Organizational Efficiency in Banking is Not About Downsizing, it’s About Alignment.

After 30 years in this industry, I’ve seen “efficiency” become synonymous with downsizing.  Since the early ’90s, when efficiency was only considered in terms of the expense half of the income statement, mass layoffs became the solution, regardless of the impact on the customer experience.  Banks and credit unions relied on inertia and the difficulty of switching banks in a paper world to keep dissatisfied customers from leaving.

However, with the advent of online and digital, the customer can switch banks in under five minutes, and the industry has begun to realize that it is the customer experience that matters most as the primary differentiator and revenue generator.  Efficiency is no longer about downsizing. Instead, it is about alignment across people, processes, platforms, and delivery channels, all with the intent of providing exceptional customer experiences.

Efficiency: Beyond Cost-Cutting

Today’s customers expect immediacy, intelligence, and personalization across every channel. Banks and credit unions, in response, have layered on technology. But too often, what results are complexity, not clarity, cost, not capability, silo’s not seamless delivery.

Real organizational efficiency is not about subtraction, it’s about precision. Precision in anticipating the members’ financial needs and delivering solutions consistently, regardless of the channel the member chooses to interact with the financial institution.  While resource allocation, organizational structure, and process improvements should not be ignored when considering organizational efficiency, channel efficiency and the customer experience should be the primary focus.

Channel Chaos: How Did We Get Here and What Happens Today

Prior to the 1960’s everything was delivered by one channel, the branch!!  The arrival of the call center allowed for call activity to be centralized, creating a second, independently staffed channel and redirecting activity out of the branch.

When the ATM came onboard in the 80’s, centralization became the norm, with everything from basic teller transactions to inbound calls to credit directed away from the branches.

By the time online banking arrived in the 90’s, many prognosticators sounded the death knell for the branch. With today’s digital transformation bringing the ability to open accounts without branch assistance, the toll of the bell has only rung louder, and centralized staffing silos have continued to proliferate.

Yet, ironically, customers continue to see value in the branch despite declining activity. Many surveys rank a branch near where you live or work as the second most important decision factor for selecting your financial institution.

And despite their digital savvy, Gen Z visits the branch more frequently per month than any other generation according to a recent survey conducted by BAI.

This siloed delivery channel model, which has been created over time, has resulted in significant inefficiency. Each channel creates its own workstream, leading to additional delivery costs and friction while creating disjointed customer journeys that result in attrition and lost revenue opportunities.

Redefining Efficiency as a Growth Strategy

Efficiency and customer experience are not opposing forces. They are interdependent. To be successful, channel staffing also needs to be interdependent, not siloed, and activity needs to be directed to wherever there is available staffing capacity.  Routing activity based on staff capacity rather than location allows for increased staff utilization and richer customer experiences.

An optimized channel framework reduces operational drag and increases engagement. It cuts noise and surfaces opportunity. It replaces channel conflict with channel cohesion.

Institutions that get this right will deliver faster onboarding, increase cross-sell and retention, reduce cost-to-serve, and improve employee satisfaction, while gaining margin, trust, and customer satisfaction. Instead of siloed handoffs, you get connected journeys that feel intuitive to the customer and efficient to the institution.

Recently, one of our Engage fi clients was trying to close the $6.5 million gap necessary to achieve their peer median efficiency ratio of 70%.  We started by mapping the customer journeys for a new account opening through each delivery channel (web, mobile, online, phone, branch), as well as looking at the activity levels of each channel and the market demographics around each branch.  By focusing on the customer experience and market opportunity, we ultimately increased staff utilization from 23% to 59% across all delivery channels, and reduced delivery costs by $12 million or 67%.

While resource allocation and process improvement became part of the solution for our client’s organizational efficiency, it was driven by defining the customer experience and optimizing the delivery of that experience.  We helped the financial institution recognize the interdependence of efficiency and customer experience.

Final Thought

Today, the financial service industry has been enamored with digitization and the promise of AI to gain efficiency.

While important, let’s not forget that unbridled channel proliferation and the staffing silos that came with it still need to be addressed to create true efficiency on both sides of the income statement and a positive impact on the customer experience.