The banking industry is currently in an excellent standing than it was a decade ago when the global crisis struck. In the recent decade, it has expanded in both size and profitability to unprecedented levels.
In accordance with Deloitte’s report, the company’s resiliency has increased significantly over the last decade. Moreover, the bank industry’s total assets surpassed $124 trillion in 2018, as stated by Banker’s Top 1000 global bank rankings.
For the first time ever, US-based banking institutions acquired a capital of $17.5 trillion in 2018. The U.S. banking sector’s return on equity (ROE) accounted for 11.83%, recording the strongest ratio since the economic crisis.
Background of Bank
The group of financial services cannot function without a strong banking industry. As opposed to the financial services that focus on investments, risk redistribution, insurance, and other financial activities, this financial sector is more concentrated on lending and direct savings.
The birth of the bank happened during the time when empires required a means of settling payment for goods and services from oversea countries.
As soon as the first currency was issued and affluent individuals sought a secure location to safeguard their money, the bank became popular since then.
Financial systems were necessary for ancient monarchies to promote commerce, disperse wealth, and acquire tax revenue. As they do now, banks were expected to play a significant part in that.
What is Bank Value Chain Analysis in 2022?
A value chain analysis of the bank is generally done to uncover specific operations in which the business might develop market share and gain a competitive advantage, including the bank’s operation, sales, customers’ services, technology, and more.
In addition, institutions typically reduce operating expenses and greater profits by optimizing the value chain.
On the other hand, the analysis will help the business to look at how appealing a market in that specific industry might be financially beneficial to the company.
On top of that, the goal is set as a way to figure out how to make as much money as possible while cutting costs.
Bank Primary Activities
Inbound Logistics
In the banking industry, inbound logistics can be seen when you store the incoming material, data collection. When clients visit the counter or customer service, consumers are informed about the services offered by the bank.
From there, customers always obtain the best possible solutions from the bank. Apart from this, retail banking is a division in which the bank manages customers coming in and going out.
To put it simply, this banking service offers a variety of services, including simple credit and debit cards, mortgages, open savings accounts, and other finance-related and non-financial services.
For instance, the customer service employees at the front desk serve as the delivery of information and solutions to clients. Counterfeit and low-quality inputs may be detected by the system and procedure used to receive them.
Operations
When it comes to the finance sector, efficiency and effectiveness are essential. Additionally, an operation is responsible for enforcing the bank’s numerous regulatory standards and addressing trading inconsistencies.
As a surprise, every bank considers operation as the heart of the organization. The operation carries many challenges that may arise, such as settling down the trades, processing the transactions, and assuring the business demands.
Outbound Logistics
In the financial service sector, outbound logistics refers to the way of attracting clients to use the service. In most cases, banks like to settle their customers with nearby branches that are easily accessible for them.
Other than that, customers expect their services to be delivered in a way that suits their needs. Hence, this is where the back office comes in.
Bank operations and security elements, for example, should be upgraded to reduce fraud in the branch. Its primary output services are distributed over a safe and secure network that is free of counterfeits.
Thus, most international banks have a lot of branches in many countries worldwide to serve their clients.
Marketing and Sales
Marketing is also very important in the banking business. This sector is extremely competitive; therefore, institutions must prioritize expanding into new markets and acquiring new clients and customer loyalty.
Moreover, the work of banks’ marketing and sales departments is to use various methods of public relations, promotions, and advertising and create new products and identify new markets for growth.
To succeed in today’s market, the sales and marketing team needs to sell the services and maintain the customers.
After-Sales Services
Most bank institutions have set up a call center where consumers may obtain assistance 24 hours a day, seven days a week, with a wide range of issues.
In order to serve the customer’s needs in an effective and fast way, the call center will set up staff waiting to respond to any upcoming activities 24/7, including texts, emails, or calls from the customers. In addition, they also offer documents of any necessity.
Typically, the response personnel in the department will immediately address customers’ inquiries and complaints, enforce compliance at the right time, and provide timely assistance for all corporate operations requirements, among other things.
Bank Support Activities
Infrastructure
As with any other business, the banking industry heavily relies on its infrastructure. Whether it is physical or technological, the infrastructure helps identify the development and success of the bank.
Because of the increasing dangers associated with cybersecurity, banking practitioners emphasize developing a robust and highly-secured information technology infrastructure, especially the data center.
The cloud data center infrastructure will protect the customers’ personal data through multi-layers security protocols. Eventually, the banks could easily receive trust and belief from clients with all the backup systems and secure infrastructure.
Human Resource Management
Apart from the expanding role of information technology, HR will always remain critical in the banking value chain.
Moreover, corporate collaboration, employee satisfaction, salaries and benefits, and skill development are the five most influential factors in HR management.
However, technology and digitalization are only modern tools to help design and deliver successful employee training programs.
It is always special in the banking sector, where employees’ effectiveness significantly impacts the business’s profitability.
Technology Development
Every transaction in the bank is commonly supported and controlled by the ICT department.
As a result of its ability to improve the efficiency with which services are delivered, digital technology can potentially provide competitiveness for the banking industry.
Additionally, customer support is always available online, so they do not have to visit the bank to get the solutions they require most of the time. Furthermore, online banking and websites are essential ways to promote the business and attract more customers.
On top of that, mobile apps are the most convenient and quick way for day-to-day transactions. Having this technological update will give the institutions a wide range of benefits.
Procurement
Procurement is the process utilized in the value chain for the best purchasing to support business activities.
These things usually involve resources, petroleum, and utility assets like equipment, soft and hard wares, and office appliances.
Therefore, any more efficient procurement procedures have the potential to reduce the price of inputs.
To achieve the institutions’ business goals, building supplier partnerships, purchasing products and services, to handle bidding, and awarding contracts after procurement are the five most critical value operations in procurement.
Key Takeaways
Banks leverage the Value Chain Analysis to stay ahead of their competitors.
Additionally, each area’s value-added and customer satisfaction methods will increase productivity, reduce work redundancy, and improve service quality.
Moreover, all service level agreements must be adhered to improve departmental coordination and efficiency.