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How Retail Banks Are Driving Revenue Growth !

By Fahad Khan
Banks will increasingly need to proactively set revenue growth agendas, and a consumer-centric approach for product development and services.

Since the last decade, retail banks have had to focus more on cost reduction than revenue generation. These financial institutions are undoubtedly disadvantaged since their revenue growth depends heavily upon the macro outlook.

Sluggish economic growth, stricter regulations, and low-interest rates have challenged the retail banking sector's resilience. However, the future (at least for the forecast period 2023-2028) looks bright for the banking industry.

Better economic conditions, an increase in the working population, and higher government investments in banking are expected to be some of the significant drivers of revenue growth. Does that mean retail banks will not have to change their existing revenue model to survive? Not necessarily, because digital banking concerns such as cybersecurity and data management come into the picture.

But, the gloomy clouds of low profitability are gradually lifting.

Opportunities to Thrive in a Challenging Environment

For retail banks, lucrative markets, a more significant market share, and mergers and acquisitions are critical drivers to grow revenue. The catch is that revenue growth is vital for all three as it offers a long-term competitive edge.

Low-interest rates and rigid regulations have shifted most retail banks’ focus from revenue generation to cost reduction. Their revenue is left to the mercy of high-interest rates and regulatory measures, making it very ambiguous.

This sense of helplessness in a volatile environment has only pushed employees to do more with some scattered cost-control tactics. The results? Just as precarious and, in most cases, uninspiring returns on standard assets.

That’s not all – such measures offer an illusion of growth because the same is usually short-term. Improving bottom-line performance long-term requires a singular focus on growth (not just cost control). Thankfully, the tables are turning in favour of retail banks.

While regulatory measures and interest rates may remain unchanged still, other areas show promise. One prominent example is the increasing use of technology among customers for daily financial transactions. Banks can leverage this by improving their offerings through tech.

The offerings can be made more personalised to attract newer pockets of customers, also those who may have previously been underserved.

Retail Banks Paving the Way to Growth

The question of the hour is how successful retail banks drive growth in a challenging environment (albeit rife with growth opportunities). Let's find out -

1. Mapping Customer Journey through Big Data Analytics

Big Data Analytics has offered banks good strategies for increasing revenue. It is possible to create millions of customer touchpoints across multiple marketing channels through advanced analytical tools.

Among these touchpoints, banks can identify which touchpoints are the most critical and from what viewpoint. They need to analyse and determine the touchpoints that work best for query resolution, those required for the initial sales journey, and those that support loan renewal processes.

With the identification of each touchpoint, banks can also identify critical areas for improvement and growth. However, customisation is vital, as showcased by successful banks. The retail world has already set the bar high, offering granular-tracking opportunities through mobile applications.

Banks and financial institutions should offer digital-only services, but first, they need to understand their customers better through journey mapping.

2. Acquiring a More Intimate Understanding of Customers

Growth Jockey keeps customer-centricity as the directing compass for all growth initiatives. Companies use advanced research methods and analytical tools in the retail industry to understand their customers.

The aim is to understand what customers think about a particular product or service and how they react to it. Successful retail banks earn revenue in a similar manner.

As we see, customer expectations toward personalisation are high, especially with the retail industry’s success. Successful banks recognise the gaps early on, switch to reliable tech providers, provide unambiguous offerings, use advanced data analytics, and employ lean techniques to eliminate ineffective processes.

3. Improving Affluent Segments

The affluent segments or markets show much promise from the viewpoint of revenue for banks. It is projected that most of them can earn as much as 40% of their total profits from these segments alone. Naturally, both small and large retail banks are focusing on these segments.

But, the main question is how to drive growth using these segments. From our analysis, two main attributes contribute to success. Firstly, banks need to have a thorough understanding of the affluent markets. Not just that, but an account of the sub-segments is also required.

After a thorough understanding, the focus must be shifted toward developing a solid value proposition and offering products that align with the needs of affluent customers. These customers usually vouch for a digital interaction-oriented model.

What would this look like in practice? Growth Jockey would have a bank design a remote advisory model that caters to the requirements of affluent customers who use its services remotely. Such a model can drive revenue growth and better client relationships at the same time while handling greater customer loads.

4. Incorporating Pricing Decisions Driven by Intelligence

Depending upon the regulatory measures, the function of retail banks also extends to pricing their services. The same can be fine-tuned with the help of information on price elasticity. All this information is typically gathered through competitive analysis and transactional data derived from web-crawling techniques.

Not only these, but Growth Jockey also considers the latest management and front-line dashboards valuable information sources for pricing. For instance – pricing decisions can be taken initially based on gross margins and word-of-mouth information.

Then, a market-wide scan regarding the product's future profitability can be conducted. This will enable the bank to fine-tune prices based on elasticity models that consider geography and risk scores. Intelligence-driven pricing, in turn, will help drive revenue growth.

5. Employing Micro-Segmentation to Discover Niche Opportunities

As far as retail banking profit pools are concerned, the next five years show a CAGR of 3.6% starting in 2023. Though not harmful, modest gains are only expected. This means banks need to identify pockets of growth opportunities in current markets.

Growth Jockey believes one way this is possible is through the use of advanced data analytics. To be specific, analytical tools can quickly help cross-examine profit data and revenue along different areas, including product, geography, demographics, and even third-party information.

Once the comparison is complete, banks should be able to recognise key areas of improvement and high potential. Since these were previously unrecognised, focusing resources here will improve growth and revenue.

6. Rethinking the Conventional Care Centre Model

Another way a bank can improve revenue growth is by rethinking the conventional care centre model. Structured traditionally around the first-in and first-out mantra, the traditional model, could be more beneficial from a growth-centric view.

It leads to the underutilisation of agents. However, Growth Jockey has observed that Big Data opens up new growth opportunities. One example is interactive voice response – this feature can redirect calls to agents best suited to handle niche customer queries.

For instance, those skilled in problem resolution can be assigned calls from those customers; the same holds for product closing, etc. Then, banks can refine the entire process by establishing successful customer and agent pairs.

Banks using this technique for revenue generation can additionally see higher retention rates, fraud reduction, reduced call time, and more excellent cross-selling opportunities.

Solutions to Bank On

The banking economy has impressive growth in store for years to come. Banks must leverage this golden opportunity by setting up a solid revenue growth plan. The same is only possible through a highly customer-centric approach to products and services.

While the grounds are fertile, the nurturing techniques are also many. Growth Jockey believes that today’s retail banks can leverage trends like data transparency, data ubiquity, and data cost reductions to identify growth avenues.

Also, since heavy cost-cutting will only lead to diminishing returns, it is high time that banks take an entirely new approach to growth and revenue. These are some ways to guarantee consistent profits in the time to come.

At Growth Jockey, our unwavering dedication lies in creating customised models that effectively tackle the crucial challenges confronted by our clients across diverse industries. Regardless of the size of your company, whether a small-scale enterprise or a large corporation, you can now leverage cutting-edge technology to drive revenue growth.

Take the decisive step towards unlocking the next level of growth for your brand by contacting us today!

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3rd Floor, GJPL, Time Square Building, Sushant Lok, Gurugram, 120009
Ward No. 06, Prevejabad, Sonpur Nitar Chand Wari, Sonpur, Saran, Bihar, 841101
Shreeji Tower, 3rd Floor, Guwahati, Assam, 781005
25/23, Karpaga Vinayagar Kovil St, Kandhanchanvadi Perungudi, Kancheepuram, Chennai, Tamil Nadu, 600096
19 Graham Street, Irvine, CA - 92617, US