Banks target 2030 cost cuts through transformation efforts

About 1 in 3 see embedding AI as a way to transform their organizations.

Operational and cost transformation is at the top of banking agendas globally in an era of economic pressure, rising competition, and rapidly evolving customer expectations, according to KPMG.

Transformation agendas include embedding AI into new ways of working (38%), addressing cybersecurity and fraud (33%), and improving data and analytics capabilities (29%).

Over half or 53% of banks expect to cut costs by 10% by 2030 from their transformations, whilst 29% want to cut costs by more than 20% by 2030.

Yet successful transformation has been a challenge, with just 24% being “highly successful” in achieving cost reduction goals, and 18% being highly successful in achieving their transformation goals.

“Reading between the lines, banks executives are pushing hard to drive cost reduction outcomes through variations of top-down and bottom-up approaches. The challenge remains execution and making the gains sustainable by changing the underlying nature and form of the work,” said Owen Lewis, global lead for banking cost transformation, and a KPMG international parter.

KPMG suggested that banks focus first on productivity, and cost reduction will follow.

One client, for example, was able to realize a 35% sustainable productivity uplift in over 12 months by adopting workflow and automation enhancements.

“Firstly, at a business unit level, the [KPMG] team reviewed FTE allocations and operational metrics to develop tailored transformation plans,” it said.

”By digitizing inputs, enabling intelligent routing, and automating processing through Intelligent Automation and straight-through processing (STP), the bank significantly reduced manual touchpoints,” KPMG said.

Banks’ focusing their cost and transformation efforts around the customer is a good idea, but it must be done with an enterprise view looking end-to-end at the customer experience and expectations, said Sara Forbes, partner, advisory transformation services, KPMG in the UK.

“If you are just introducing a bunch of individual point solutions, you may be scoring wins in siloes, but you are probably not delivering on your overall cost, operational or customer objectives,” Forbes said.