• Jami Nordlund, Expert |

Climate change mitigation, customer orientation and covid-19 response are commonly mentioned by Nordic banks as an area of focus, or as part of their respective strategies, when one reads their latest annual reports. But a fourth common denominator and “Big C” is their focus on COST.

The fact that cost optimization is high on banks’ “C-suite” agenda is no big news. However, it has become even more a priority for many players, as the COVID-19 crisis and its consequences have affected banks’ incomes and put pressure on their profitability. KPMG’s global banking cost transformation survey suggests that the vast majority of banks, all around the world, are refocusing and accelerating their cost optimization efforts.

Customer focus

Not surprisingly, digitization was seen as the most important cost lever by 59% of the survey respondents. In our view, its biggest potential is to be found in process automation, and especially end-to-end digitization in the middle and back office – because this is where labor-intensive processes can be most easily optimized to free up time for customer-centric activities. It is true that customer-centricity and cost consciousness can easily be considered to be mutually exclusive topics.

However, the application of a customer lens to cost optimization is a smart way of ensuring that cost reductions are only targeted at activities that do not add customer value, and that those activities and processes that do add value are streamlined, rather than axed. The KPMG Connected Enterprise for Retail Banking is our proposed framework for end-to-end customer-centric digital transformation.

How to succeed

Cost transformation should be started by setting a focused cost agenda. In our experience, successful banks focus on key programs, rather than on a wide range of small cost reduction initiatives. By using KPMG’s methodology, these programs can first be grouped into 12 underlying cost transformation levers, and can then be prioritized.

But the mere setting of the objectives and strategy for cost reductions is not enough. Our study suggests that the probability of success is maximized by rethinking and mapping a new Target Operating Model (TOM) that will actually deliver the benefits. In support of this, the majority (91%) of banks that were successful with their cost reduction initiatives had also fully mapped their new TOM.

Another success factor for cost transformation is to embrace a strong cost culture, rather than running cost programs year after year. Our survey shows that executive accountability, and cost-reduction-related KPIs are acknowledged as the most important enablers of successful cost transformation, in addition to a strong cost culture. In other words, building a cost culture starts from the very top of the organization, and the executive management’s buy-in is imperative. Shifting to a mindset of continuous improvement is another key success factor that helps banks to move from periodic cost cutting exercises to a culture of continuous performance improvement – a culture where cost optimization is no longer seen as a negative and restrictive activity. 


  • Cost optimization has become an urgent priority for many global banks.
  • Applying a customer lens to cost optimization ensures that cost reductions are only targeted at activities that do not create customer value.
  • Setting a focused cost agenda, mapping the set objectives and strategy for a new Target Operating Model that will actually deliver the benefits, and embracing a cost culture and mindset of continuous improvement are the key factors that will ensure a successful cost transformation.