How often do we hear from the banks that Business climate is tough and hence, lack of growth? How often we see the central banks commenting on the liquidity situation locally and globally? You may ask, why globally for a central bank? Well, no economy today is separated from what is happening in the Middle East or how the US or the Euro zone react to the interest rates and affect the financial markets globally. Some Arab Spring in the Middle East may lead to a regional turmoil, which affects the global crude oil output, thus, pushing the crude oil prices to unprecedented levels. Or the US Fed announcing the pruning of the QE program, sending the global financial markets into a tizzy. And locally, of course, there are multiple factors at work, which may put financial markets at risk of losing control and growth.
Top up these challenges with the most critical of them all – customer. The customer expectations of a bank have completely changed and they are increasingly being compared with other organisations they interact with – retail, telecom, for example. The ease with which a customer can change banks has increased tremendously. With just a click of a mouse or a phone call, everything can be done. It has become as simple as that. In such a challenging environment, increasing customer value is not only the key to growth, but for survival too.
Again, keeping the customer at the fulcrum of all decision making is becoming essential. For banks and financial services organisations, increasing customer centricity means creating and offering innovative products and pricing strategies – the ones that suit the customer needs and keep him to bank with you.
Convergence of business domains, business models, brings in another complexity to the banking world. Today, telecom operators are also providing banking services, albeit very basic ones. But, it will be only time that they start behaving and offering what a universal bank will. Consumer retail is another example which is tinkering with offering banking services like payments, etc Then convergence of technology is also happening these days, the technology used for high speed phone networks is being used as a core feature in banking infrastructure. Banks are also increasingly becoming real-time, gradually, reaching a stage where they see other industries being already there.
Consumers whether in banking or otherwise, are increasingly demanding remote channels to transact. This digitisation produces disruptive business models that require swift responses. This also means capturing new Revenue streams and optimising these digital channels. And all this is to be done in tandem with proactively managing risk, maximising operational agility and maintaining the margin controls.
Revenue Management is a holistic and strategic approach to product management and optimisation of revenue, profit and customer value. It involves accurate, timely and effective pricing of products and services and Omni-channel delivery of customer experience.
It encompasses a set of core business and system processes, from increasing the wallet share through customer retention and loyalty programmes and product cross-selling and up-selling, to capturing of new revenue streams through quick roll-out of product variations and offers.
It is essentially customer centricity – generating and selling personalised offers. An offer with right product at right price through right channel, at the right time, and all at the optimal / right profit margin, thereby, leading to enhanced customer experience leading to better engagement and loyalty.
It also entails using the entire value chain within the customer ecosystem to capture the full possibilities from it. It could be proving flexible settlement structures to facilitate revenue sharing and transfer pricing, or delivering the capability to determine the exact value contribution of the partners.
It is the way to look at offering a package to the customer at an optimised price to meet all his and your requirements at the same time. It is a way to incentivise your customer and drive his behaviour accordingly. Discounts can be given on deposit fees during off-peak hours and this helps you to manage risk and load at the same time. Similarly, interest rate discounts on home loans can be offered based on the relationship of the customer, his total product usage, risk profile, etc. All such offerings, go a long way in driving customer delight and helping you maintain your margins at the same time.
Revenue Management is a way to be customer centric and be inside-out, rather than being outside-in. Offer what the customer needs, instead of selling to him something from outside, which he may or may not need. This approach improves the customer experience extensively and leads to customer stickiness and increased wallet share.
On the same lines, Business Assurance becomes another key component for sustainability, growth and performance. A comprehensive business assurance in a nut shell is management of enterprise wide risk by a comprehensive single customer views, product profitability and potential risks.
Business Assurance is a set of systems and processes to ensure structures, processes, systems for revenue management work together to manage risks, eliminate revenue leakage, maximise margins and deliver analytics to meet regulatory and compliance requirements. It allows data collection at individual transactions, helping to manage compliance to regulatory controls such as anti-money laundering.
It offers the capability for smooth integration of internal external systems, driving complete transparency, leading to operational optimisation and agility to drive informed decision making at all organisational levels. It can also allow managing the margins by allowing threshold pricing to achieve the margin targets.
Such a comprehensive Revenue Management & Business Assurance has to be a part of the strategic plans of the banks and financial institutions to maximise returns in such a complex and demanding environment.
