How to Rationalize and Simplify Your Bank’s Product Portfolio
Many contemporary retail banks tend to maintain large portfolios of banking products that number by the hundreds, creating a high level of complexity that often results in customer confusion and high maintenance and operational costs. These financial institutions are likely to continue to struggle with this complexity as the number of the products they offer—and [...]
The post How to Rationalize and Simplify Your Bank’s Product Portfolio first appeared on Tekrati and is written by Gia Patterson
]]>How to Rationalize and Simplify Your Bank’s Product Portfolio
Many contemporary retail banks tend to maintain large portfolios of banking products that number by the hundreds, creating a high level of complexity that often results in customer confusion and high maintenance and operational costs. These financial institutions are likely to continue to struggle with this complexity as the number of the products they offer—and variations of them—proliferate.
In many cases, this amplification in complexity occurs because banks don’t maintain a single source of truth for managing their product catalogs. With insufficiently synchronized product data and the existence of siloed product groups across multiple product processors, portfolio centralization is made impossible. In addition, the increasing geographic distribution of retail banking businesses as well as the continuing reality of mergers and acquisitions across the financial services industry are causing bank branches to have disjointed databases and applications. All of these means banks are failing to have a complete overview of customer and product relationships, and stakeholders across the business are not able to collaborate effectively to create products that address customer needs best.
Simplifying and rationalizing your retail bank’s product portfolio can have a positive impact on your financial institution’s ability to manage changes in product features and pricing. Moreover, it also empowers the front end of your business in terms of its ability to offer simpler, more relevant, and more useful products that your customers will truly need and want. To this end, this short guide aims to highlight some of the ways your bank can achieve this goal.
Leverage the Power of a Modern Product Manufacturing and Management Solution
Outdated legacy software solutions tend to be notoriously inefficient in terms of giving financial institutions the ability to rationalize and simplify their product portfolios. Even simple price and feature changes can result in the proliferation of new core consumer products, preventing banks from being agile and creating overly complicated portfolios that cannibalize their profits.
Your bank can avoid suffering the same fate by upgrading to a product manufacturing and management solution that lets you go to market more quickly with more innovative and relevant products. In addition, this solution can also help you expand the features of existing products with ease, all while allowing you to create pricing strategies that bolster client retention and to build efficient and well-defined product bundles.
Just one of the several modern retail banking solutions that you can invest in, a product manufacturing and management solution allows your financial institution to be more nimble by centralizing product data from across different operational systems into just one repository. This repository will serve as a single destination for modifying or configuring product information. For example, users will have the ability to set up new features for already-existing banking products, which is extremely helpful in preventing new products from being created by the system unnecessarily.
Adopt a Product Design Approach That Focuses on Modularity
In today’s highly competitive financial services market, banks that are unable to meet client demands for personalized product offerings are likely to lose out to more agile, more innovative financial institutions that can better adapt to customer needs and desires. Adopting a modular product design approach is one way to make sure that your bank can meet this demand for personalization, all while maintaining a simple and rationalized product portfolio.
To do this, you need to first determine the features that should be part of the standard product offerings. Afterward, you should identify the “modules” that can be added to these basic offerings as optionals and incidentals—all based on what customers need and what they are willing to pay for. This can apply to a wide variety of banking and non-banking products—from checking and savings accounts with diverse specifications to loan products, insurance plans, and investment vehicles that can have specific variations and optional features that customers can choose from. All of these are possible if you have a modern and efficient product manufacturing and management solution.
Create Optimal Product Mixes with the Right Bundling Schemes
In the current financial services landscape, it is often no longer enough for banks to consider just the existing value that customers bring to their business; they also need to exert more effort to actually improve customer lifetime value. This means that financial institutions must build stronger, more authentic relationships through well-thought-out strategies, including creating seamless onboarding processes, engaging in better customer service, and coming up with more innovative product offerings. The last of these can include a variety of sub-strategies, but presently, one of the most effective ways to generate better customer lifetime value is by creating effective bundling strategies.
Under such strategies, your bank can combine several banking products to make less attractive products more popular or to encourage customers to augment their purchases. Additionally, your bank can also combine different products to engender vendor lock-in, which means that customers will be encouraged to remain within your bank’s product ecosystem, reliant on your financial institution’s offerings and services. That being said, effective bundling strategies should be designed such that they will be mutually beneficial to both your financial institution and the customers you serve. For example, in return for their loyalty, customers get to enjoy a variety of benefits, including discounted pricing, better rates, and a range of loyalty rewards.
All over the world, many banks continue to struggle with the challenge of managing a broad range of products and services. While the simplification of product catalogs tends to bring significant benefits to financial institutions, existing hurdles like overreliance on outdated legacy solutions can hamper efforts at making product portfolios more rationalized and product development teams more agile. It is important for banks to deal with this challenge at the soonest possible time in order to enjoy the advantages of product management transformation. These can include lower operational and maintenance costs as well as various financial gains brought about by being better able to meet the needs of customers.
The post How to Rationalize and Simplify Your Bank’s Product Portfolio first appeared on Tekrati and is written by Gia Patterson
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