In 2019, it’s become the norm for … Arkadi Kuhlmann and Bruce Philp, The Orange Code: How ING Direct succeeded by being a rebel with a cause, Wiley, 2008. What hampers their progress is uncertainty about how best to build on core strengths to create sustainable outcomes. To provide a structure for navigating this chaos, and to galvanize the shift to bolder thinking, we’ve identified six opportunities for banks to fuel future growth. The switch to Thomas Cangemi from longtime CEO Joseph Ficalora could foreshadow a push to curtail the company’s reliance on multifamily lending and the pursuit of a bank acquisition that lowers funding costs. We use cookies essential for this site to function well. Banks should consider this option if.... they want to enter new markets or segments without the need to invest in the physical infrastructure that would otherwise make such moves prohibitively expensive. While growth strategies are usually considered a means to overhaul competitors, they may also be seen as a defence mechanism. A narrow focus on core adjacencies ignores the broader role a bank can play on behalf of its customers. Subscribed to {PRACTICE_NAME} email alerts. Chief Strategy Officer at CenterState Bank, Chris Nichols is an active bank investor, entrepreneur and lover of quantified banking. The National Credit Union Administration may get a new leader, several institutions could seek to expand their fields of membership, and a pot banking fight may reemerge. Growth Strategies: Defined. But most institutions are focused on pruning their networks to cut costs. They’ve been overly cautious, playing defense, with me-too digital initiatives primarily designed to counter moves by actual or potential disruptors. The classic example of this kind of service is banks providing credit-card processing to retailers. Banks have long relied on making customers aware of relevant products... 2. Post Bank, for example, has become the largest provider of mobile phone services in Italy. By moving into ecosystems beyond the traditional core, banks are able to tap their existing client base and operational capabilities, strengthen engagement, and capture data that will provide a more complete view of customers’ needs. Which unconventional growth opportunities represent a good fit with current resources and competitive position? Here's a sampling of how banks are adjusting branch networks to suit changing strategies. Rockefeller Capital Management will buy Whitnell & Co., a business Associated bought in 2017 that manages $1.4 billion of assets. A supermarket approach can allow banks without a strong position in such areas to grow in these segments as a complement to their current offerings. A. Often referred … Banks should consider this option if … they already possess an information advantage over competitors—or if they have the prospect of creating an information advantage, or extending an existing one, via external investments or partnerships. Moving into adjacencies—both banking and nonbanking—allows them to take advantage of their already strong franchises by offering new services to current customers. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Market Cooperatively with Partners. What capabilities should be in place to go after these opportunities. Grow beyond your core into relevant ecosystems. Somesh Khanna is a senior partner based in McKinsey’s New York office and global leader of Digital McKinsey in financial services. The ideal international structure will help … Growth strategies Banks can’t ride fee income gravy train much longer Noninterest income has bolstered profits this year. In addition to generating new revenues, ecosystems of this sort can protect banks from the efforts of fintech start-ups and digital giants to invade banking’s traditional turf. Speculation is swirling that the Boston company will go on a buying spree after raising $1.8 billion, though some investors are advising caution. This aggregation model provides customers with easy, one-stop access to financial products and the ability to address multiple financial needs through a single, integrated channel. Gain Operational and Financial Control. ING Direct was the original digital attacker, starting as an exclusively online bank in 1996 and attracting more than 20 million customers in 9 countries over a little more than a decade, before spinning off several of its national subsidiaries in the late 2010s.3 But digital technology and big data/analytics are still poised to shake up the financial-services industry. Building Retail Channel Diversity. People create and sustain change. Engaging across buying journeys can allow banks in such a position to gain access to a larger pool of potential revenue and enrich the overall relationship with their customers. Something went wrong. There is no one-size-fits-all answer. 2. ING, for example, has partnered with US-based fintech start-up Kabbage to serve SME customers in Europe. Innovate from within existing businesses, set up separate units, or partner with/acquire from outside? In a rising rate environment that is coupled with strong economic growth achieving deposit goals is the best way to control funding costs while enabling your Bank or Credit Union to meet the lending needs of your customers and members. A commercial bank’s performance can be evaluated along the dimensions of deposit mobilization, quality of lending, capital adequacy analysis, liquidity, earnings, and loan growth. This proven software’s comprehensive features empower financial institutions to grow their loan portfolio, increase income, and reduce risk. It refers the nature and direction of the economy in which a firm … Please click "Accept" to help us improve its usefulness with additional cookies. RoE figures based on analysis by McKinsey’s Financial Services Practice. Leading banks are making inroads in five areas that allow them to build models that suit their strategies-in-the-making and can flex as new priorities emerge (see Figure 3). Six digital growth strategies for banks 1. Bank stocks have climbed because of expectations that the change of power in Washington will hasten vaccine distribution and speed the economic recovery. Other banks are partnering with care providers and health insurers to provide a consolidated billing platform that makes it easier for consumers to pay for medical expenses. The key growth strategies of online banking market players are merger and acquisition, product launch, and joint-venture. Acquiring Boston Private could put the parent company of Silicon Valley Bank years ahead of schedule in catering to the investment needs of high-tech and biomedical clients, whose industries have thrived during the pandemic. Most big banks have the tools and advantages to push the boundaries of their existing business models. In addition to the financial fallout, COVID-19 is reshaping the global banking industry on a number of dimensions, ushering in a new competitive landscape, stifling growth in some traditional product areas, prompting a new wave of innovation, recasting the role of branches, and of course, accelerating digitization in almost every sphere of banking … Stay current on your favorite topics ), the expertise to scale wins, and the management discipline to kill off poor performers. Banks can grow by engaging with consumers at other stages of their decision journey. Channel optimization. Mortgages (tied to home buying), auto finance (tied to car buying), and credit cards (tied to taxi/ride-sharing trips and restaurant visits) are examples of such products. The ‘ABC Bank’ has formulated its own defense strategies besides the government limitations and restrictions in the country. Some banks have even gone farther and moved into nonbanking adjacencies (see outer ring in exhibit). As we see it, many banks haven’t set their sights nearly high enough in response to disruptive attackers. To begin, banks should think hard about a series of questions: No matter which opportunities banks decide to pursue, they will need to commit to—and invest in—new digital capabilities in areas like design, innovation, data and analytics, personalization, and digital marketing. Never miss an insight. We strive to provide individuals with disabilities equal access to our website. Please try again later. Banks considering a factory plan, for example, should have enough tech talent (particularly around APIs) to be able to maintain appropriate levels of security while serving the given product or service to third parties. Exhibit Another is to create new offerings, such as reports or benchmark analytics, based on bank data. Use minimal essential Jeanne Pinder Sep 26, 2019 Digital transformation’s top 10: The impact factors that matter As new fiscal years begin and the Banks in this position may find it difficult to increase their share in existing segments. For example, a customer with a checking account would be encouraged to consider a personal line of credit, a home-improvement loan, or a bank credit card (see inner circle of exhibit, labeled Core). Subscribe. To build privileged relationships with customers, some financial supermarkets rely on recommendation engines, which use transaction, merchant, and customer data generated from the platform to provide personalized suggestions and offers. 3. Sales effectiveness is not just a function of knowledge, but also of discipline and coaching. Create a financial supermarket. We'll email you when new articles are published on this topic. Use paid search marketing to your advantage. If you would like information about this content we will be happy to work with you.