acts with excessive caution, avoiding short-term manoeuvres and focusing on long-term solutions. In this strategy, it is important not to lose touch with the market. To do this, it is important to effectively decompose long-term goals into short-term objectives, with measurable results.

Optimisation of operational and offline processes can start with an analysis of what are the biggest cost items and what is their weight in the value chain and contribution to value added, and optimising which items will not affect the ultimate value of banking services?

It is important for management to analyse tools and technologies, especially the most promising ones, the use of which can automate processes and reduce operating costs. Immersing themselves in trends and building financial models can make decisions more quickly. For example, this could relate to the use of cash recycling equipment to improve processes related to cash transactions. Direct integration of cash recyclers, can save the time and cost of using dual keying for transactions between cash recyclers and tellers, and performing manual balancing at the end of the day. An example is the case of Arvest Bank, with $26 billion in assets, which has reduced balancing issues by 100%, and performs same day reconciliation. The savings are in the hundreds of thousands of dollars and the bank continues to look for new solutions to optimise costs. Savings are possible with RTA-solutions for remotely staging transactions from different workstations into a single queue.
There are solutions that will not only save on operational costs, but will also significantly increase loyalty. Increasing the loyalty of current customers always leads to referrals. And this strategy can both increase revenue and reduce marketing costs. An important step is the introduction of self-service and assisted technology. Self-service centres, through integration with the core, can perform all the same operations as tellers in branches. Banks can learn valuable self-service expertise from merchants. An assistant who supports customers in the self-service process - significant savings on tellers, fixed costs for infrastructure and branch equipment.

What's happening with digital banks? 

Digital banks and Neo-banks are most interested in analysing quantitative customer insights to adjust development strategies and integrate features that have maximum value for the user and have a multiplying effect on metrics. 
It is important to properly obtain and systematise such customer data.

The main Nord - star metrics of banks are:

• Increase in fee income
• Increase in funding
• Increase in interest income
• Increase NPS and customer retention
• These objectives can be taken as a basis for the development strategy in the current period.

The bank can manage customer activity in its services by building a system of metrics and influencing user behaviour, activity indicators in the mobile application, online banking.
We can segment customers using RFM analysis models, cohorts based on the activity results of customer segments.

We can use various metrics such as:

• DAO, MAO
• Conversion of customers into users

Transactional metrics, while measuring the proportion of transactions among all users, frequency and trend of change in average amounts. 
If, in doing so, we observe the change in transactional metrics in specific segments heterogeneously, we can also draw conclusions accordingly
Automating transactional actions through the creation of templates, opportunities for automatic repetitions of previously performed user actions can significantly pump up our metrics.
Following the main trends, it is important for the bank to transfer all payment and money transfer activity into digital channels, creating a clear and convenient tool for users to solve their daily tasks from any device. Using data on the frequency, average amount of transfers and payments in different user segments will help to effectively manage the bank's fee policy by incentivising user activity. Managing this process can improve the margins of operational processes.

The key product of the bank. directly affecting funding ratios is of course debit cards. The evolution of this product has now made it an industry standard to provide the ability to issue virtual debit cards, without the need for physical issuance, to add them to devices with NFC payment and E-commerce capabilities. The convenience is that the user can get the card in a few clicks and immediately use it for their needs.
The development of sales services for the bank's loan products is more challenging from an operational point of view. The digitalisation of this process needs to take into account the different purposes of lending and to effectively screen the customer. It is especially important for the bank to comprehensively cover all processes with metrics to manage the user experience, to offer the user various integrations to obtain more data about the customer in order to analyse their application more accurately in the scoring process. 
It is important to build an effective model for transforming a lead into an application and an application into a loan agreement. Channel optimisation and improving the user journey can seriously reduce operational costs in the credit product supply chain. 

By analysing data from metrics within a loan product, a bank can select and pump in the most marginal loan products for itself, subject to greater alignment with the needs of its target audience. 

It is important for the bank to retain customers by increasing LTV, Retention and this it can achieve by incentivising customers to use digital communication channels. 
The team can pump various proxy metrics such as frequency of logins, customer churn, conversion of new active customers into loyal users. It is important to extend the customer lifecycle, for which churn rates and especially their causes, cash flow and account balance dynamics should be analysed.
In today's banking sector, a key success factor is the ability to adapt to change and integrate innovative approaches into customer experience management. Optimising operations through automation, developing digital service channels and implementing self-service technologies can significantly reduce costs and increase customer satisfaction. The importance of data analytics and customer segmentation cannot be overemphasised as they provide banks with the ability to create personalised offers and manage their customer base more effectively.
The digitalisation of credit products and the introduction of flexible scoring methods can optimise the loan origination process, reducing risk and transaction costs. The evolution of products such as debit cards, including virtual card offerings, emphasises banks' commitment to meeting the needs of the modern consumer and strengthening their market position.
Managing customer experience and loyalty through the use of digital channels and data analytics is also key. This not only improves service quality, but also extends the customer lifecycle with the bank by incentivising the use of digital products and services.
In conclusion, maintaining competitiveness and growth in today's banking industry requires a comprehensive customer-centred approach to innovation. This includes not only the introduction of technological innovations, but also strategic planning aimed at improving customer satisfaction, optimising operational efficiency and developing new products and services to meet changing market needs.
And I will write about what innovations lie ahead for the industry in the next articles.