THE EXECUTIVE’S GUIDE TO DRIVING EFFICIENCY IN FINANCIAL SERVICES

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In the middle of 2016, J.P. Morgan chairman and CEO Jamie Dimon observed that we are experiencing “uncertainty and turbulence in the markets.” In early 2017, he updated that view and said things are looking better “if you take a walk around the world.” Either way, to say that we are experiencing a period of economic uncertainty right now would be an understatement.

Slow economic growth, low interest rates, and pressure from regulators have made it especially difficult for financial institutions to operate efficiently and create better value for shareholders. Organizations of every size are putting their business under the microscope to evaluate and determine how they can do more with less.

How can organizations drive efficiency? What initiatives do companies have in place? What have been the results of these programs thus far? In this guide, we will explore these questions and more.

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STREAMLINE OPERATIONSConversations with our clients have shed light on what’s taking place in their organizations and how they’re approaching their need to become more profitable. It’s evident that, for many, transformation initiatives are in development or already in place. These initiatives are not short-term plans, but rather ones that span many months or even years. Without a doubt, some companies are going for quick wins – initiatives that can be carried out quickly, achieve efficiency immediately, and have a positive effect on the balance sheet. At the end of the day, any boost in revenue or reduction in expenses creates improved shareholder value.

These transformation initiatives enable companies to become more efficient and profitable. Streamlined operations foster an environment in which employees can focus on building stronger relationships with their customers, placing effort where it’s needed most. It’s a strategy that will help reduce financial and regulatory risk. It’s a strategy that benefits customers and shareholders equally. It’s a strategy for success and the long-term.

As we learn about the inner workings of these transformation initiatives, it becomes clear that they are either driven from the very top or, at the very least, have strong support from executives across departments. Management is being held accountable for achieving their goals of improved performance and profitability. They are not being judged by the effort put into these initiatives, but rather by the results.

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CONSOLIDATE IT APPLICATIONSCost reduction remains a priority among financial institutions. Aside from re-negotiating contracts with vendors, consolidating IT applications is an ongoing trend in the industry.

When speaking on the topic of expense reductions, Ralph W. Babb, chairman and CEO of Comerica, said, “We will enhance our technology capabilities, while reducing our overall spend by optimizing our infrastructure and substantially reducing the number of IT applications across the bank.”

Matt Zames, J.P. Morgan’s chief operating officer, indicated that by 2018 he wants to shrink the number of software applications the company uses by 25%. In 2015, the company was able to cut the number by 13%.

A Financial Times article highlights Deutsche Bank’s initiative to streamline its IT infrastructure in an effort to reduce costs and simplify operations. Having amassed more than 4,400 applications in total, the company had eliminated 500 of them as of the first quarter of 2016.

HSBC also has a grand plan to become a more efficient, cost-conscious financial services provider that can compete on a more even playing field. In the company’s June 2015 investor update, HSBC outlined how it was planning to grow, boost productivity, and streamline operations, all while saving the organization approximately $5 billion. One part of the plan is to get more value out of the current technology, noting that having more systems doesn’t necessarily equate to an increase in efficiency. The company has plans in place to trim 750 applications over the next few years and move many of its non-business-critical systems to the cloud. In the second quarter of 2016, HSBC reported it was on track to meet its cost-savings target, confirming its belief that managing costs throughout the company is essential for long-term growth and profitably.

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AUTOMATE PROCESSESBoosting productivity through automation is another goal of the industry. Automation drives down costs and enables better control and compliance. It gives firms scale by allowing them to better serve existing customers and address new segments of customers by allocating resources to areas in which they can make the biggest difference. Eliminating simple manual processes that leverage high-cost resources is where automation can be highly advantageous and is often one of the first places to which major financial institutions look for quick wins.

When providing an update on the strategic initiatives CIT Group currently has in place, chairwoman and CEO Ellen Alemany said the company is making “technology and operational improvements, such as reengineering some

processes and automating certain functions, as well as standardizing technology where it makes sense.” Ms. Alemany continued, “While this may include some investments, it will also drive lower costs going forward.”

Deutsche Bank wrote about its goal of becoming more efficient: “In line with the bank’s goals of becoming simpler and more efficient, global markets operations is restructuring to reduce costs, strengthen controls and eliminate inefficient manual processes through greater automation.”

Cutting costs is also part of Bank of America’s strategy to become more profitable. In regards to its goal to cut an additional $5 billion in annual costs by 2018, the bank’s chairman and CEO, Brian Moynihan, said, “It’s a constant reduction in personnel through hard work and automation.”

When discussing the ongoing program, the company has to help position itself to deliver positive results, Greg Carmichael, CEO of Fifth Third Bancorp, said, “We’re continuing to invest in areas of automation to optimize operations.”

