As the CFO of a middle-market bank, you face mounting pressures inherent within your industry – both regulatory and economic. Daily, you battle against compressed margins due to lower interest rates (especially in commercial lending) and a shaky economy.
At least 40% of costs [for financial services] are a result of wasteful activities that provide no added value to your customer.
In today’s marketplace, it’s much too risky to rely on your “gut” for decision-making. Lean banking data analysis is an evidence-based solution that provides you with a new view of your challenges to improve efficiency and data quality, effectively eliminating waste in your organization.
The Principle Of Lean Banking
“Lean” processes are being adopted globally by organizations suffering from some level of inefficiency that’s negatively affecting their bottom line. Post-recession, as the financial industry continues to resolve its credit and capital problems, many banks are now shifting their focus to improving operational efficiency.
The objective of a lean banking approach is to identify areas of waste and inefficiency within your organization and then apply proven methodologies to generate solutions. Lean middle-market banks enjoy improved customer experiences, get the most out of their staff, improve operational controls and reduce monetary waste wherever possible.
Lean banking is a low-cost way to eliminate non-value-added activities throughout all areas of your banking organization. As lean banking operations take shape, you set the stage to develop a company culture with the mindset for continuous streamlining of processes and improvements to operational efficiency.
The Path To Lean Banking Process Improvement
Many middle-market banks assume efficiency improvement should focus solely on overhead reduction. That’s a start. However, to drive substantial lean banking process improvements, you need to improve revenue.
Over the last 10 years, drops in revenue rather than increases in overhead have driven declines in middle-market bank efficiency ratios. Therefore, your lean banking process improvement initiatives must include an analysis of sales and marketing, margin management, non-interest income management, as well as an ongoing review and improvement of these elements of lean banking operations.
The Benefits Of Implementing Lean Banking Operations
Overlapping and/or inconsistent data, manual reporting, disparate systems and aging technology lead to poor information quality. Internally, your bank requires fast, accurate and increasingly transparent information to support smart, informed business decisions.
While lean banking helps you gain internal operational efficiency through fast and accurate banking data analysis, this process also satisfies the external needs of your organization (i.e. stakeholders and regulators who demand transparent, reliable information in less time).
Streamlined processes and operational efficiency lead to reduced costs and released capacity, meaning lean banking process improvement contributes significantly to your bottom line.
In fact, financial institutions leveraging lean banking operations report results of 20-30% cost reduction within 12 to 18 months and maintain cost-efficiency ratios below the industry average.
Lastly, unlike other banking process improvement methodologies, lean banking does not require significant capital investment. Lean middle-market banking concepts and tools are relatively easy to learn and apply.
Lean Banking Relies On Building A Client-Centered Organization
Banks have long-struggled to deliver excellent customer experience due to processes that are not geared toward the customers’ needs – this has hurt customer satisfaction overall.
Lean banking initiatives are rising rapidly in the financial sector, yet most banks’ approaches are still too focused on cutting expenses. Real, lasting change requires your bank to focus on the cultural aspects of lean banking process improvement.
Think of lean banking as a behavioral change. Reduction of costs is just one benefit. To achieve a high-performing organization, combine lean banking operations with best practices that inspire your staff to deliver continuously excellent customer service.
Lean banking is all about improving process efficiency, performance management, organizational capabilities and the mindset and behaviors of your staff. However, as you identify and remove non-value-added activities, your end-goal should always be focused on who the customers are and what they value, as they are a direct extension of your value stream.
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