Preventing Revenue Leakage in a Complex Banking Ecosystem
By Binesh K, Strategy, CEO’s Office, SunTec Business Solutions
Modern corporate banks must focus on the customer and personalize deals, pricing, bundles and more for a customer-centric, value-driven experience. Unfortunately, many banks still don’t have the state-of-the-art solutions they need to manage these varied customer relationships effectively. Organizations lack automated systems with advanced capabilities for price setting, deal management, billing, and contract renewals. Ad hoc processes left to the discretion of individual employees make for a bad customer experience as well as increase the risk of revenue leakages. Approximately 1 to 5 percent of EBITA is lost unnoticed because of inefficient contract and payment management.1 As the business of corporate banking gets increasingly competitive banks must focus on plugging revenue leaks and improve profitability.
Understanding Revenue Leakage
Banking relationships are growing increasingly complex with most corporate customers working across multiple regions, currencies, entities, and engagements. Relationship managers need to have a unified and consolidated view of customer engagement across touchpoints as well as intelligent insights into their behavior to be able to offer hyper-personalized, bespoke pricing options and offers effectively. And in the absence of empathetic and quick negotiations there is increased customer dissonance, dissatisfaction and procedural inefficiencies that lead to revenue leakages.
Inefficient billing and invoicing systems coupled with error-prone reporting processes also pose higher risks of revenue leakage. Incorrect pricing, refund errors, unbilled transactions, multiple freebies to same customer, errors in calculating discounts, undercharging and inaccuracies during service downgrade are some of the most common reasons for revenue leakage. It could also stem from avoidable clerical errors like unsent invoices, incorrect data entries, untracked payments, conversion loss due to exchange pricing and more. In the absence of reports that are not intuitive, settlements that are not transparent and deemed unfair, and inaccurate value exchanges, there is increasing customer dissatisfaction and even customer attrition. The renewals that do take place are not founded in useful insights on customer behavior or an effective value driven relationship. They are not based on profitability of the relationship, leading to loss of revenue.
A Holistic and Tech Powered Customer-Centric Strategy to Plug Revenue Leakage
Corporate banks need a revenue management solution that ensures transparency to customers, enhances customer experience, and plugs revenue leakage. A technology platform that can break down silos to integrate data across channels and touchpoints is a critical requirement for financial institutions/ corporate banks looking to plug revenue leakages. Modernizing the core is time consuming, expensive, and risky. So many banks are opting to work with third-party partners who can implement middleware solutions to optimize revenue management and customer experience.
An effective revenue management system entails:
- Set the right prices based on information on relationship value and manage pricing execution
- Negotiate with corporate clients based on simulations, thereby taking informed calls on negotiations
- Automate approvals based on set rules
Billing & Invoicing:
- Automate scheduled invoicing and manage complex multi-entity, multi-region invoices
- Ensure accurate invoicing along with intuitive timely reporting
- Create an informed settlement process
- Improve dispute management with insights and granular data for each customer relationship
- Assess performance of relationship with complete information on profitability
- Renew contracts based on previous performance and customer context and priorities
Revenue leakage can be a result of non-collection of earned revenues or losing potential earnings. It has a significant impact on the financial health of the organization. An effective customer-centric process and technology is essential for preventing and plugging leakages. The right technology can enable you to seamlessly integrate and deploy a powerful system for revenue management.