Achieving agility in financial services

The pressure for financial services organizations to transform

Today’s established financial services (FS) organizations face increasing pressure to transform and innovate to remain competitive against innovative startups, fintech and challenger banks. They also have to adapt to meet ever-changing customer expectations.

The Covid-19 pandemic expedited the closure of brick-and-mortar branches in many countries, forcing established FS companies to change the way they operate internally. Changing regulations such as the transition away from LIBOR are adding extra pressure to financial services organizations to update, rewrite and translate content that has existed for years.

To overcome these challenges, FS organizations need to focus on optimizing their internal processes and operate more efficiently to encourage technological innovation that improves operations, customer delivery and competitiveness.

This PEX Network report features expert insights from TD Wealth, PSCU and Nintex on how to achieve operational excellence in the virtual space now that they move toward digital channels, improve organizational agility and encourage innovation. Featuring real-life success stories from Auswide Bank, Lloyd’s Bank and Banco Santander, it aims to provide an understanding of where the industry is moving toward.

“Organizations are hiring people they may never meet. Therefore, they need to have a strong structure, good communications channels, smart and easily repeatable processes and data management strategies.”

Michael Dove, VP center of process excellence at PSCU

Key drivers for FS organizations to become more agile

In recent years, agility has been a top issue and focus for FS companies. According to Michael Dove, VP of the center of process excellence at US-based credit union service organization PSCU, it is driven by a need to be flexible when quickly introducing new products and services, as well as entering and discovering new markets.

“You often need to adapt to new incoming market opportunities by introducing a new technology to a system,” he says. “It has been a key element in the case of blockchain or peer-to-peer payments, and although you want to lead in bringing in these concepts, in some cases you are playing catch up.”

The Covid-19 pandemic has highlighted the need for FS organizations to transform and move to virtual channels. Karen Reichle, VP, customer success engagement at Nintex, who has more than 20 years of experience in the financial services sector in organizations the likes of Bank of America and SouthTrust Bank Corporation, is seeing an increase in digital transformation in the sector which is creating the “ability for teams to work virtually from anywhere”.

Abhinav Suri, head of process excellence at TD Wealth believes using digital capabilities will improve customer experience as expectations are changing. In a PEX Network interview released in February 2021, Katherine Campbell, chief digital officer at Assurance Financial noted that millennials are expected to be the largest generation to purchase homes in the coming year, meaning the need to go digital has been “mandated by the market”.

Established banks are transforming to remain competitive in a market disrupted by innovative start-ups, challenger banks and fintech. One example is Spanish bank Banco Santander, which has started to move its entire IT infrastructure to the cloud with the aim to be fully digitally enabled by 2023. It has already helped deliver to its customers during the pandemic as proven by a 60 percent increase in digital activity among its 148 million customer bases.

In order to make the digital journey, PSCU’s Dove notes two obstacles for established FS companies to become more agile. Firstly, massive legacy systems make it difficult for them to make any changes, an issue not encountered by many start-ups that are fully online and operate solely with new technology. Dove explains: “There is so much connectivity – to change one thing you need to transform three parts down the line.” Secondly, organizations need to think about the legal ramifications that each change engenders on compliance.

The next section of this report will look at how FS organizations can achieve operational excellence in the virtual space to become more agile.

Also read: Mastering change in hybrid work models

How to achieve operational excellence in the virtual space

By focusing on their processes, FS organizations will be able to transform and become more agile. TD Wealth’s Suri believes it is easier for companies to start working on back-office transactional, high-volume, rule-based processes.

PSCU’s Dove believes that having good processes around managing information technology (IT) is critical. He also sees recruitment processes as very important in order for FS organizations to adapt to skills that evolve alongside technology. He explains: “If you do not have the right people managing the technology, it is not going to be agile.”

“Data helps us measure the output of a process while also assessing the input, to understand how it delivers value for the customers.”

Michael Dove, VP center of process excellence at PSCU

People are critical to any operational excellence program and Dove believes they should be the starting point. A good change management program should also be adopted as legacy systems have been in place for decades, with some employees operating them for as long.

“If people are not ready to adopt the new technology, products and services, you need to get them excited about doing something new without being afraid to take a risk,” he says.

As some regions of the world open up following Covid-19 lockdowns, organizations need to be nimble in managing both office-based and remote workers, and a focus on processes and data will help, says Dove.

“Organizations are hiring people they may never meet. Therefore, they need to have a strong structure, good communications channels, smart and easily repeatable processes and data management strategies,” he advises.

Suri considers data as critical and at TD Wealth it plays a key role in all operational excellence initiatives.

“We always look at what can be improved with the right data extraction and then see what can be automated to enhance work and client experience,” he explains, adding that integrating data with processes is crucial, otherwise “there will always be a gap”.

At PSCU, Dove uses data to ensure good process management through defining processes and understanding value streams, which boosts the organization’s ability to be agile, optimize and automate. He says: “Data helps us measure the output of a process while also assessing the input, to understand how it delivers value for our internal and external clients.”

Customers were the motivation behind the “Road to Right” initiative at Australian-based Auswide Bank, which serves more than 85,000 customers. A critical aspect of the program was to fully understand the bank’s processes and find ways to improve them, as many consisted of Word documents and PDFs saved to SharePoint. The bank needed an easy-to-use tool for process management and a no-code tool to improve business processes through automation and digital forms.