A good example of automation comes from a publicly traded financial services company that has businesses in banking and wealth management. Like many other companies, it identified automation as the mechanism that can help it become more productive throughout its operations. One area it decided to tackle first was the credit process, from application to approval. Using digital technology, the company was able to automate the entire process, from the collection of data, to its analysis, to its storage. The results pointed to a shortened timeline, more closed business opportunities, and a better overall customer experience.

At the 2016 Milken Institute Global Conference, Daniel Nadler, chief executive of finance at the analytics firm , said traditional financial services firms like J.P. Morgan will still be here in the long run — “they’ll just be more efficient.” He went on to say, “Analysts, young associates, vice presidents — anyone whose job is moving a column of data from one spreadsheet to another — is going to get automated.”

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INVEST IN TECHNOLOGY While some companies are keen on trimming the number of legacy IT applications through consolidation, they all agree that investments in technology are critical when it comes to operating in a digital world that has created incredibly high customer expectations. The adoption of mobile devices has significantly changed the operating landscape.

During his remarks that discussed the company’s outlook for 2017, TCF Financial CEO Craig Dahl said, “We’re going to continue to leverage technology to create new product and service solutions that meet the financial needs of our customers and drive operating efficiencies.”

In an interview with Dennis K. Berman, financial editor of The Wall Street Journal, Brian Moynihan discussed the key attributes of today’s bank. “You have to be able to meet every customer, everywhere they want, and no one channel wins,” Moynihan said. While customers are still walking into brick-and-mortar branches, the increase in and importance of other channels have forced executives to expand online and digital capabilities to better focus on customers.

When highlighting how the company has been performing recently, Provident Financial Services’ Chris Martin, who serves as the chairman, president and CEO, said, “With the increased acceptance and use of our multiple digital channels, we continue to see efficiencies from our customers who prefer to self-serve. Our technology spending incudes more mobile applications…” These strategic “digital” investments are happening at the same time as the company is consolidating branch locations.

In an update on Morgan Stanley’s Project Streamline, a program aimed at reducing $1 billion in expenses through approximately 200 expense initiatives, chairman and CEO James Gorman said, “We need to invest behind the bank, we need to invest behind that digital strategy, we need to invest behind upgrading the technology.”

However, while omni-channel is essential in today’s environment, financial institutions are, in fact, shrinking their real estate footprint and cutting back on their workforce. When it comes to employees, many companies have realized the benefits of reducing the number of personnel who sit between management and customers and offsetting them with technology, in order to provide customers with quick decisions. This helps organizations provide service that is meaningful and filled with domain expertise.

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The widespread use of digital devices has introduced new levels of vulnerability that have never been seen before. Cybersecurity, such as fraud and DDoS attacks, is an area that is receiving tremendous attention and investment. Companies must protect the trust between them and the customer.

In an SEC Form 10-Q, J.P. Morgan indicated that it planned to increase its annual budget to battle cybersecurity from $250 million to $500 million. In an interview, Bank of America’s Brian Moynihan said that they are not capping themselves when it comes to fighting cybercrime. It is “the only place in the company that doesn’t have a budget constraint…you’ve got to be willing to do what it takes.”

Initiatives that revolve around the use of customer analytics continue to be at the top of the to-do list for companies. Remember, these transformation initiatives are necessary to drive efficiency and create new revenue. Better insight into customer and prospect data can help relationships evolve and new ones develop. The ability to cross-sell and generate additional dollars out of existing relationships is one of the most effective revenue-generating methods and ways to spur growth.

To that end, companies also understand that they need to provide more effective sales training and better tools to facilitate business development activities. This, of course, requires investments to be made in both strategy and technology.

ACHIEVING MEANINGFUL RESULTSTransformation initiatives require the development and implementation of strategies and technologies capable of delivering operational efficiency, reducing expenses, and increasing revenue. As an organization, you can commit to putting initiatives similar to the ones discussed here in place. It will require everyone, all the way to the CEO, to be on board and contribute where necessary. Even if the plan is executed thoughtfully and perfectly, it will take time to achieve meaningful results. However, if and when your company is fortunate enough to make significant strides in the effort to become more efficient, customers and shareholders will greatly benefit for years to come.

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PERFICIENT + FINANCIAL SERVICESWhether it’s keeping pace with today’s digital transformation and cross-channel customer experience demands, improving operational efficiency, or dealing with the complexities of regulatory reform, we’re helping you redefine the future of financial services for your customers.

Companies in banking, asset and wealth management, capital markets, and insurance turn to us to help solve their most complex business and technology challenges.

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ABOUT PERFICIENT Perficient is the leading digital transformation consulting firm serving Global 2000® and enterprise customers throughout North America. With unparalleled information technology, management consulting and creative capabilities, Perficient and its Perficient Digital agency deliver vision, execution and value with outstanding digital experience, business optimization and industry solutions.

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