The Future of Revenue Growth for Banks – Remediating Revenue Leakage

Darren Cherry
Consulting Practice Director, EMEA

Remediating Revenue Leakage

Most banks look to replace legacy billing systems once they realise how much revenue they are haemorrhaging. Knowing about revenue leakage and having the skills, capabilities, and techniques to fix it are entirely different beasts.

During the global economic boom, banks sought to achieve competitive advantage through acquisition, but this created an integration challenge. The key to success is streamlining IT and business infrastructure and working from a common operating model which takes time, money, and effort. While systems rationalisation programmes seek to address these challenges, one of the issues surrounding IT disparity is the possibility for transactional processing errors, or failures, that can result in a loss of income.

Revenue leakage happens as a result of a bank’s failure to collect all revenue owed. All revenue loss is unwanted and avoidable if you have the right processes and systems in place to safeguard against it. Alongside a lack of controls in place monitor and enforce deal compliance, leakage is typically the result of low operational processes. It can occur at every stage through the customer lifecycle. Money that goes uncollected is wasted opportunity and eats away at profit margins. Leakage typically occurs due to incorrect pricing, issuing too many refunds, having a source of unbilled transactions, and discounted pricing agreements that go unchanged for year after year.

The Oracle Revenue Management & Billing (ORMB) system takes care of all these things and remediates against additional sources of leakage. ORMB gives banks the certainty that if a transaction or service fee is due, then through its AR capabilities, revenues are collected, in full and on time.

A more complicated scenario to deal with is revenue lag – in other words, the gap between your receivables and what you could achieve through understanding the customer’s propensity to pay for services. ‘What if’ and scenario-based mapping plays a crucial role in determining what banks could charge against what is currently assigned. The delta is quite surprising. Mapping pricing against target market segments and undertaking wholesale uplift becomes achievable once you have a deeper understanding of customer behaviour and how they do business with you. Pricing uplifts, judged against the acceptance in the market, not only grow organic income but gives you complete traceability of all fee’s charges and other income.

ORMB allows banks to approach leakage from another angle. With ORMB, instead of correcting errors after they occur, or not detecting and correcting them at all, the system enables banks to examine and plug root causes of leakage throughout the operation, and to update data using workflows before the charges are calculated and bills produced.

In previous implementations, ORMB has plugged leakage up to 10% of income – that’s quite an exciting proposition considering the current state of the global economy.

This is my fourth blog post in a series of blogs on how banks can enjoy revenue growth by adopting the right technologies and best practices. To learn more, feel free to message me to explore more or have a conversation.

For more information, please visit:
Oracle Revenue Management and Billing Quick Start Program: Visit solution page
Oracle Financial Services: oracle.com/financial-services

More from Darren Cherry:
Blog #1: The Future of Revenue Generation for Banks
Blog #2: End to End Revenue Management
Blog #3: Dynamic Pricing & Product Cataloguing

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