Businesses all over the world are falling victim to the significant impact that COVID-19 has generated and therefore are now feeling the consequences it is set to leave in the wake. The financial services sector is no different. Banks were dealing with hurdles even before the pandemic, for instance changing customer expectations, higher operating costs, and new technology, all within an evolving regulatory landscape. The current crisis is yet another challenge that's been added to the mix and also the sector is starting to manage the economic aftermath, so must concentrate on a couple of things to emerge successfully into the post-COVID-19 landscape: efficiency and customer retention. The way to accomplish this is by modernising legacy banking platforms, a risky process.
Banks wish to remain competitive and grow; therefore, it is no longer a question of if they will transform, but exactly how they'll achieve the desired result and avoid the chance of failure, whilst ensuring top class customer experience.
Value as a key consideration
When banks think about the worth of any investment, among the best places to begin is the help to customers. Transformation often results in moving from highly manual ways to more efficient and automatic processes. This can then result in better personalised services and products, internal process efficiencies, enhanced cybersecurity, advanced analytics, and reduced risk, especially fraud and malicious activity. All of these add significant value to customers and improve operations over the business.
Each financial services organisation should make sure it is evolving in line with its competitors to create greater value for purchasers and employees. This can be achieved through innovation in services and products. For example, AI and robotics may be used to keep costs down and mitigate risks through capabilities for example self-supervised learning and logical reasoning. Elsewhere, blockchain can be used to give a holistic look at an organisation's ledger, which increases collaboration and transparency across the business. Both types of innovation enable employees to concentrate their time towards value-add activities which will still give a more seamless experience for that customer.
Transformation is inevitable
To modernise their banking platform banks should – in a single way or any other – replace their historical systems with increased modern, cost-effective, and flexible platforms. That will be essential to ensuring they have the capabilities necessary to enable digital products.
Traditionally, banking institutions take a variety of methods to transformation, such as developing new platforms and partnering with fintechs. However, achieving success for additional mature banks is also challenging given the obstacles presented by their complex and costly legacy platforms.
In addition, stakeholders also need to be brought along around the transformation journey. Although banking transformation may have traditionally been the domain from the IT function, the outcome on current and future value for the entire business means it ought to be on the agenda of a much wider set of senior executives. Including the CIO and COO and should also potentially include the Chief Risk Officer, Chief Financial Officer, Chief Digital Officer and Chief Experience Officer.
How can banks become successful within this scenario?
The way forward for banking
There is always going to be risk involved with transformation, but this could be overcome by carefully managing business operations and eliminating siloes. Organisations should think about the order by which they want business outcomes delivered and how this aligns to the overarching business, use relevant delivery methods, for example agile methodology, and constantly measure their success against set criteria to ensure they are following a correct path, making adjustments as necessary.
When considering the size of change involved with modernising legacy systems, it's not surprising that business leaders also occasionally suffer from opposing views to transformation. However, this is often mitigated by making sure that the benefits are communicated through the business and allowing people to be involved.