The organization implemented Nintex Promapp® to map processes, while also leveraging Nintex Forms and Nintex Workflow to support and optimize its customer-facing ones including loan originations and personal banking. More than 900 processes have been mapped and the bank has identified opportunities for automation. The replacement of paper forms has resulted in a five-fold improvement in approval time for its loan origination services.

According to Nintex’s Reichle, process mapping technology allows companies to document process and is key to the beginning of the automation journey.

Automating processes will allow FS businesses to increase operational efficiency and save time by removing manual tasks from employees’ workload, who can spend more time with customers and expand services they offer. It also increases accuracy by lowering error rates, which is a benefit seen by Reichle as “often overlooked”.

She advises organizations to look for solutions that can be easily implemented by the business unit’s SMEs as “this frees up IT resources, which has an impact on overall operational excellence”, while creating a center of excellence will strengthen the initiative and provide governance. Reichle explains: “It provides the framework needed to identify and map and document processes, automate them and adhere to regulatory requirements, auditing and security guidelines.”

“We always look at what can be improved with the right data extraction and then see what can be automated to enhance work and client experience.”

Abhinav Suri, Head of process excellence at TD Wealth

At TD Wealth, the work toward process excellence consists of four pillars.

End-to-end value chain assessment

Firstly, end-to-end value chain assessment helps create visibility on how the business operates and what impacts its performance. Suri says: “We focus on the customer journey from the first interaction all the way until a task is completed in the back office.”

Managing business processes

Secondly, TD Wealth has a BPM-specific tool to know how processes are executed. For every process being assessed, Suri’s team uses it to establish a process discipline, which he sees as a foundation for any kind of business transformation. He says: “With BPM we build and sustain the culture around process excellence and increase the maturity of our organization around processes.”

Execution excellence

Thirdly, focusing on executing excellence helps TD Wealth manage the delivery of outcomes of a multi-year transformation plan. While issues impacting internal processes and client experience have been identified in the first two pillars, now is the time for process reengineering or process automation. Suri says: “This is where we leverage the emerging technologies available in the market and we make it part of the business.”

Innovation

Finally, innovation is deemed critical by Suri. He defines it as not only new technologies out in the market, but also the way in which a company will implement them. The next section of this report will discuss the type of innovation that are revolutionizing the FS sector and increasing organizations’ agility in the virtual space.

Implementing innovation in the FS sector

The changes in technological solutions and capabilities have been drastic over the last year, in part accelerated by the Covid-19 pandemic. TD Wealth’s Suri says: “If we keep a close eye on the innovation happening in the market and how we can leverage it, it can become a key aspect of the speed at which we bring products and services to market.” Below we look at some opportunities these technologies offer.

Lloyd’s Bank has implemented artificial intelligence (AI) to its automated International Trading Advice help desk, which has reduced search time queries from minutes to seconds while maintaining replies’ accuracy. Lloyd’s Canada team implemented it to ingest and analyze contract documents to ensure local regulatory compliance.

Blockchain already has a proven record in the FS sector for its ability to store tamper-proof data without relying on a single person or organizations in bitcoins operations. When implemented within businesses, it can help streamline banking and lending services and decrease compliance risk, issuance and settlement times. By allowing documents to be accessed online by multiple users at the same time without tampering with the information, it allows for real-time verification of financial documents and know your customer (KYC) data and streamline credit prediction through the instant information collated by user activity across a network.

The Australian Stock Exchange is planning to replace its system for bookkeeping, settlements and clearance with a blockchain solution by mid-2022 while HSBC will digitize the records of $20bn worth of assets with its Digital Vault platform to provide real-time information about placements made by investors.

Biometrics are set to aid FS organizations in preventing identity fraud and improve customer experience by using a customer’s unique fingerprint or voice to use mobile banking on their smartphone. A few established banks have already implemented the voice technology, including Bank Australia, NAB, HSBC and the Australian Taxation Office.

Before implementing any innovation, FS organizations should take their time to find the right technology for the right use. Suri explains: “Build a proof-of-concept and do some checks first, because it is better to go slow at first so that you know you are investing in the right technology.”

He adds that technology has a key role to play in the speed at which FS organizations bring the change, and it will become easier on the business side to think about ideas, features and improvements. Low code is expected to have a massive impact as it will change how organizations think about new technology implementation.

In coming years, Nintex’s Reichle sees production failover measures ramping up, while workforce transformation will include a remote-working strategy and automation. There will also be a continued increase in demand for digital channels. This, she explains, will grow the digital operational footprint, shifting operational excellence and support from traditional to digital offerings.

As for traditional operational excellence methodologies, PSCU’s Dove believes that although they will be there “forever”, some upgrades might be needed to adapt to the new processes and technologies. Taking the example of integrating design thinking into Lean Six Sigma, he adds: “We might need to enhance the current toolset and technologies while maintaining the bones and the structure.”

There are a lot of opportunities for FS organizations to become more agile, innovative and remain competitive in a market that is constantly evolving. To achieve this, a focus on internal processes will help increase operational efficiency, customer delivery and regulatory compliance.

Top three takeaways from this report:

• Historic FS organizations can become more agile by focusing on optimizing their processes and implementing new technology, training people along the way to succeed.
• Technology is key for the FS sector to move toward digital channels if the right talent is recruited, which can be done by optimizing recruiting processes.
• Emerging technologies such as AI, blockchain and biometrics are set to revolutionize the FS sector and strengthen the security of digital channels.

Read the PDF version of the report here