The perfect financial wave: Bankers are looking beyond the Fed and interest rates

Digital & Social Marketing Strategist, Analytics Platform, IBM

Santa Cruz, California, is renowned among dedicated surfing enthusiasts as Surf City, USA. Every day, surfers—whether tour pros or young tech workers from Palo Alto and the nearby Bay Area—come to the city’s beachfront at Steamer Lane, the site of the region’s best surf breaks. There they wait for the rising tide, hoping that swell, tide and wind shape the waves to give them a world-class ride.

Wall Street is a long way from Santa Cruz, but as bankers eagerly await the December 2015 meeting of the Board of Governors of the Federal Reserve System—a meeting that many of them hope will end the era of 0 percent interest rates—they find themselves in much the same position as the hopeful surfers of Steamer Lane. Today, like surfers waiting for the tide, bank find their paths to profitability and return on equity depending on forces largely outside their control: policymakers, regulators and legislators.

Why wait for the tide? Beyond interest rates

Many banks, believing that a rising tide lifts all boats, have settled themselves into what some market observers consider the new reality of global banking: stable—if unimpressive—return on equity and slow growth. Moreover, although after-tax profits for the global banking industry have been breaking records, a detailed analysis reveals that bank profits are not only uneven across geographies, but also heavily dependent on growth in China—and that growth looks to be stalling.

Understandably, then, banks eagerly look to the Federal Reserve for an increase in interest rates. Research conducted by the Bank for International Settlements has revealed a strong link between monetary policy and bank profitability, lending credence to the conventional wisdom that rising interest rates could boost bank margins and heighten such institutions’ profitability. Unfortunately, as McKinsey points out in its Global Banking Review 2015,

Many in the industry are waiting for an interest rate rise or some other structural lift to profits, but even if rates rise, that will be insufficient to fundamentally improve economics. ... Much of the benefit will get competed away, and risk-costs will likely increase, especially in economies where the recovery is still fragile.

Carve your wave: The business advantages of case management technology

Banks at the vanguard of the financial services industry can do more than simply wait for the tide to turn. In the United States, the banking industry is highly fragmented and commoditized, and in such a marketplace, banks that wish to stay ahead of the competition must adopt proactive measures.

Consider, for example, how banks can adopt advanced case management solutions to seek good business outcomes while cutting costs, thereby enhancing their bottom-line performance. Indeed, such technologies offer many business advantages:

  • Drive business transformation across core banking systems.
  • Adopt agile and streamlined business processes and workflows.
  • Rapidly adapt and realign to structural shifts.
  • Quickly design products and deliver them to market.
  • Proactively manage client relationships.

Catch the perfect wave: The return on investment of case management solutions

For banks, implementing case management technologies can boost customer acquisition rates as well as revenue per customer, and all while cutting operating costs. Moreover, the return on investment (ROI) of such implementations can be significant—Forrester, for example, estimates that users of IBM Case Manager will realize an ROI of 238 percent, as well as cost savings of about $13 million.

To learn more, discover what business advantages IBM case management technologies can provide to your organization, then watch this webcast for a real-world example of how Union Bank reaped significant cost benefits by implementing IBM Case Manager. After that, begin bringing these advantages to your own institution with a no-cost trial of IBM Case Manager or IBM Case Manager Mobile.