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Why Banks Need Financial Planning Agility To Drive Competitive Advantage

July 27, 2022 Vena Solutions  
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The banking landscape is more challenging than ever before, with factors such as increasingly tight margins, escalating customer demands and fierce competition at play.

Plus, as interest rates continue to fluctuate, finance leaders are under pressure to lead the charge in searching for new and innovative ways to fund growth.

Why Agile Financial Planning Is Critical to Banks and Credit Unions

In 2020, 50% of consumers interacted with their bank through mobile apps or websites at least once a week, compared to 32% in 2018.

With bank interactions moving online in today's post-pandemic world, the race is on to deliver the right mix of digital banking products—despite the price tag of new development projects. Banks that can’t keep up with customer expectations risk losing market share to newer, nimble players who are unrestrained by the costs of transforming legacy systems.

To meet immediate operational needs and set the groundwork to achieve future goals, banks need an accurate view of all their financial data and the ability to quickly shift plans based on profitability, capital demands and market conditions.

However, to unlock this agility and gain a competitive advantage, banks will first need to solve four key challenges:

Challenge 1: Staying on Top of Actuals and Profitability

Changing economic conditions have forced banks to increase interest rates, cutting into profit margins. In 2020 alone, U.S. bank profits fell 36.5% from the prior year.

For regional banks with smaller loan portfolios, it can be especially challenging to maintain industry-standard profitability when approximately two-thirds of their revenue comes from interest income.

In 2020, U.S. bank profits fell 36.5% from the prior year.

To gain an accurate view of profitability, data needs to align across departments, branches and lines of business. But, product-level data is often spread across core banking, enterprise resource planning (ERP), asset liability management (ALM) and other source systems, making product profitability analysis challenging.

Between ERP, ALM, general ledger (GL) and human resource information system (HRIS) data, it can be impossible to find the numbers needed to keep everything in check. And when margins are slim, there is little room for error.

 

Automate Real-Time Reporting1

Challenge 2: Adapting to Customer Demands

While fluctuating interest rates are slashing innovation budgets, customers are driving demand for new digital banking products and experiences. According to a survey by the Boston Consulting Group conducted in 2020, 24% of consumers planned to use bank branches less—or stop visiting them altogether—after the pandemic.

24% of survey respondents plan to use bank branches less or stop visiting them at all after the pandemic.

With this in mind, it's clear that banks need to respond with next-generation online banking products and services or risk losing market share. Studies show customers are willing to switch banks for better digital products—31.4% of local and regional bank customers would be at least "somewhat likely" to switch to a bank that offered a better mobile card app.

In the race to meet customer expectations, finance teams can’t afford to be spending time on operational tasks like manual data consolidation and reconciliation. Instead, their time should be spent strategically planning and forecasting to make sure they can cover operating costs while funding digital transformation projects.

Unfortunately for many banks, siloed legacy systems and ad-hoc integrations slow down innovation. But in today's increasingly competitive environment, seamlessly connected data is needed to transform both the front-end and back-end of consumer digital banking experiences.

Prepare Legacy Systems for Change1


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Olympia Federal Savings and Vena

With Vena, the community bank cut budget consolidation times by 50%, generated net interest margin forecasts on demand and accelerated monthly financial reporting to 30 minutes.

Read the Story

Challenge 3: Improving Stakeholder Collaboration

The impact of fluctuating interest rates on net interest margins and the growing technology costs tied to the development of digital products are adding to the pressure for banks to consolidate through mergers and acquisitions. Regional consolidation can quickly boost a bank’s deposit rate, while cross-country consolidation can help mitigate risks tied to the economic markets in any particular area. With scale and cost savings, consolidated banks can improve profitability.

But consolidation has its own complications. Branches scattered across various geographies and grappling with disparate data issues need to be able to analyze numbers in one place while meeting different regional regulatory requirements.

In addition to creating one single source of truth across disparate systems, banks also need to create new processes to work together to get the right data to the right stakeholders in the right way—and in a timely manner.

 

Standardize Workflows & Reporting1

Challenge 4: Adapting to Changing Market Conditions

So what happens the next time there’s a crisis? One of the biggest lessons to take away from the turbulent times we've experienced over the past couple of years is that banks need to be primed and ready to manage change. As we've seen, conditions can shift overnight—from interest rates to regulatory requirements and even entire business models.

Banks need to be ready to react to preserve everyday business operations and business continuity. According to Accenture research, when firms are agile, they are more than twice as likely than the average organization to achieve top-quartile financial performance (55% versus 25%).

Agile firms are more than twice as likely as the average organization to achieve top-quartile financial performance (55% versus 25%).

To prepare for change, scenario planning is key. For example, financial teams should be able to make fast, nimble changes to key drivers—like forecasted prime rates—so they can see immediate impacts on margins and profitability.

By considering different possibilities for the future, banks can become more resilient and less susceptible to costly business interruptions.

 

Leverage Real-Time Scenario Planning1

How Banks and Credit Unions Can Achieve Financial Planning Agility With Vena 

Vena for Banks and Credit Unions gives your finance team complete planning and analysis capabilities within one platform built to meet the unique challenges of the banking industry.

Access Real-Time Insights To Improve Decision-Making Accuracy

Set up your finance team to drive timely, data-driven business decisions without all the manual effort. Vena connects your source systems and automates data integrations to help finance teams back up business plans with accurate, real-time data from all relevant sources.

Focus on Innovation To Enable Growth

Free up your team's time to focus on strategy—not reporting. Vena integrates your GL, Core Banking, ALM and FTP data sources into one source of truth so that finance teams can stop chasing after the details and look ahead at the bigger picture instead.

Streamline Workflows To Enhance Collaboration

Set up your finance team to drive timely, data-driven business decisions without all the manual effort. Vena connects your source systems and automates data integrations to help finance teams back up business plans with accurate, real-time data from all relevant sources.

Become Resilient To Adapt to Changing Market Conditions

Create best and worst-case insights using what-if and scenario modeling capabilities. Vena connects your models, so you can plan for any scenario using rolling forecasts, driver-based forecasting and top-down forecasting.

 

Woman typing at laptop with graphs on it.
Financial Planning for Banks Made Easy

Learn how Vena’s pre-configured solution built for banks and credit unions integrates all the templates, data models, source system data and business logic needed to meet your organization's specific business and industry requirements.

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