West Monroe Study: Despite Technology Investments, Mid-Market Banks Aren’t Capitalizing on Efficiency Opportunities

CHICAGO – More than a decade after the financial crisis, mid-market banks still have a long way to go to reach optimal efficiency – despite holding it as a top priority today. Half of mid-market banks report that boosting productivity is the No. 1 strategic priority, ahead of driving new customer growth, expanding digital presence, and improving security. Yet, while nearly 80 percent of bank executives perceive they have been extremely or very successful in improving efficiency and/or productivity in the past year, only 34 percent report having an efficiency ratio at or below 50 percent.

These are among the key findings in a new report, “Driving Down the Bank Efficiency Ratio: Despite Digital Adoption, Vast Improvements Remain,” released today by West Monroe Partners, a business and technology consultancy.

“The efficiency ratio is the single most important metric for banks seeing to understand the productivity of their organizations and remains the key indicator of progress in the quest to become more efficient,” said Neil Hartman, senior director in West Monroe’s Financial Services practice.

“We’re seeing mid-market banks invest in the right technologies to drive more efficiency, but the progress is too slow—and it could be sped up if executives turned their attention to the how the tech is implemented.”

In Q2 2019, West Monroe surveyed more than 150 executives across U.S.-based mid-market banks – entities with $1 billion to $250 billion in managed assets – to gauge whether they are fully leveraging these opportunities to drive up productivity in their organizations.

Nearly all – 98 percent – of bank executives said they are currently implementing strategies to improve efficiency. Technology is the most common strategy employed, with 61 percent of banks indicating they are leveraging automation tools. Many, however, reported lackluster results with new technology. While 91 percent said technology acceptance is high, only 43 percent of banks are seeing results from those investments.

“New technologies make possible what was unthinkable a decade ago. They are causing profound changes in workforce development, organizational structure, management, executive priorities, and shareholder expectations,” said Jerin May, director in the Technology practice and West Coast Security & Infrastructure services leader. “The industry is making the right investments to make significant gains in productivity, but banks should first focus on optimizing their technology investments. When new technology is not fully aligned with an organization’s goals, strategy, people, and even available skillsets, results will always lag.”

Other key findings of the report include:

• While automation is the most commonly implemented strategy, many banks also report implementing performance management tools (60 percent), data-driven strategies (48 percent), and training programs (45 percent) as a means of improving productivity and efficiency.
• Banks’ moves to introduce new technology often lack a broader strategy. Only 34 percent of executives surveyed said that when they implement a new technology to improve efficiency, they always redesign the business process first.
• Banks must change how employees work alongside new technology. In the survey, 73 percent said they are using time freed-up by automation to focus on strategic initiatives, while 67 percent said they use that time to complete other tactical activities. Only 38 percent are using that time for relationship management and selling.

A full copy of the report is available here.

About West Monroe Partners

West Monroe is a national business and technology consulting firm that partners with dynamic organizations to reimagine, build, and operate their businesses at peak performance. Our team of more than 1,400 professionals is comprised of an uncommon blend of business consultants and deep technologists. This unique combination of expertise enables us to design, develop, implement, and run strategic business and technology solutions that yield a dramatic commercial impact on our clients’ profitability and performance. For more information, visit www.wmp.com

Media Contact

Christina Galoozis
cgaloozis@westmonroe.com
312.447.6623