Connect with us

BANKING

Why Banking is experiencing a second wave of transformation

Why Banking is experiencing a second wave of transformation 29

By Keith Pearson, Head of Financial Services EMEA, ServiceNow

The financial landscape has seen significant changes in the last six months, with key themes emerging from the industry including operational resilience, economic recovery, cost reduction and an acceleration of digital transformation.

At the start of this crisis, much of the banking industry was in a different position to many businesses. The 2008 recession spurred a need for improvements and combined with the emergence of tech-savvy fintechs, the industry has seen a major shift as customer expectations have adapted. The pandemic has forced organisations to accelerate innovation already part-underway in the banking industry.

As banking experienced its first wave of transformation, institutions focussed on customer engagement, uniting physical and digital channels for an improved customer experience. Banks invested heavily in front office digital technology, creating visually appealing mobile apps, engaging online banking experiences and technologies for bankers to personalise customer engagement.

However, this digital engagement layer is not enough. Regulations like PSD2 reinforce the necessity to remain compliant, adding additional pressure to the digital transformation process which in turn has been accelerated by COVID-19. Banking is therefore in the midst of its second wave of transformation, where financial institutions are creating and seeking out critical infrastructure to better connect underlying middle and back office operations with the front office, and ultimately, with customers.

Fragmented operations

Many financial organisations are still struggling because they have yet to streamline, automate and connect the underlying processes that are enabling customer experiences. Which poses the question: why is connecting operations so difficult?

In most cases, multiple systems are still glued together by email and spreadsheets to track end-to-end status. Around 80% of a middle office employee’s time is spent gathering data from systems to make a decision, with only 20% spent actually analysing and making the decision.

The disconnect negatively impacts customers. For many, experiences like opening a bank account or getting a mortgage involve clunky, manual processes riddled with paperwork and delays. When front and back office employees lack the ability to seamlessly work together, customers can be asked for the same data multiple times, elevating frustration.

Customers have little patience and can be inclined to publicly broadcast problems when left unresolved. In a world of social media and online reviews, this could be detrimental to a company’s reputation.

With digitally native, non-traditional financial services players gaining market traction by offering a seamless customer experience, maintaining satisfaction is crucial for traditional banks to ensure that customers don’t switch. Banks must focus on making it easy for customers to do business with them by offering faster cycle times with more streamlined operations.

The fintech effect

Fintechs and challenger banks like Starling have shown what connected operations can do, having been built with digitised processes from day one. Modern consumers expect round-the-clock service from their bank. As financial institutions look to the future, developing a model of operational resilience that is capable of withstanding unforeseen issues, like power outages or cyberattacks, is critical to minimising service disruption. Having connected internal communications between front and back office staff means customers can be notified about any problems, how they can be fixed and when they might be resolved, as well as receiving continuous progress updates instantaneously.

Automation can go a step beyond this. Today, customers expect companies to not only do more and do it faster but to prevent problems arising in the first place. With connected operations and Customer Service Management (CSM), banks can proactively fix things before they happen and resolve issues fast, enabling frictionless customer service and replicating the ‘fintech effect’.

And compliance?

Keith Pearson

Keith Pearson

In the European Union and the UK, PSD2 and the Open Banking initiative are giving more control to the customer over personal account data. Digital banks such as Fidor and lenders like Klarna are seeking to reinvent banking by offering customer-centric services. But the process of streamlining underlying operations is not simply about providing customers with the fintech-esque experience. More than 50% of a financial institution’s business processes are also impacted by regulation.

Financial services leaders are focussing on streamlining and taking cost out of business operations while also placing importance on resilience. Regulators are pushing banks to have a firmwide view of the risk to delivering their critical business services.

Banks must invest in digitising processes to intuitively embed risk and compliance policies, which are generally managed separately and often manually from the business process, leading to excessive compliance costs and risk of non-compliance. With the right workflow tools for monitoring and business continuity management, banks can minimise disruption by gaining access to real-time, actionable information about non-compliance and high risk areas, encompassing cybersecurity, data privacy and audit management.

Increasing openness of financial institutions to regtech solutions, or managing regulatory processes in the industry through technology, will prove key during this second wave of transformation. Banks will increasingly move away from people and spreadsheets and toward regulatory solutions that provide a real-time view of compliance and provide an end-to-end audit trail for Heads of Compliance, Chief Risk Officers and regulators.

With a unified data environment aided by technology, financial institutions can drive a culture of risk management and compliance to improve business decisions.

Riding the wave

The banking industry is still in the midst of its second transformation, and the pandemic hasn’t made it any easier. But riding this wave and successfully digitising processes to connect back and front office employees will present a profound difference to customer service.

