Mind the Gap: Connecting Front, Middle and Back Offices in Banking
Digital transformation is important; on this point, most financial institutions can agree. Yet many of these same institutions are not making enough progress in digitizing their operations to remain competitive with customers while keeping costs in check. In one survey, although 61% of banking executives want a customer-centric business model, only 17% feel prepared1. In another report, just 6% of banks consider themselves to be “digital trailblazers,” and less than half identify as “fast followers” of digital technologies2.
A key part of the problem is that banks miss out on opportunities to enhance the overall customer experience and improve their operating models.
It’s all connected. If your middle and back-office processes are largely manual and paper-based, your banking customers will feel the ripple effect of this inefficiency. Manual paper processing and data entry lead to errors and rework—and delays that will frustrate and alienate your customers. Consider that a single European bank found that more than 70% of account applications were paper-based, and of those, 30 to 40% contained errors3.
A gap between customer-facing systems and back-end systems can create an uneven experience for your customers—you may wow them in the beginning, but their enthusiasm will quickly wane if they encounter errors, delays and poor (or nonexistent) communication. So what can you do?
Create Organizational Readiness
To achieve a full-scale digital transformation, everyone at your bank has to be onboard with the strategy at an organization-wide level. Banks that succeed at digital transformation know it involves more than just IT. It makes sense to solicit input from people across the business, in different departments and at different levels—not just IT. First and foremost, get executive level buy-in as quickly as possible. Then, you can work on creating cross-functional teams focused on the customer journey first and internal processes second. You are now in a better position to communicate the vision, goals and success criteria widely to ensure visibility and alignment.
Develop Your Digital Transformation Plan
Once you’ve gotten the green light from corporate leadership and gathered feedback from your various teams, you’re ready to get started on the nuts-and-bolts of developing a transformation plan. Whether your plan is relatively straightforward or more complex, it’s advisable to follow three standardized steps:
#1—Mapping and Prioritizing Opportunities
Most banks simply do not have the resources to tackle all digital transformation opportunities at the same time. Therefore, you’ll likely have to prioritize. A good way to do this is by creating a heat map to target digital opportunities most relevant to your bank. Start by identifying the product lines, banking segments and other information specific to your bank and then assign a numerical priority for each opportunity (1-not a priority, 2-low priority, 3-moderate priority and 4-high priority).
When you create your heat map, use a progressive approach: start with customer-facing processes and lines of business that will have the greatest impact on your bank’s results and benefit your largest base of customers. Pay particular attention to short-term, high-impact wins in your strategic lines of business, and then dig deeper into your large back-office processes with low levels of digital maturity. These are typically where you have large numbers of employees performing manual, paper-based tasks—and lots of waste and redundancy.
#2—Assessing Digital Maturity
Within your bank, there can be a lot of variation in the amount of digital investment (and maturity) among your lines of business. It can be very helpful to use a digital maturity model (see figure below) to get a better sense of which areas need improvement and which areas you want to digitize first. A “big picture” view can go a long way in helping you launch your end-to-end digital transformation plan.
For example, a digital maturity model can help you identify areas where you could improve the customer journey, such as applying for a consumer loan or account-servicing transactions (change of address, etc.). Ultimately, you want to move from manual to fully digital—getting rid of paper, automating your processes, engaging your customers with self-service, enhancing compliance and analyzing your processes to discover areas to improve.
#3—Digitizing Processes from End to End
You won’t realize the hoc approach: once you decide to digitize a process, you must digitize not only customer-facing, front office processes, but also middle and back-office processes.
End-to-end means, well, end-to-end: from customer engagement and onboarding in the branch, online or via mobile phone, all the way to back office processes such as loan approval, underwriting and loan closing. Start with the goal of meeting customer expectations with streamlined processes that keep bankers, customers, and processing personnel informed and on the same page, while also meeting auditability and compliance requirements.
Ultimately, your automated process design should result in your customers and your employees saving time through less data entry and gaining better visibility throughout the process. And your bank will be better-positioned and informed to make business decisions, quickly adapt to change and ensure regulatory compliance.
Learn how you can close the gap between your customer-facing processes and your middle and middle and back-office operations. Get the whitepaper Banking on a Digital Future now.
1 Retail Banking 2020 Evolution or Revolution, PWC
2 Banks’ Emerging Views on Digital, CelentCelent
3 Automating the Bank’s Back Office, McKinsey & Company