We will not hear about bricks and clicks after this recession
Deloitte pick up on an interesting characteristic of banks here. Cost cutting occurs during downturns, but its spend spend spend when things are looking good.
Banks rarely get to the point of incremental efficiencies that they note here. Citi are a classic example as noted in the FT this morning.
This fits with the view that this change we are undergoing is not just another blip before we return to business as usual. There is no business as usual coming. The future is smaller, framed in different business models, contains a greater mix of small business, and smaller companies and with retail consumers working harder, longer and for less money.
All this points to realignment of the banks’ models to be more efficient, more effective in customer interaction, and more automated, with much greater reliance on online banking and mobile banking, with less on branch banking.
This time we will not hear about ‘bricks and clicks’ as we did in 2002.
The turmoil in the financial markets, coupled with the economic downturn, is fundamentally altering the financial services environment. In this new world, improving operating efficiency has become a competitive necessity. But while financial firms have typically moved quickly to reduce costs when the business cycle is contracting, far too often these efforts have been quickly forgotten when business picks back up.
In this report, we present research conducted by the Deloitte Center for Banking Solutions demonstrating the critical importance of operating efficiency to the fortunes of financial firms. Among the findings is that building efficient operations is not enough — steady, continuous improvement in operating efficiency are required. In fact, banks that have achieved continuous improvements in efficiency have also generally experienced far greater gains in their share prices.