Adopt a light digital footprint over a physical footprint to compete
During the first conflict in the Middle East, the American Army invented the “Light Footprint” concept, which can be summarized in 3 points. First, do not commit if there is no critical need for it; second, make your team agile and flexible enough to make key decisions quickly; and third, if you can’t win, make sure it’s a tie and protect yourself from threats. Further developed and enriched in the professional services industry to describe the dynamics, techniques and tools within organizations, there are a number of opportunities to apply this concept to the financial services industry.
There are strong links between the military’s physical footprint and the banking world’s light digital footprint
Digital friendly countries with limited constraints on data collection and use provide an advantage for banks that could prove valuable to exploit. Let’s take the Coverage Cost of a major CIB player as an example: based on our figures, the Coverage cost is around 10% out of the total CIB Costs. While replacing part of the human presence by digital platforms, the positive cost impact could be at least 1%, which, in the scale of a large CIB entity, is far from negligible.
A digital footprint has been named as “the world’s most valuable resource” by the Economist because of its impact on customer experience and the way companies communicate. A “light digital footprint” approach could be leveraged in the digital world, oriented towards data collection, smart analytics and an enhanced digital presence. One of our key contacts in a major CIB provided the example from the pharmaceuticals industry: to estimate the demand of the paracetamol market, you could either set up a team that would physically meet pharmacists across a region and gather top-down data; or use a digital platform such as Doctolib.com, an online medical booking platform, to study the requests for medical appointments with general practitioners. Not only would this save time, but the execution cost would be dramatically lower.
This tells us that, within certain business segments, virtual coverage in digitally friendly territories could be heavily driven by digital platforms and assets with a reduced weight of human interactions, resulting in reduced costs and improvement of customer service quality.
In Private Banking, the hot topic of Impact Investing has been featured on the World Economic forum agenda for a number of years. It has more weighting within the investment portfolio of new generation high-net worth clients and could be largely embraced by specialized platforms with minimum human coverage.
Although it is challenging to change the digital friendliness of certain regions from a regulatory and internet censorship perspective, these examples demonstrate that increasing digital coverage proves to have impact on both cost and revenue in the right segment and geographical regions.