By Andrew Warren, Head of Banking & Financial Services, UK&I, Cognizant

Businesses around the world are falling victim to the significant impact that COVID-19 has generated and are now feeling the consequences it is set to leave in its wake. The financial services sector is no different. Banks were dealing with hurdles even prior to the pandemic, for example changing customer expectations, higher operating costs, and new technology, all within an evolving regulatory landscape. The current crisis is another challenge that has been added to the mix and the sector is starting to face the economic aftermath, so must focus on two things to emerge successfully into the post-COVID-19 landscape: efficiency and customer retention. The way to achieve this is by modernising legacy banking platforms, a risky process.

Banks want to remain competitive and grow; therefore, it is no longer a question of if they will transform, but how they will achieve the desired result and avoid the risk of failure, whilst ensuring top class customer experience.

Value as a key consideration

When banks consider the value of any investment, one of the best places to start is the benefit to customers. Transformation often results in moving from highly manual processes to more efficient and automated processes. This can then lead to better personalised products and services, internal process efficiencies, enhanced cybersecurity, advanced analytics, and reduced risk, especially fraud and malicious activity. These all add significant value to customers and improve operations across the business.

Each financial services organisation should make sure it is evolving in line with its competitors to create greater value for customers and employees. This can be achieved through innovation in products and services. For example, AI and robotics can be used to reduce costs and mitigate risks through capabilities such as self-supervised learning and logical reasoning. Elsewhere, blockchain can be used to provide a holistic view of an organisation’s ledger, which increases collaboration and transparency across the business. Both forms of innovation enable employees to focus their time towards value-add activities which will continue to provide a more seamless experience for the customer.

Transformation is inevitable

To modernise their banking platform banks should – in one way or another – replace their historical systems with more modern, cost-effective, and flexible platforms. That will be essential to ensuring they have the capabilities required to enable digital products.

Traditionally, financial institutions take many different approaches to transformation, such as developing new platforms and partnering with fintechs.  However, achieving success for more mature banks is additionally challenging given the obstacles presented by their complex and costly legacy platforms.

In addition, stakeholders also need to be brought along on the transformation journey. Although banking transformation may have traditionally been the domain of the IT function, the impact on current and future value for the entire business means it should be on the agenda of a much wider set of senior executives. This includes the CIO and COO and should also potentially include the Chief Risk Officer, Chief Financial Officer, Chief Digital Officer and Chief Experience Officer.

How can banks achieve success in this scenario?

The future of banking

There is always going to be risk involved in transformation, but this can be overcome by carefully managing business operations and eliminating siloes. Organisations should think about the order in which they want business outcomes delivered and how this aligns to the overarching business, use relevant delivery methods, such as agile methodology, and constantly measure their success against set criteria to make sure they are following the correct path, making adjustments as necessary.

When taking into account the scale of change involved in modernising legacy systems, it is not surprising that business leaders also occasionally have to deal with opposing views to transformation. However, this can be mitigated by making sure that the benefits are communicated throughout the business and allowing people to be involved.

Due to the impact of COVID-19, business continuity planning is not an option but a necessity, and needs to be built into any transformation alongside industry-specific demands that financial services organisations face, including changing customer expectations and strict regulations. Although the approach to delivering a successful banking transformation will vary across the sector, the most important thing for businesses to remember is that value drives every aspect of change, meaning they should be sure to view their transformation strategy through a value lens.