Digitization: The 360-degree Mindset

Technology is significantly changing the way the world moves. The change is nothing short of a disruption, affecting businesses and industries across the board. With banking at the epicentre, the impact of technology is palpable, and fast becoming the edge indispensable to staying competitive and relevant.
Navigating the digital shake-up.

Banking as an industry has invested heavily in legacy infrastructure and systems up until now. However, with the rise of digitisation, this has proven to be an impediment, giving way to new and agile digitally enabled competitors making forays into various areas of banking sector. The rules of the game are constantly changing – it is no longer about competing with current players, but about staying nimble and competitive in the era of technological disruption.

Understanding the current ballgame.

Despite significant headwinds, banks have understood the need to digitise fast – upgrade systems and operations to transform customer experiences. Enter mobile and internet banking that quite literally hold the turf for “Anytime, Anywhere Banking”. However, investing in customer solutions alone for successful banking digitization is akin to touching just the tip of the iceberg. According to a World Economic Forum report 2018 by Bain & Company, only 1% of $1.2 trillion digital transformation investments will actually achieve their set targets. One of the reasons for this is – unless banks digitise their back-office operations, digital face-lifting of customer fronting processes only inflate the existing complexities.

Building snazzy customer interfaces, straight-through processing and point of-sale functionality around age-old legacy systems without modernising the back office with its redundant, error-prone and excessively manual processes proves detrimental in more ways than one. The impact of myopic upgrades can be summarised as:

  • High cost of employing a huge people force, maintenance.
  • High chances of error which can spill on to the customer front leading to negative customer experiences.
  • Cost of identifying and fixing errors. This also affects the morale of the workforce.
  • High response time to changing market conditions – inability to offer new solutions promptly.
  • Poses a challenge to delivering a consistent and seamless experience to the customers.
  • Duplication of an already large chunk of processes. A quick data point – retail banks deal with an avg of 300 to 800 back-office processes to manage and monitor.

Comprehensive digitization has taken a backseat for banks since a complete overhaul is not only cost-intensive, it is also challenging to upgrade without impacting day-to-day operations. However, a quick-fix approach is counterproductive; while there may be incremental benefits in the short term, the novelty wears off in no time resulting in a burgeoning complexity of processes and an ultimately unsustainable system.

The 360-degree mindset.

Digitizing the army of back-office processes that power customer experiences at the front end is just about as important and imminent as modernising front-office systems. A study points out to 60% of customer dissatisfaction sources originating in the back office.

While it may not be possible (or even viable) to digitize 100%, an amalgamated approach of automating processes on one hand and using IT solutions to manage residual operations that must be carried out manually on the other hand can help breathe a new life into redundant systems and process relays.

A holistic way of looking at digitization is what we insist upon – that factors in overall customer experiences, workforce engagement and rationalization, clarity on strategic way forward, cost and viability studies, the need for agility and future-readiness.

Flagging off the Journey.

The journey of a thousand miles can be plunged headlong into, or can be broken into several shorter hikes, with a milepost defining each. Banks can start their digitization journey from any point, depending on where their priorities rest.

1. Interventions with longer turnaround time like overhaul of legacy infrastructure:

Rearchitecting the foundation of banking operations is time and resource intensive, but the impact of a robust core banking system can be immensely transformational. It positions the bank for a bright digital future since it becomes the basis for other digitization interventions.

2. Intervention with shorter turnaround and high impact impact like digitization of processes Payments, Workflow Automation, Branchless Banking, Agency Banking, Branch Automation:

These help augment process efficiencies, detect and correct bottlenecks and increase productivity thus improving customer experiences significantly. Since they entail modernization of complex paper based processes, the need for manual intervention reduces considerably while also mitigating scope for error and rework. These also help offer an array of banking conveniences to its customers without them needing to physically visit the bank branch, thus fructifying the tenet of ‘Anytime, Anywhere Banking’

3. Interventions with quick turnaround and high impact like Account Opening, Customer Onboarding, Mortgage and Loan processing, Teller Operations. Since these can be incorporated quickly, they yield rapid returns but with limited impact. They help modernise a bank’s front office systems, reduce manual effort and help deliver better customer experiences.

The Epilogue.

There is no gainsaying that the future is for digitally-enabled nimble-footed banks, who have pulse of the customer on one hand, and an eye out for the savviest newbies and the biggest players on other hand. The moment has arrived when the question “whether or not to go 360 degree digital” is not pertinent any more. What holds relevance is how soon and how effectively can digitization be woven into the very DNA of a banking institution.