In an ideal world, it would be easy for a business to stay on top of its profitability situation and not bleed cash because of delays or inefficiencies. But in reality, it’s much harder to achieve—even for a financial institution like a bank or UK stockbroker. In fact, there’s a term that encompasses the situation in which a bank fails to collect all the revenue it’s owed. That phenomenon is called revenue leakage—and if it strikes a chord, perhaps it’s something that’s already happening to your own bank.
Is there a way out of the problem of revenue leakage? Luckily, the answer is yes, thanks to existing revenue management solutions for banks. Plugging the holes in your profitability situation may not be achievable overnight, but technology can bring you closer to addressing the root problems and securing a better outlook for your bank. Here’s how you can be more proactive about revenue leakage, and how to earn more from better business efficiency and pricing strategies.
What Are the Main Culprits Behind Revenue Leakage?
The first step to addressing turnover leakage is identifying why it happens in the first place. What are the most common causes for these hemorrhages? The six biggest problems for banks are the following:
Issues in Transaction Processing
If your staff are overwhelmed by a massive volume of transactions, it may take them a long time to clear them all, and there’s a chance they’ll commit some errors along the way. But a lot of time is lost to a fundamentally inefficient system—and the same goes for money. Transaction processing may be one of your top pain points in your revenue management, and thus an issue that deserves your priority.
Another problem may lie in outdated or undynamic pricing for your financial products. To be fair, it’s difficult to arrive at prices that satisfy your corporate and retail customers without causing your coffers to bleed. But it’s a challenge worth undertaking if your goal is to move your investment banking products.
Your billing system is another likely culprit, especially if it relies on manual bill processing methods. Even just a few cents off the right billing amount, reflected in just a few banking statements, could eventually snowball into major revenue leakage. If these inconsistencies keep popping up, then it’s time to review your billing system and make it more efficient. Business books suggest software as a service could allow you to plug a gap in your billing system with a billing plugin.
Mounting Unbilled Transactions
A related issue is the number of transactions that may have gone unbilled for too long. For example, major revenue leakage will ensue if banks fail to quickly implement charges when customers’ balances dip below the minimum. You need to be aware of the transactions that often fly under the radar, and you need to charge the right amounts for them.
Static Discount Programs
Your discount program may be a favorite among your banking customers, but what if the discount prices have remained the same for years? If your discount rates are making too much of a dent in your current profitability situation, then it’s worth recalibrating the prices and finding new ways to retain customer loyalty.
Uncollected Dues Upon Service Termination
Lastly, you may also be losing money from uncollected dues when a customer’s services are terminated. The customers may not end up paying their last charges upon termination of the service because the system can’t process it quickly or efficiently enough. Again, this causes bleeding that can—and therefore must—be prevented.
Onboarding a New Revenue Management Solution: Plugging the Holes in Your Bank’s Profitability Situation
From the scenarios listed above, it’s easy to deduce the value of a pre-emptive approach to your revenue leakage problems. It’s better to find out where your problems lie and respond to them before things get worse. Banking books recommend a pro-active approach. It’s definitely a much smarter method than simply correcting the errors as they occur—because by the time all errors are accounted for, your bank will have lost a lot of money.
One of the best things you can do to stop the trend of revenue leakage is to onboard a new revenue management solution. A good solution will have the following capabilities:
Streamlined, Efficient Bill Processing
Your solution should be capable of seamless collection and processing of customer fees, and it should accommodate the more complex billing scenarios. This will achieve two things for you: better management of accounts receivable, and greater liquidity for your bank.
The Ability to Implement Smarter Pricing
Another thing to demand from your solution is the ability to implement smarter pricing, which takes customer trends and customer behavior into account. Transition out of a silo-based pricing scheme into one that’s based on evolving customer data, and determine the ideal prices to achieve top-line growth.
Options for Dynamic and Customer-Friendly Rewards Programs
Your solution may require you to change your discount prices to be more forgiving on your coffers. But in exchange, it should also help you facilitate a fresh new rewards program that remains appealing to customers. Instead of using big discount prices as a selling point, you can aim for more dynamic discount prices and encourage customer enrollment through rewards points or other perks.
The Potential to Address Revenue Lag after Revenue Leakage
In the best-case scenario, your bank will be able to shift its priorities from revenue leakage to revenue lag. After plugging all the holes, you may finally get the chance to focus on earning faster and increasing your current margins. Thus, the ideal revenue management solution will do more than help you address your existing problems—it will also allow you to be optimistic about your future earnings.
Solving the problem of revenue leakage is easier said than done. But a new solution will give you significant headway into identifying key problems, achieving full revenue clarity for your organization, and becoming more agile in aspects like pricing. Commit to saving money and keeping your bank profitable in the long term.