New kids in town force legacy banks to rethink antiquated IT strategies
Never before have Britain’s banks been under greater pressure. Faced with public scrutiny over historic practices and pressure from some quarters to jettison operations with systemic risks, many are grappling with a more fundamental challenge: How to reform their own structures and operations to meet the longer-term competitive threats posed by emerging challenger banks.
Echoing earlier David and Goliath-like battles in other industries, the new kids on the block could be the catalyst for market reform similar to that witnessed by some of Europe’s flagship airlines, which were left languishing in the jet stream of fast-growing, low-cost carriers.
Competing with agile young competitors
Over the last three years, the challengers have nearly doubled their share of the retail lending market, including mortgages and unsecured loans, while differentiating themselves from the big banks in several ways. Metro Bank is attempting to compete on convenience, with branches open up to 12 hours a day, seven days a week. Virgin Money is prioritising service. And the latest entrant, Charter Savings Bank, is vying customers with attractive easy-access account rates.
The challengers are lithe, resourceful and unencumbered by older, established processes and routines. They’re also free to harness technology without the overhead of legacy systems. As a result, their business models offer greater scope to develop agile and flexible customer-focused operations.
For traditional banks, a customer-centric approach creates major demands on their legacy line of business systems (LOBs) and processes, originally designed for internal access, with limited connectivity and rarely intended-for customer interaction.
Most legacy retail banks have accumulated a broad customer base. From SMBs and large corporates, to working families and retirees, these institutions are now forced to tackle some of the greatest targeting and operational challenges ever seen, as they bid to remain competitive.
So what are the options available to these banks? In particular, how do they take into account the need to deliver customer-centric quality growth, which meets the disparate expectations of a hyper-connected Generation Y, the baby boomers and everyone in between, while remaining profitable and keeping regulators and other stakeholders on side?
Clearly, they need to keep up with the technological times. If your financial institution is relying on paper, while customers are banking by phone, you need to update your strategy.
Attracting and retaining digitally savvy, demanding customers
Customers are demanding and expecting ever-higher levels of service and value. Social channels add further to the mix, offering customers the ability to communicate openly about their experiences, often without the banks being involved in the conversation. The best way to combat this is to offer superior service – to each customer.
And you can’t do that if you’re constantly searching for documents and information.
Operational overheads are hard to contain, while growth and returns on equity remain low minimal. Compliance, regulation and legislation compromise traditional business models, with technology presenting itself as a key differentiator in both front and back-office processes. Fast and effective operational manipulation of ‘big data’ is critical, providing key customer insight and experience analytics upon, to shape the business vision and strategy.
It is in such environments that enterprise content management (ECM) solutions come to the fore by capturing documentation electronically, making it instantly available in a central location. It also helps user productivity by eliminating of costly manual tasks and the need for users to switch applications to find information. With the benefit of increased transparency into documents, information and processes, executives and managers also gain improved visibility, while empowering staff to focus on assisting customers.
Efficiency, cost-savings, seamless integrations and fewer steps in a process are all potential benefits when considering the wider IT strategy. However, this value proposition could be lost when installing a new system that adds more work for every other system. The interaction of an ECM system and how the implementation environment works with existing systems will, therefore, play a key part in how legacy banks can make significant headway in this area.
Take, for example, a traditional mortgage management solution. More often than not, it requires input from multiple sources, including paper, email and in-house account details.
To accomplish tasks, the mortgage clerk needs to know how to access multiple systems. Imagine the number of screen changes and system swapping actions required when answering a client query – even worse if it is a telephone call. As clerks update every single system that touches the customer, it becomes a manual process of re-keying information many times. Especially if important systems can’t communicate with each other and share information.
Aside from this process being time-consuming, it leaves far too much room for human error. It also places a significant premium on staff operating costs and challenges staff retention, while doing little to improve the customer experience.
Optimizing your environment
In a seamlessly interoperable environment, utilizing ECM allows legacy banks to go beyond simple data retrieval, where customers may provide initial data electronically via an eform, a mixture of electronic and paper documents or even as transferred files. ECM optimizes processes by immediately capturing, auto-filling and indexing data across systems – without the need to switch screens, rekey information or train staff on multiple systems. Just fast efficient interoperability, providing effective and secure data delivery.
Such interoperable environments expedite and improve business decision-making by delivering immediate access to supporting documents, while minimising training costs and accelerating user adoption.
The threats posed by challenger banks requires new approaches. By tackling the value proposition of such competitors – cutting-edge technology, efficiencies, cost-savings – legacy banks can focus on reshaping their own processes and operations through a solution-focus that enables problem owners to quickly resolve their process issues, without new systems that require extensive specialist IT consultancy, developers and support.
Simply put, right now is the time to update antiquated IT strategies, before it’s too late.