OVERCOMING THE CHALLENGES OF THE TWO-SPEED WORLD

By Nitin Rakesh, CEO & President of Syntel Inc.

So much talk recently has centred on the booming FinTech industry, yet relatively little consideration has been placed on the large institutions from whom they are taking market share. The banks are losing ground to companies such as TransferWire and Funding Circle, with perhaps the most significant infringement on their traditional territory coming from companies in the fast-moving payments sector, such as Apple. The FinTech revolution has left the banking industry with a dilemma about how to respond to this threat, as smaller companies have been able to take advantage of the age of digital disruption more rapidly.

Banks risk wasting time and resources trying to defend against these incursions; instead, they need to embrace the same omni-channel approach that their smaller competitors are adopting and beat them at their own game.  With businesses across all sectors experiencing a digital revolution, it is important to balance the need to reinvent themselves while maintaining current operations, also known as the “Two-Speed World.” The Two-Speed World means that businesses need to hold on to mission critical systems while they are being pushed to create digital innovations.

It also represents an opportunity to reduce the cost of running the bank while using these savings to change the bank – i.e. to simultaneously modernise and migrate mission critical systems, in order to cater to the digital native consumer. This is now an imperative to avoid Digital Disconnect.

The best way for a traditional bank to embrace the Two-Speed World is to increase the efficiency and agility of underlying legacy systems, while simultaneously creating digital innovations, thereby enabling them to develop new products and speed up time to market.

The key challenge for the big banks is that their start-up competitors utilise the latest technology from scratch, enabling them to serve their clients with minimal disruption. This approach is advantageous as when they are ready for launch, their offerings are far more modern than that of competitors.

Traditional banks must realise that in order to fight back, they must dramatically transform their services to avoid being rendered obsolete by the new-age players. The best way to do this is to automate many of the inefficient manual processes that legacy systems require. This acts not only as a cost reduction exercise, but it also improves the quality and speed of delivery to the customer.

For instance, at Syntel we are currently working with many financial services clients, to whom we have committed savings up to 45 per cent, while improving the end-to-end cycle time by up to 80 per cent and the resultant quality. This outcome-based approach to digital transformation relies on process automation to drive agility, efficiency and savings, frees up invaluable resources and capabilities, and allows banks to focus on their core business and enhance the customer experience.

These end goals exist to ensure that our clients understand the true advantages of automation. By optimising the “run the bank” activities, companies can springboard into the new economy as funds and manpower are freed up for initiatives to “change the bank,”  such as developing enhanced digital banking services. Resources are one key advantage that the large banks have over their FinTech competitors, and automation allows them to free up human capital and funds. Banks often attempt to undergo this transformation on their own, but this can be a perilous approach.  Traditional banks are experts in banking, but digital transformation is not core to their business. Profound technological changes require a judicious approach and a high degree of skill to ensure that business critical systems and services are not disturbed in the process. This type of blend between domain and technology is a critical process that requires expertise of its own.

By looking for an external partner, banks can initiate a cost-effective and efficient transformation and modernization project that will deliver the flexibility to adapt to the modern market. With automation initiatives, we typically see a freeing up of around 40 per cent of operations bandwidth, which allows larger financial institutions to benefit from another inherent advantage, the knowledge and experience of their staff.  By freeing up staff from repetitive tasks, they can focus more on high value work, like creating new products and services that enable easier, richer interaction with clients and customers.

In a world that is becoming increasingly connected, the millennial generation (or digital natives as we call them) are accustomed to fast responses over multiple channels. Therefore, having these extra resources available to key stakeholders can provide the omni-channel service that separates banks from competitors.

The greatest worry for banks is that they will be leapfrogged by start-ups before their transformation can be completed; this is why time is critical for banks to benefit from experts in navigating the Two-Speed World.

Banking has often been seen as slow to adopt new technologies, but this is an unfair label. The size of large banks and the competitive nature of the industry can often make innovations seem too risky to C-Level banking executives, with current deliverables taking precedence. By embracing digital transformation through automation, banks can have it both ways — becoming more efficient and at the same time freeing up the resources to innovate and compete in an ever-advancing digital economy.