Originally Published on: SpendEdge |Innovative Procurement Process for Banking Cost-Saving
The banking industry is still grappling with the aftermath of the great depression witnessed a decade ago. Various procurement costs, including real estate, ATM maintenance, transaction and card processing services, collections, risk management, security services, and in-branch marketing, are exerting pressure on the profitability of banks. To sustain competitiveness and thrive in the market, banks and financial institutions are exploring various cost containment strategies. The banking sector actively seeks innovative approaches in its procurement process to manage and curtail costs.
Supplier Cost Breakdown Source: SpendEdge Procurement Research Report – Global Banking Services Category
Request Proposal
Pooling Resources for Cost Containment Banks and financial service providers have introduced groundbreaking solutions for pooling resources for a specific line of business, assigning a dedicated entity to manage the processing. Pooling resources to share infrastructure and operational costs across organizations can lead to substantial savings while increasing investment efficiency, rendering capital-intensive projects more viable.
Vendor Consolidation or Supplier Rationalization Vendor consolidation is a procurement strategy employed by the banking and financial services industry to realize cost savings. Banks aim to reduce the number of vendors across geographies and business units, concentrating on selecting a preferred vendor per spend category. Implementation of such vendor partnerships allows banks to enhance operational efficiency and productivity, saving valuable time and money. Additionally, these procurement cost reduction strategies eliminate the need for extensive training procedures for staff and ensure compliance with the procurement process.
Investment in Technology The financial industry has traditionally been resource-intensive and heavily reliant on human expertise. While most banks invest significantly in ERP systems, the utilization of technology is constrained, primarily due to a scarcity of individuals proficient in such technology. Blockchain technology is emerging as a transformative force in the financial services industry, capable of eliminating protracted transaction processes and expensive third-party verification. Such technologies can rapidly enhance the efficiency of the procurement process within the financial industry.
Adoption Of Public Cloud Services for Digital Banking Banking service providers are turning towards applications and storage space available in the public cloud, eliminating the need to invest in dedicated hardware and software resources. Opting for various engagement models such as SaaS, PaaS, and IaaS enables banks to digitize their services without the necessity of maintaining data centers.
Revolutionary Procurement Strategies Cost-saving strategies in procurement in banking
Supplier Negotiations and Consolidation: Banking institutions can achieve significant cost savings by negotiating better terms and conditions with their suppliers. Leveraging their purchasing volume and consolidating procurement efforts enable banks to negotiate lower prices, improved payment terms, and reduced service fees. This approach can be particularly effective for commonly purchased goods and services, such as office supplies, IT equipment, or facility maintenance services. Strategic supplier management and partnerships can lead to long-term cost reductions.
Technology and Automation: Implementing technology and automation solutions in the procurement process can streamline operations and reduce costs. Procurement automation tools, such as e-procurement systems and e-sourcing platforms, assist banks in optimizing supplier selection, purchase order processing, and invoice management. By automating routine tasks and minimizing manual intervention, banking institutions can save time, minimize errors, and improve compliance with procurement policies, ultimately leading to cost savings.
Supplier Performance Evaluation: Regularly evaluating supplier performance is crucial to identify underperforming vendors and assess the quality of goods and services provided. Utilizing key performance indicators (KPIs) to measure supplier performance in terms of cost-effectiveness, quality, and delivery timeliness allows banks to hold suppliers accountable and maintain transparency in the procurement process. This practice encourages suppliers to continuously enhance their services, and if necessary, banks can replace underperforming vendors with more cost-effective alternatives.
Explore more about the procurement process in the banking services market, including pricing strategies, supply market landscape, pricing trends, negotiation strategies, procurement cost reduction strategies, and procurement insights in SpendEdge’s upcoming report on the global banking services market.
