International Finance
Banking

Swiss pvt banks need to intensify their industrialisation efforts

Ten steps have been recommended to become state-of-the-art bank September 07, 2016: The most recent SFI White Paper reveals that Swiss private banks are being forced to revise their value chains further using industrialisation strategies in order to be able to fulfill the present and future requirements of state-of-the-art banking. According to a survey of Swiss private banks, most respondents have still not engaged sufficiently...

Ten steps have been recommended to become state-of-the-art bank

September 07, 2016: The most recent SFI White Paper reveals that Swiss private banks are being forced to revise their value chains further using industrialisation strategies in order to be able to fulfill the present and future requirements of state-of-the-art banking. According to a survey of Swiss private banks, most respondents have still not engaged sufficiently in the industrialisation process, and their efforts are concentrated mainly on cost cutting rather than on efficiency gains. Banks are advised to take action soon, since not fully industrialised value chains will make it difficult for Swiss private banks to operate profitably and staying competitive will require a great deal of effort.

According to the most recent SFI White Paper, Industrializing Swiss Private Banks: A Strategic Road Map, Swiss private banks are being forced to use industrialisation strategies to promptly revise their value chains in order to be able to fulfill the present and future requirements of state-of-the-art banking. Prof. Pascal Gantenbein from University of Basel and Kristof I. Trautwein from University of Basel conducted a survey of Swiss private banks to assess their progress in terms of industrialization. The survey’s conclusions are captured in ten recommendations that banks should consider when industrializing their value chains.

The main conclusions are:

  • Most banks surveyed claim to have progressed only to medium-level industrialisation.
  • Critical mass—that is, the size banks must have in order to run their operations profitably—is not crucial for future success as long as banks apply industrialisation approaches. Moreover, bank size seems to have no impact on the progress of industrialisation.
  • Swiss private banks often link industrialization to standardization and outsourcing in order to reduce costs and complexity but not necessarily with the objective of achieving higher efficiency.
  • About half of the banks surveyed exhibit an outsourcing of operations level of less than 25 percent and most banks are still trying to optimize their value chains using internal solutions.
  • Most banks are focusing on industrializing their back offices. While this part of the value chain is important to industrialize and such efforts are—today—a prerequisite, the greatest efficiency gains are expected to result from an industrialized front office, which should thus be banks’ focus going forward.
  •  Small to medium-sized private banks are expected to face the biggest process industrialization challenges. They should either specialize in a specific business model or focus on their front office and outsource all remaining operations.
  • Medium-sized private banks need to be clear about their long-term goal with respect to their size and business model in order to apply the appropriate industrialization strategy.

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