Banks need to continuously revise their strategies so that they can grow their revenue and have a competitive advantage. Increasing revenue means capturing a wider market share through offering something which will set the bank apart from other competitors.
Banks try to keep up with continual technological changes so that they can satisfy their customer’s needs. Unfortunately, the banking industry is highly regulated whereby their reserves are analyzed against their ability to prevent bank failure risks. As a result, banks have limited ability to increase their revenue significantly.
The low interest rates are applying pressure on bank’s profit margins according to Shaftoe (2015). Furthermore, the growth of revenue has remained modest while the net interest margins have kept on declining. This is because banks normally earn profit through giving out loans and they are now limited from charging more interest against the loans they provide which makes it harder to increase their profitability levels.
Nonetheless, low interest rates can still open new opportunities in the market which will enable banks to perform well. Therefore, there are particular strategies that need to be applied so that banks can increase their revenue despite the challenges that they face in the current market.
Use Data Analytics
Analytic tools can be used to predict the way customers will value the financial products that want to be introduced by the bank to the market in terms of the price that they can pay; this will increase the degree of accuracy in terms of how beneficial a new product will be before it is introduced to the market.
Some banks use market research and data analytics to restructure their products which has eventually led to an increase in their revenue because they learn the customer demands and incorporate them to the products and services.
It is also important to increase profit-generating customer behaviors, transaction activity and channel usage. Recent research shows that almost 55 percent of customers are moving towards self-service channels even though most customers still use bank branches as their main point of contact.
Banks need to reduce activities in their branches so that they can save more money and improve their product profitability. Non-branch transactions enhance the interchange fee income and assists in offset declines as well as other miscellaneous fees.
Instead of depending on one service or product financial institutions have to ensure that their products are specialized according to the needs of the customers. Financial institutions have the ability to attain enough market research that will ensure that they diversify their services.
The changing technological environment has influenced the wants of the customers, currently, more customers want products that will make their life easier while still ensuring that their money is secure and they can access services at anytime, anywhere.
Financial institutions, for example, can diversify the mortgage services, wealth management, insurance, credit card operations and so on so that they can deliver their financial services in an efficient manner. Financial technology institutions can offer services that can upgrade bank products using unique technology which is bound to keep the bank customers and guarantee return on investment.
Improve Customer Acquisition Approach
In the past, banks used direct mails so that they could generate inquiries which would eventually drive sales. Currently, banks are losing sales opportunities because of the reduced connection that they have with the customers. Bank branches have reduced significantly and this means that sales opportunities reduced.
Therefore, financial institutions have to increase their market share through re-establishing branches as the main destination where customers can go to. For instance, financial institutions can embed local micro-market strategies into sales and marketing process that can imminently reduce the cost of customer acquisition.
Localized marketing programs can help focus on application of efficient tactics that are aimed at right trade areas. Lower customer acquisition costs will enable investment reallocation towards future strategies for digital growth. If this is utilized appropriately, a financial institution can drive more traffic to its branches and attain more accounts at lower costs.
Beaird (2016) pointed out that progressive banks can increase revenues from innovative new offers and business models by 5%; increase revenues from new products and distinctive digital sales by 10%; and lower operational costs through automation, digitization and transaction migration by 30%. This would result in a total potential net profit opportunity of +45 percent.