How to elevate financial institution performance in 2021

To move forward with confidence, focus on four areas

Mark Ricci

Mark Ricci

Principal, Advisory, KPMG US

+1 704-371-8083

Bob Ruark

Bob Ruark

Principal, Banking & Fintech Strategy Leader, KPMG US

+1 704-371-5271

Celeste Diana

Celeste Diana

Principal, Corporate Strategy, KPMG US

+1 516-456-1863

Banks need to drive rapid, sustainable efficiency ratio improvement to meet the rising customer expectations and remain competitive.

To remain viable long term, financial institutions will need to solve the customer-cost-revenue equation. Specifically, they will need to reduce efficiency ratios (operating expense divided by revenue) to below 50 percent. That’s an aggressive goal, as today the average U.S. bank has an efficiency ratio of approximately 64.2 percent.

The good news is that by taking bold action in the four areas below, you can be poised to seize emerging opportunities in 2021.

1.  Focus on the Customer

A customer’s best experience, across any product or service, has become what is expected of everyone they do business with—banks included. Financial institutions need to transform to deliver what consumers want: on-demand, self-service, with easy and error-free transactions. When banks fail to address those expectations, competitors enter the market, working feverishly to close expectation gaps and grab their share of customer trust and loyalty.

Financial institutions need to transform to deliver what we all want as consumers – self-service, on-demand, easy to do business, and error-free. A digital enablement strategy allows an organization to redesign its processes and reestablish its infrastructure at a lower cost structure, so the organization can deliver to the customer the right information, at the right time, and at the right place.
Mark Ricci, Advisory Principal, Financial KPMG LLP

2.  Enable performance improvement

For most financial institutions, the benefits initially gained from performance improvement or cost reduction programs that were implemented ten years ago are now gone. While many of the keys to elevating improvement are largely the same, some levers have changed.

Planning for sustaining the change is often missed. Implementing annual goals for incremental change will over time develop a new culture of ongoing performance improvement.
Robert Ruark, Advisory principal strategy, US Fin Tech leader KPMG LLP

3.  Accelerate digital transformation

COVID-19 has clearly fueled digital transformation strategies and budgets. These transformations require new business and operating models—and will drive enormous customer benefits. Linking performance improvement to digital transformation initiatives will help financial institutions shift focus to digital channels for sales, service, and operations.

Despite the mixed motivations, COVID-19 is accelerating digital transformation strategies and budgets and surprisingly many see this as a galvanizing opportunity to create a new operating model


have accelerated elements of their digital transformation strategy moderately or significantly, as a result of the pandemic



have increased their digital transformation budget moderately or significantly, as a result of the COVID-19



of organizations are focusing the scope of their digital transformation strategy across the entire enterprise

4.  Develop a continuous improvement culture

Most financial institutions have matured over decades of transitions, acquisitions and spin-offs. This means that operations cannot be undone in a matter of weeks or months; the journey will not be short nor pain-free. Once improvement initiatives are implemented, planning for how to sustain the new operational and organizational changes is critical—and commonly overlooked.

Companies need to assess both the benefits and risks of the proposed change. Understanding how much you can improve those levers while maintaining an acceptable amount of risk is one key to sustaining the change.
Jim O’Dell, Advisory Managing Director, Customer KPMG LLP
Elevate performance improvement in 2021
Download this paper to uncover how you can best drive your institution’s efficiency ratio below 50 percent.