Banking services are important, but brick and mortar branches less so. Want to check your balance, pay a bill, send money to a family member? You can do it all from an app on your phone. You don’t need to visit a bank branch anymore.

The fintech revolution has done more than just put the power and convenience of your bank on to your phone, of course. It’s opened up whole new services and markets, like peer-to-peer lending. Traditional banks are also facing competition from major tech and social media companies like Alibaba, Amazon, Apple, Facebook and Google. They excel at providing simple, fast and enjoyable user experiences and are increasingly offering financial services, from the basic ability to make a purchase through to the provision of credit. That combination of a growing portfolio of financial services and a commitment to great user experience means established banks could start to become invisible and consequently lose out on customers.

To address this risk, banks have started to reimagine themselves and have started on the digital transformation journey, connecting with customers in their channel of preference and introducing new features and services via these digital channels. But that means balancing future-facing developments with legacy business and structures, plus developing new routes to market. All of which present challenges as well as opportunities.

New partnerships and channels can introduce new security risks. They also mean the overall value chain gets longer and more complex; with more stages in the whole process, there can be challenges in terms of consistency of service and communication, too.

Rishikesh Deole, Head of Digital BFSI North West Europe at Tata Consultancy Services (TCS) believes: “It is of utmost importance to have clear visibility on the health of the business service at any given time and be able to predict, prevent and if required to react – be able to react fast.”

Cost optimization three-step readiness

The question facing banks is: can you react fast enough?

Rishikesh continues: “When you’re weighed down by decades of legacy IT, complex processes, and silos that have developed as your business has grown, it’s very challenging for a traditional bank to compete.

“Agile newcomers are running rings around them. The only way to fight back is to streamline operations and pare them right back to what is functionally necessary to deliver a unique combination of robustness and speed.”

You don’t need to look far to find advice that tells. This is great if the numbers stack up. But AI is a significant investment and can only offer a commercial advantage if the cost can be diluted.

Optimizing costs calls for the identification of standardized, repeatable processes that can first be simplified and afterwards fully automated.

Going through the stages of teaching an AI tool how to replicate a business process will require that process to be broken down to its essential pieces; what is the logic underpinning it, what are the critical success factors, and what elements might be regarded as superfluous to the objective?

Source: Shutterstock

Creating more streamlined and efficient processes is more than a perk of using automation. It needs to be part of the strategy.

“Banks have complex value chains which make it practically impossible for any single employee to have an end-to-end view of processes,” Rishikesh says.

“In the event of a problem, it can result in a hastily convened meeting for maybe as many as 12 people, all experts in their individual field, trying to figure out what went wrong.”

One solution to this seemingly intractable problem of process visibility – or the lack of it – is to adopt a zero-touch operations strategy. There are three tenets of zero-touch: Predict, Prevent and React – fast.

Data analysis will allow you to spot trends. This can be used to identify patterns and deviations from expected behaviour – the basis of predictive analysis. That way, if something is about to fail, it will reveal itself in changing sequences of behaviour so you can take action before the problem hits.

Delivering benefits at speed

It won’t be possible to predict absolutely everything. Sometimes you might get caught out by a system failure for any one of a number of reasons. What really matters then is how fast you get back up and running.

“The time you spent on step one, predict, will pay off,” Rishikesh advises. “It will provide you with a full audit trail detailing the chain of events, allowing you to drill down to code-level if necessary, to find and fix the problem, thereby reducing your downtime dramatically.”

TCS has been working with one of the leading peer-to-peer lending companies in the Nordic region during a very interesting period in its growth and development.

Having become popular and successful in its core field, it began to expand into other areas of operations, such as invoice payments, and payments to retailers and travel companies. That meant having to integrate many new businesses, partners and their tech protocols on to its platform, and adapting to new operational processes.

One of the first tasks undertaken by TCS was to reimagine the customer’s processes in a way that delivered complete end-to-end visibility. “It’s important to be able to tailor that visibility to make it more impactful,” Rishikesh continues.

“The CEO needs a high-level view of overall performance and how that aligns with strategic goals. The tech team leader needs a step-by-step breakdown including the code. Any single component along the value chain that might start to underperform or cause problems can be spotted and corrected straight away.”

It echoes similar work TCS has done with a mortgage provider, too.

Source: Shutterstock

“We streamlined several key processes,” says Rishikesh. “If an existing customer is applying for a refinancing loan, there’s no need to follow the same process that is required of a brand-new customer – you’ve already got most of their information. We took that clear objective and used it to transform the remortgage application process, taking it from around two weeks to 20 minutes with almost 90% of applications going straight through processing.”

That focus on delivering clear and measurable business benefits also drove the work TCS did with a leading insurance provider. By deploying robots and automating streamlined processes human-error rates, which had been damaging the profitability of areas of the business, were brought under control. Knowledge-sharing was improved, too, which reduced the burden on certain key workers to undertake a range of routine tasks and freeing their time for more valuable activity.

Change: your only certainty

When a business has grown gradually over many years it is to be expected that certain inefficiencies will become part of its DNA.

Whether they’re caused by the integration of acquired businesses, the creation of new divisions, or as a result of reacting to new regulations, it is very rarely the right time to scrap established processes and redefine them.

Instead, those processes are accepted and adapted to. However, when external pressures – such as disruptive market entrants or rapidly changing customer expectations – are brought to bear on such an organization, the limits of those bloated and over-complicated processes become all too apparent.

To stay relevant, banks and other established financial sector businesses need to deliver what the customer wants, not what their processes will allow.

Those that understand this will invest in new technologies that enable them to create new levels of operational excellence, underpinned by their legacy of business rigour and trusted reputations. Those who do not risk facing an uncertain future in an ever-changing financial services landscape.