Globys Research A strategic perspective on invoice-to-cash

Is revenue leakage worth the fix?

Topics: Information Reporting

Just like that constantly dripping faucet, revenue leakage is often written off as more of an annoyance versus a problem that needs immediate fixing. You know it’s happening but with exposure to just a few drips at a time, the damage seems tolerable in comparison to the other challenges at hand. Not to mention that the last time you attempted to fix it, it took you far too long to identify the source of the problem – making you question if the fix is really worth the effort.

But if you could combine all of those leaks into a single value and have a clear picture of the impact it’s having on your revenues, would your sense of urgency to fix the problem change?

Analysts and advisors have long pointed out the revenue that banks are leaving on the table – BCG stating undercharging and leakage is 3-5%, Tower Group saying average revenue leakage is 7%, and DHL claiming some banks mischarge 70% of transactions – but without a way to quickly recognize and fix the leaks, little has been done.

Recently though, we’ve seen a shift in the value banks are placing on the fix of the continuous drip – for two main reasons.

First, banks are hyper-focused on making the most out of each and every customer relationship. We’ve all witnessed or had first-hand experience with declining revenues and growing regulations. Times are tough and customer facing teams are on the hook for not only keeping their customers devoted to the bank but doing so while ‘encouraging’ them to increase their spend.  Collecting what’s owed – versus finding new streams of revenue – is the obvious low hanging fruit.

Second, the ease in implementing and applying a fix has been greatly reduced thanks to advancements in automated analysis and visualization. The challenge in the past was the lack of business user tools (meaning ‘I get the insights required to take action – when and how I need them’) to support this specific use case. These teams need visibility into the customer charges as well as the fee schedules they’re being charged against (or supposed to be charged against).  Most banks can provide this today – at least in a static state.

But what’s also required – and lacking to date – is an automated process to determine any variances among these two values, across every product and service, across every account, and across every single customer. It’s this built-in analysis that drives the direct delivery of relevant insights to the teams that need to act to resolve the leakage problem. As opposed to receiving a set of stagnant aggregated data, this automated approach enables a continuous understanding of the magnitude of the leaks and provides guidance as to where to focus efforts to drive the greatest gain.

Banks are acknowledging that these once seeping revenue leaks – whether 3, 5, or 7% – are beginning to look more like gushing pipe breaks given today’s market dynamics. Every dollar counts and as more products and services are offered, more charges will be administered, and more leaks will occur.

For most banks, watching their revenues go down the drain is no longer an option.