Competition is as fierce as ever in the European financial services industry as the move toward a harmonized market over the past decade has driven down margins.

It’s Economics 101 – by pushing for transparency, competitors will undercut one another until they are either driven out of the market by the inability to reduce prices further, or they have cut their prices so low that margins become a fraction of what they once were.

Assuming that surviving on lower margins is preferable to being pushed out of the market, how can you give yourself a fighting chance?

If you can’t compete on price, your only other option is to compete on cost. The ability to do this effectively may mean you stay in the game longer, or if you’ve already “won” the race to the bottom, you may gain back some of those lost margins.

What does this have to do with the Cost: Income Ratio? The CIR is a measurement of productivity, and productivity is a measurement that compares inputs to outputs.

If we transition this over to dollars and cents (or Euros), a bank is considered more productive if it can accomplish the same task with lower inputs (costs).

These costs range from paying for hours worked to fees – any cost, or opportunity cost even, that goes into a specific output.

How does this connect to procurement?  Finding hidden savings in your procurement process can lower cost, thereby lowering your CIR. It’s pretty straightforward.

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While the list can go on, here are six ways to do it:

1. Conduct a spend analysis. See where your areas for improvement are and go after them. The use of a Spend Analytics solution could dramatically help you through this.

2. Automate your supplier management using 2019 tools such as SRM, e-Procurement solution..

3. Automate your sourcing process. Manual processes take time, time takes money, and combined they drive up your CIR.

4. Negotiate better contracts. Research from industry analysts says that as much as 2-5% of total annual costs can be saved by eliminating contract inaccuracies and non-compliance.

5. Avoid off-contract spending.

6. Automate your accounts payable. Best-in-class accounts payable organizations can reduce their costs to $4 or less per invoice by leveraging the right technology to automate the accounts payable process.


While many of the above go hand in hand, any one of them can make a huge difference in your bottom line and, ultimately, your CIR.

Par Olivier Audino, le 06/05/2019

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