An analysis of revenues generated by ABC bank from its foreign exchange (forex) division shows that returns have been unpredictable over time. The bank needs to understand what is wrong and how it can rectify the situation. While the market situation may not necessarily support huge profits like those seen in 2009, several other banks such as BBB bank and CCC bank have managed to post decent returns.
The erratic performance is evident in the annual totals that have fluctuated from $3.6 million in 2008 to $5.9 million in 2009; down to $4.4 million last year, with projections showing that this year (2011) will not surpass the $3 million mark.
While it may seem as though things are looking good due to the increase in new forex accounts from 345 in 2010 to 485 in the first six month of 2011, a different picture emerges when you look at the rollover rate. While the number of new accounts increases every year, the rollover rate has stagnated below 65% each month with an annual average of 51 per cent over the last year. This means that either the new clients are not using the accounts that they open or once they join ABC bank, the sales staff do not track their performance or interest in the business. The low rollover rate, that hit a worrying 46% in April 2011, is an indication that the rise in account holders is not translating into an increase in revenues.
Discussions with mid-level managers in the division revealed that the organization of the forex division is the primary cause of the problem. ABC bank currently uses multi-product frontline sales staff to handle forex related queries unlike other banks that are posting better returns.
A look at BBB bank and CCC bank shows that professional sales officers handle forex products and services only. These sales officers have recently been the force behind the two institution’s forex success. Once a client registers in the two banks, an officer starts following-up on their progress while updating them on the best way to handle business. ABC bank therefore needs to re-orient its strategies for the forex division and allocate dedicated sales officers for the frontline forex office.
Professional forex sales-persons will bring a number of benefits as explained below. First, professional sales-persons provide specialized services with good product knowledge, reducing risks to the bank when they advise clients. Second, professional sales-persons have a stronger relationship with clients and can build strong customer loyalty to the bank. Third, the sales team can be aggressive in promoting forex products due to their deeper understanding of their area. Fourth, the team can handle a larger amount of forex accounts as opposed to general sales-persons. This enables the bank to absorb an influx of clients, enhancing revenues. Fifth, professional sales-persons have the most updated market information that can translate to increased returns. Lastly, dedicated professional sales-persons who specialize in a specific product like forex have a lower turnover rate as opposed to general sales representatives, this ensures business is continuous and rollover is high.
However, the engagement of professional sales-persons will increase the wage bill dedicated to the sales department, possibly straining the allocated budget. It will also increase the marketing budget for customer outreach but this could potentially bring profits in the medium to long-term.