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Financial services firms are facing challenges today that are more severe and intractable than any they have encountered before. As they move forward in this new environment, they will likely be forced to accept slower growth and leaner profits. Cost-management alone will not be enough to remove the threat of diminished performance. To succeed in the new era, financial firms will need to significantly upgrade the way they approach the disciplines of process improvement, customer relationship management, and product innovation. Financial institutions have long responded to cyclical trends affecting their business. Short-term changes in economic growth measures, such as gross domestic product, unemployment, consumer spending and corporate borrowing, are among the factors that banks continually assess as a matter of course as they seek to optimally satisfy demand for capital and loans. On top of these ongoing cyclical changes, banks are now facing a number of secular shifts. Unlike cyclical trends, these changes are powerful, long-term directional moves with lasting impact. The secular changes affecting banks today stem from new regulatory requirements, far-reaching shifts in the global economy, changing consumer attitudes toward bank brands and risk, and a wave of new, well-equipped competitors. Navigating the new environment will require banks to adopt entirely new strategies. Traditional responses effective during typical business cycles, such as changing fee schedules, will no longer position banks well to grow and differentiate in the market. To maintain their competitiveness, banks will need to excel in ways they have not in the past, including instilling efficiencies, retaining and growing customer relationships, and developing new products.
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