The bank of the future will be frictionless, digital, cloud-enabled, and efficient; interwoven into the fabric of people’s lives. It will continue to be compliant and controlled but will deliver those outcomes differently, with risk management digitally embedded within its operations.

Demonstrating the operational resilience of its key services will not only drive customer confidence but will also provide a greater indicator of control to regulators and the market, adjusting overall risk ratings and freeing up capital reserves to drive more revenue and increase profitability.

The institutions that will thrive in this increasingly digital and connected world are the ones that are actively transforming themselves and the way they do business now, by taking learnings from fintechs, following regulations and paving the way in defining the future of financial services.

Continue Reading

Recent Posts

The lockdown money revolution 30 The lockdown money revolution 31
FINANCE2 days ago

The lockdown money revolution

By Granville Turner, Director at Turner Little. Many Brits have found that lockdown has been beneficial for their money, having...

Self-employed taxpayers and Making Tax Digital 32 Self-employed taxpayers and Making Tax Digital 33
BUSINESS2 days ago

Self-employed taxpayers and Making Tax Digital

By John Hemming, CEO of Cirrostratus Exedra, the company that runs the VAT Direct Making Tax Digital Service The HMRC’s ambition...

Auditor regulation and litigation - down to the Wire(card)? 34 Auditor regulation and litigation - down to the Wire(card)? 35
BANKING2 days ago

Auditor regulation and litigation – down to the Wire(card)?

By Tom Snelling, partner at Signature Litigation and David Entwistle, a regulatory lawyer and legal risk specialist Introduction The collapse...

Why it’s time to adapt to the virtual world: how to master online negotiations 36 Why it’s time to adapt to the virtual world: how to master online negotiations 37
TECHNOLOGY2 days ago

Why it’s time to adapt to the virtual world: how to master online negotiations

By Tony Hughes, CEO at Huthwaite International, a leading global provider of sales, negotiation and communication skills development Virtual negotiations...

Protecting against man in the middle attacks with dynamic linking 38 Protecting against man in the middle attacks with dynamic linking 39
FINANCE1 week ago

Protecting against man in the middle attacks with dynamic linking

By David Vergara, Senior Director of Product Marketing at OneSpan In recent years, the booming growth of mobile applications has...

The Case for Banks to Digitally Transform: Iterating out of lockdown 40 The Case for Banks to Digitally Transform: Iterating out of lockdown 41
BANKING1 week ago

The Case for Banks to Digitally Transform: Iterating out of lockdown

By Sudeepto Mukherjee, Senior VP, Banking EMEA & APAC, Publicis Sapient. Before COVID-19 disrupted every imaginable part of society, banks...

Difficulties of Getting on the Property Ladder Post-Pandemic 42 Difficulties of Getting on the Property Ladder Post-Pandemic 43
LIFESTYLE1 week ago

Difficulties of Getting on the Property Ladder Post-Pandemic

There is a lot of talk about what’s going to happen to the housing market over the next few months....

Russian Doll: Building digital capabilities into a bank’s core 44 Russian Doll: Building digital capabilities into a bank’s core 45
BANKING1 week ago

Russian Doll: Building digital capabilities into a bank’s core

By Ian Johnson, Managing Director of Europe, Marqeta COVID-19 has left its mark on every industry, and banking is no...

How the US and Europe's COVID-19 Responses Have Affected Exchange Rates 46 How the US and Europe's COVID-19 Responses Have Affected Exchange Rates 47
TRADING2 weeks ago

How the US and Europe’s COVID-19 Responses Have Affected Exchange Rates

In living memory, few events have thrown the reputations of different countries and regions under such intense scrutiny as the...

Recognising the surprise PE investment potential in southern Africa 48 Recognising the surprise PE investment potential in southern Africa 49
INVESTING2 weeks ago

Recognising the surprise PE investment potential in southern Africa

By Martin Soderberg, partner at SPEAR Capital. An event of historic significance passed largely unnoticed in the world’s media recently,...

Why Banking is experiencing a second wave of transformation 50 Why Banking is experiencing a second wave of transformation 51
BANKING2 weeks ago

Why Banking is experiencing a second wave of transformation

By Keith Pearson, Head of Financial Services EMEA, ServiceNow The financial landscape has seen significant changes in the last six...

Making your mark: an introduction to trademarks 52 Making your mark: an introduction to trademarks 53
TRADING2 weeks ago

Making your mark: an introduction to trademarks

By James Turner, Director at  Turner Little  Are you looking to protect your brand? The chances are, you are –...