Operation transformation will create huge value for commercial banks and should become the next source of dividends, according to a new report by the Boston Consulting Group.
Rapid advancement of financial technologies and the mobile internet has led to profound changes in the financial behavior of commercial banks' clients. Driven by intensified competition from a growing number of non-traditional competitors in the digital domain, banks will rely on operation transformation as a key way to handle the challenges they face, said Chen Benqiang, partner and managing director of BCG, a global management consulting firm, at a recent media briefing.
Such a transformation will help banks reduce costs significantly.
"Take a mid-sized, joint-stock commercial bank as an example, supposing that it posted an operating income of 100 billion yuan ($15 billion) in 2016. If its cost-to-income ratio is cut by 1 percentage point via operation transformation, its profit will increase by about 1 billion yuan," Chen said.
In addition, operation transformation will also play a major role in process optimization, thus improving the quality and efficiency of end-to-end flow and releasing greater sales potential of a bank, according to the report.
Cheng Yi, principal of BCG, said major trends of operation transformation include online-offline integration, financial service customization, workflow automation, trans-regional and cross-level operating resource allocation, data analytics and the construction of a cloud operating platform.
One of the key trends focuses on an increasingly high level of integration of a bank's online and offline channels, so that the client can start a business process via any channel and switch to other channels to complete the process, thus setting high requirements for unified management of business processes and interfaces of different channels, the report said.
By using technologies, including fingerprint identification, facial recognition and electronic signature, banks are able to move the manual process of certain financial services from offline to online.
This will improve workflow efficiency, optimize customer experience and enhance data quality by reducing intermediate steps, such as information input and review.
China Merchants Bank Co Ltd, a Shenzhen-based commercial lender with a strong foothold in retail banking, applied facial recognition technology to help identify fraud during application process for an online personal loan product, with a fast, simple and automatic procedure of approval.
Next, China Merchants Bank will further its efforts in searching for ways to adopt artificial intelligence in operation supervision to prevent the possible negative impact of new technologies on financial services, while stepping up efforts to develop consumer finance, said Liu Jianjun, executive vice-president of the bank.
