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Vanessa Bailey, Business Consultant – Banking, Experian

Digital transformation is an on-going, active programme for most large banks. It costs money, takes time and uses resource. All told, it could take years to implement. Yet customers expect fast, efficient services every day. If they find it difficult to access products and services they will seek alternative methods elsewhere, increasing churn.

Consider time, money, resources and the customer – but for how far ahead?

You could look to update your current legacy systems, which may solve these challenges in the short term. The bigger question is ‘how much further ahead have you looked?’ It’s important the business understands if this will be a short-term fix that may leave it with an even bigger challenge in a few years…

Some organisations have taken the next step and looked at modernising their software to be digitally equipped, through re-platforming. It is not an easy task, but spending the time to fully understand the business needs and capabilities to support the transformation will set the business up to meet the expected demands of the future.

During this process, you need to look ahead, understand what is on the horizon and attempt to plan for this in your architecture. However, the temptation to future-proof every eventuality when migrating to a new decision making platform can often lead to the requirements becoming too detailed and complex. It’s easily possible to lose sight of what is needed today. It’s important to strike a balance.

Why not repurpose what’s under the hood?

Traditional legacy systems are a staple part of the banking infrastructure, and have become immensely complex as they have been modified over time.

When you lift the bonnet, it may be hard to find exactly what you’re looking for. Legacy systems may look a little clunky, but you can still learn from what’s already there. Given businesses will have spent years developing workflows and decision strategies, there may be a lot of the base design that can be re-used if they still serve a good purpose now, and for the projected tasks ahead.

Digital transformation is the opportunity to refine the decision-making strategies that you want today. You therefore need to ask yourself ‘what are we trying to achieve at this point?’

The economy, regulation, people, and unpredictable life events all influence change.

When looking at digital transformation, it’s useful to ensure the system is flexible enough to adapt to future changes (known and unknown), but you also need a system that’s fit for purpose now. The business needs to make decisions based on the current climate, but also able to modify decision strategies as needed. By creating an agile build, it sets a foundation to build on again and again.

As laborious and resource intensive as it may be perceived, it’s setting a foundation that accommodates growing and changing business. Then the future becomes simply updating and adapting, not completely transforming.

Make informed decisions using customers’ current circumstances

New data-sets are becoming available that were not in existence a few years ago – alternative loans, rental data, MCDS (Mandatory Commercial Data Sharing), and many more are now much more accessible.

With this availability comes the risk of using old, or older data, and old scoring policies in credit risk decisions. It’s brought through not being able to accurately assess a credit application that uses the most recent available insights. This could mean that lending decisions aren’t reflective of the customers’ situation – and therefore they may not get the most suitable products or terms. It also poses additional unnecessary conduct risks that could be simply rectified.

New platforms and decision software can help address these issues more quickly than re-engineering old ones. Teamed with accurate credit scoring and the use of up-to-date data, a new platform can help the business make substantially better decisions.

Legacy systems tend to be less flexible and cost more to keep live over the long term. So when the tipping point comes, a migration is something to seriously consider. The costs of doing so must be balanced against potential brand reputation, data security concerns, and compliance. As well as the future savings a new platform can bring to your business, such as cheaper to enhance, easy integrations such as API’s, enabling growth.

Whilst customer expectations are high at the digital level, offline experiences need to be considered too. Customers simply want to receive a good service that is best suited to their needs, across any channel. This means that accurate credit and fraud assessments should be based on how much the customer can afford, and identity should be verified based on the information being presented or asked for at the time. This may be done digitally, but, it also needs to be managed using data that is available through traditional channels – such as the phone or in the branch.

The platform needs to be flexible – designed to handle all scenarios, utilising a consistent policy that’s easy to update no matter the touchpoint. The business want to be confident that whether the customer calls, applies online via smartphone, or walks into a branch, they will be assessed consistently and fairly. And that you are confident you have the most up-to-date information on that individual’s circumstances that has informed the decision.

When designing new systems don’t be tempted to put everything in at the beginning

When looking to repurpose and update older systems it’s easy to fall into the trap of looking at what you have, not at what you haven’t. Time is critical and it’s tempting to proceed with yet another enhancement to your current system – redeveloping and enhancing a specific area – such as scorecards, without considering what else could influence necessary change in the longer term. Consider the issue like jenga… If you keep adding to it, it will stand up – but only to a point.

How much bigger would the problem be if it fell down and needed redesigning? How much more investment would you need? Balancing the need to deliver a fit-for-purpose decision strategy, knowing what to add now and later, is a considerable challenge.

It’s important to consider the business’ needs in comparison to the customer’s. It’s also important to lead any change or transformation project with the customer at the forefront… Like regulators have.

A full redesign

When designing new processes and systems there is a clear temptation to make them so big that it allows for ‘any eventuality’.

Yet if they become too big they run the risk of not being functional at all. You do need to look at the future, but you also need to act now. Approach the challenge with these filters:

  1. Try to factor all elements into a wish list and filter out what can be done now or at a later stage
  2. Don’t let the list get too big that it stops forward progress
  3. Relate everything back to the customer and regulatory responsibilities. Consider their needs and wants – and how to meet them
  4. Decide which one to do first and which offers the best, cost effective opportunity to contribute towards the future of the business
  5. Changes in regulation can happen quickly. Consider if you have the functionality to adapt to change, or if you need to start again

I’ve recently worked with a large bank to help them review some of their on-boarding journeys in digital and traditional channels. Re-platforming was the best option for them. By understanding the strategic objectives, we overcame the challenge of balancing what they need now versus what they think they’ll need in the future.

They redesigned their new practical, functional decisioning systems to deliver just what they need for the present, but with the ability to grow, optimise and change quickly, later. What they now have is the ability to extend, to add further building blocks and integrate other concepts and changes at a later stage.

That’s the choice to consider. Stay as you are? Develop and respond to today’s trends? Or redesign, setting up a foundation for the future.

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