Solving the cost to serve challenge
The landscape of financial services is rapidly evolving, with 91% of companies in the sector either using or considering AI solutions. However, true differentiation lies not in mere adoption, but in strategically leveraging these technologies to lower the cost to serve.
For CFOs, this presents both a challenge and an opportunity to drive significant value for their organisations.
The ‘cost to serve’ concept, encompassing all expenses involved in servicing clients, has become a critical focus for CFOs in maintaining competitiveness and profitability. As profit margins tighten and competition intensifies, optimizing this metric can significantly impact the bottom line and free up resources for strategic investments.
CFOs are uniquely positioned to spearhead this transformation. Their bird’s-eye view of the organization’s financial health, combined with their strategic role in resource allocation, makes them ideal candidates to drive AI-powered cost reduction initiatives.
AI’s true value in financial services lies in reducing manual work, which often leads to errors, inefficiencies, and higher labour costs. For CFOs, this translates into an opportunity to significantly improve operational efficiency and financial performance.
By leveraging their comprehensive understanding of the organisation’s financial ecosystem, CFOs can identify high-impact areas for technological intervention. Non-advisory, compliance, and administrative tasks often inflate the cost to serve and should be prime targets for automation. For instance, implementing systems that automatically classify documents and apply access controls can substantially reduce compliance-related expenses.
However, the CFO’s role extends beyond identifying automation opportunities. They must ensure that AI and other technologies align with the organisation’s broader strategic goals and deliver tangible ROI. This requires not just financial acumen, but also change management skills and technological insight.
One of the key challenges CFOs face in implementing new technologies is managing organizational change. There may be resistance from staff fearing job displacement. CFOs can address these concerns by clearly communicating how AI and automation will support employees, not replace them. By articulating a vision where technology frees up time for higher-value activities, CFOs can foster a culture of innovation and continuous improvement.
Moreover, CFOs play a crucial role in educating the C-suite and board on the capabilities and limitations of AI. By providing clear, data-driven analyses of potential cost savings, efficiency gains, and competitive advantages, they can build a compelling case for strategic technology investments.
The implications of reducing the cost to serve extend far beyond immediate cost savings. Financial services providers need to deliver a return for their customers to demonstrate value, which is easier if more time is spent on client-facing activities. For CFOs, this means potential improvements in client satisfaction, retention rates, and new business acquisition – all of which directly impact the organization’s financial performance.
Furthermore, the cost savings generated through these initiatives can create a virtuous cycle of investment and innovation. As Lobo points out, “Higher profits facilitate further investment. If firms have the capital to re-invest, they can funnel additional resources into developing effective tech solutions, reinforcing and extending competitive advantage.” CFOs can leverage this dynamic to drive long-term growth and market positioning.
Looking ahead, the CFO’s role is likely to evolve significantly. As routine financial tasks become increasingly automated, the focus will shift towards strategic financial management, risk assessment, and business partnering. CFOs who successfully navigate this transition, combining financial expertise with technological savvy and strategic thinking, will be pivotal in shaping their organizations’ futures.
As financial services firms strive to differentiate themselves in an increasingly competitive market, reducing the cost to serve has emerged as a key strategy. CFOs, with their unique blend of financial acumen, organizational understanding, and strategic insight, are ideally positioned to drive this change. By leveraging new technologies, optimising processes, and refocusing resources on value-added activities, they can not only reduce costs but also enhance client satisfaction and drive long-term growth and competitiveness.