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In today's low-growth environment, banks need to rethink their approaches to reducing costs. Peter Stumbles, who leads Bain's Financial Services practice in the Asia-Pacific, discusses the importance of dispelling industry-wide myths and overcoming organizational barriers, to achieve cost transformation in the post-crisis landscape.
Read the Bain Brief: Big, Bold Bank Cost Transformation
Read the transcript below.
PETER STUMBLES: The cost imperative is clear. Most banks are not making their cost of equity, we're in a low growth environment, more cost needs to come out. The easy, low-hanging fruit has already been taken. Post-crisis, the big restructures have happened, and now it gets really hard. One of the challenges is [that] what worked before is not going to work now. And we're facing up to some of the toughest myths to get dispelled, but also to the biggest barriers that need to be overcome to help make that happen. That means dispelling myths like, economies of scale across regional or global structures are driving costs down, vs. the fact that in many organizations, for many cost areas, it's driving duplication, because the local businesses are rebuilding what we think the regional guys are trying to provide. It means challenging myths like, digital is going to do it all. And that business case to invest in the right customer experience is suddenly having a lot of cost out, because banks aren't necessarily attacking their legacy cost structures. They're inherently spending more money on building new structures, and not tackling the old.
It also means hitting some of the barriers, like organizational structures. Inherently, culturally, these are conservative organizations: we like small changes. We're very nervous about significant change. And in silos in-between these organizations, in the seams, is where a huge amount of this cost exists. In our experience, you need a catalyst. You need something different, so that the compliance staff feel comfortable, or have the mandate, to remove checks and balances, when all I do is get paid to add them. When you've got a way to work across the organization, where tackling the operating model inherently is part of a cost-reduction effort—is critical moving forward—you need a new playbook now. And these are the sorts of ideas that can help make that playbook successful.
Read the Bain Brief: Big, Bold Bank Cost Transformation
First published in 12月 2016