McKinsey's 2023 Banking Review: Navigating Change and Embracing Process Mining
McKinsey's annual banking review notes improved profits, yet highlights structural shifts. Process mining is pivotal for optimizing operations and navigating the evolving financial landscape.
McKinsey's Banking Annual Review of 2023 highlights a notable improvement in the banking sector's performance, primarily attributed to rising interest rates. However, the industry faces significant structural and macroeconomic changes.
The banking sector has navigated challenges such as increased oversight, digital innovation, and new competitors, all amidst historically low interest rates. The recent upward trend in interest rates has boosted profits, leading to the best period for global banking in over a decade.
A major shift is observed as balance sheets and transactions move away from traditional banks to nontraditional institutions, including digital payment specialists and private markets. This transition places traditional banking at a critical juncture, redefining the sector's boundaries.
The Global Banking Annual Review examines this "Great Banking Transition" and suggests five priorities for financial institutions to reinvent and future-proof themselves. These priorities include embracing leading technologies, flexing and unbundling the balance sheet, scaling or exiting transaction business, leveling up distribution, and adapting to the evolving risk landscape.
Process mining can play a crucial role in addressing these priorities. It can help financial institutions optimize processes, reduce operational costs, and enhance efficiency. Here's how:
Exploiting Technology and AI: Process mining utilizes AI and advanced analytics to automate and streamline operations, driving productivity improvements and cost reduction.
Flexing and Unbundling the Balance Sheet: Process mining helps banks analyze their balance sheet operations, identifying opportunities to optimize syndication, lending models, and third-party partnerships for cost-effective balance sheet management.
Scaling or Exiting Transaction Business: Process mining provides insights into transaction processes, enabling banks to scale efficiently or exit non-performing transaction areas.
Leveling Up Distribution: By analyzing distribution channels and customer interactions, process mining enhances distribution strategies, supporting the adoption of digital and AI-based advisory services.
Adapting to Changing Risks: Process mining can assist banks in identifying and mitigating operational and compliance risks, strengthening risk management practices.
In conclusion, as the banking industry adapts to the "Great Banking Transition," process mining offers valuable tools to help financial institutions optimize their operations, navigate challenges, and remain competitive in an evolving landscape. It empowers banks to make data-driven decisions and drive operational excellence.