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Digital transformation, transform the data, and the rest will follow

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Andrew Kouloumbride

By Andrew Kouloumbrides, CEO at Xceptor 

Evolve or face extinction, that’s the biggest challenge facing banks today.

We are at a fork in the road. But what’s the aim here? To kick the can a bit further down it, or invest in a digital transformation programme that will provide the solid foundations necessary to thrive and survive for the long term?

It is imperative to change the status quo of how banks have operated for decades, if they do not there is no way they can meet the very real but conflicting demands of banking today -to do much more with much less and yet most banks do not have the resources to carry on running their bank while transforming it at the same time.

To survive banks now must meet the ever more onerous regulatory demands and obligations; increase operational efficiency across the entire enterprise; and meet the rising expectations of clients who have embraced digital in every other element of their lives. They must also adapt to compete with the continually evolving challenges and disruption posed by the presumptuous new kids on the block, the agile fintechs which unencumbered by legacy technology and attitudes can laser target niche markets.

Limp wristed efforts that focus on cost reduction by say offshoring or chucking bots at inefficient processes will not get you there and ultimately waste more time and more money.

It’s not like chickens and eggs

From what we have seen, firms often focuson their desired end result, but with digital transformation projects, it’s deciding how and where to start that can often determines project success.

The experience of many suggests that beginning by primarily focussing on either processesor technology may not be the best route to achieving the intended digital transformation objectives.It goes without saying that learning from others’ mistakes can minimise the risk of repeating a costly failure already made elsewhere.

The problem with process

The overwhelming trend in banking revolves around reducing costs and increasing productivity and this is often process driven. But processes have tended to result from a fusing of existing legacy technologies, or quick fixes or often just because ‘it’s always been done that way’ rather than being created as best practice. If a digital transformation concentrates on process, then there’s a real danger that it will replicate imperfect existing processes and lock in more problems. Processes need to be overhauled and optimised, but there remains a need to ensure that the current processes are well-documented and understood by the transformation team.

 Looking at processes through a data-first lens enables firms to re-imagine the processes.

Don’t tape it up with technology

Too many have started by focusing on technology. It’s true that picking the technology may be a route to quicker implementation but whatever is chosen will have strengths and weaknesses, and this would suggest that an amalgam of automation technologies would likely produce a better result. Virginie O’Shea, research director at Aite Group believes that best practice in data management and strategies for digital transformation involve establishing foundational data standards and taxonomies that are consistent across the business, and that “next generation technologies are only usefully implemented when the data you feed into them is actually fit for purpose – technology is no ‘fix all’ for a firm’s broken processes.”

Data first, second, third…

Data should be the initial focus of the transformation it holds the key to realising the key analytical insights into the firm’s business and its clients – to ensure that firms can derive the best value from it.Quite apart from streamlining work processes, increasing efficiency and saving time and cost, used properly it enables clients’ transactional behaviour to be constantly monitored resulting in quicker and more personalised services and advice. It can also strengthen risk management, enhance compliance reporting, and increase security by detecting and preventing fraud. Data needs to be at the heart of the transformation, so that the right data can be intelligently connected in the right format at the right time.

Here’s some real world examples of successful data-centric digital transformations.

Bots need data

A global investment bank identified 6,000 non-strategic back-office processes that it considered suitable for robotic process automation (RPA) to enable significant labour-intensive cost savings.But its bots could only access the data in about 1,000 of the processes so success was limited.

But if you can capture any type of data in any format, and we can, then all the data in the 6,000 processes became accessible to produce real-time consolidated reports, exception work queues and dashboards, and these are automatically distributed to users. This data transformation enabled the capture of internal and external data, including from the robots, and some of the 6,000 processes no longer needed to be processed by bots but could be handled directly by Xceptor technology.

Due diligence needs data

Another firm had multiple systems and repetitive manual processes, when connecting the right fee data to the right services at the right time, to manage its 400-page invoices. There were far too many processes and the fee data couldn’t be interrogated or validated making due diligence nigh impossible. The firm wanted to eliminate the risk of paying wrong amounts and to have controls in place to pinpoint any irregularities from month-to-month.

With a data first approach we could capture invoice data across all formats and channels and enable all the fee structures to be interrogated. Automated processes enabled line-by-line reconciliations and intelligent insights allowed the firm to identify high cost agents, high exposure to certain markets or agents, and any high cost trading activity and so align its procurement strategy accordingly.

Lessons learned

We’ve worked on more than 75 implementations in 20 countries for 45 clients and there are many- lessons learnt from our experience and one is that it is important to start with the priority projects and then to gradually broaden out to building longer-term capabilities. Another is that RPAs are best for dealing with simple tasks with structured data rather than complex end-to-end processes. Given that processes are typically made up of multiple tasks, RPAs are likely to be applicable to less than 30% of a firm’s portfolio of tasks – for example the KYC process may entail hundreds of tasks, so it’s important to use RPAs for the simpler constituent tasks rather than for the entire end-to-end process.

We have found that there are three key strands to a successful digital transformation project:

  1. Always remember that data is your core strategic asset;
  2. Don’t be scared to re-engineer your processes to enhance them; and
  3. Selection of automation technology partners should be based on the tasks and processes that fit each best.

Business transformation powered by digital engineering

While digital transformation can speed up the development of new products and services and improve management decisions, it can also disrupt traditional business models, so it is imperative to regard it not just as digital transformation but as a business transformation.Follow the golden planning and decision-making rules to ensure that the digital transformation provides the solutions and versatility required, and it can genuinely transform an organisation. Labour and cost saving efficiencies, increased productivity and vastly enhanced automated analytical insights are just some of the prizes it will bring.

Banking

SoftBank reaches settlement with former WeWork CEO Neumann

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SoftBank reaches settlement with former WeWork CEO Neumann 1

(Reuters) – SoftBank Group Corp said on Friday it has reached a settlement with WeWork’s special committee and the company’s co-founder and former chief executive, Adam Neumann, putting to rest a legal battle dating back to 2019.

SoftBank, the new owner of the office-sharing firm, did not disclose terms of the settlement. Media reports earlier this week indicated the deal includes a nearly $500 million cut in Neumann’s payout from SoftBank.

The legal tussle between SoftBank and Neumann started in 2019, when SoftBank agreed to buy around $3 billion in WeWork stock belonging to Neumann as well as current and former WeWork employees. SoftBank later contested its obligation to purchase the shares.

Under the new settlement, SoftBank will purchase around half the shares it had originally agreed to buy, a source familiar with the talks had told Reuters on Monday.

The settlement is also expected to clear the decks for WeWork as it reportedly pursues a public listing by merging with a special purpose acquisition company (SPAC).

“This agreement is the result of all parties coming to the table for the sake of doing what is best for the future of WeWork,” said Marcelo Claure, executive chairman of WeWork and CEO of SoftBank Group International.

SoftBank, which poured more than $13.5 billion into WeWork, was pulled into the legal dispute with directors at WeWork after backing out of the $3 billion tender offer agreed when it bailed out the office-sharing firm following a flopped IPO attempt.

(Reporting by Shariq Khan in Bengaluru; Editing by Richard Pullin)

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Banking

Banks weigh up home working – the new normal or an aberration?

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Banks weigh up home working - the new normal or an aberration? 2

By Lawrence White, Iain Withers and Muvija M

LONDON (Reuters) – As the finance industry prepares for life post-pandemic, commercial banks are moving quickly to harness working from home to cut costs, while investment banks are keen to get traders and advisers back to the office.

HSBC and Lloyds are getting rid of as much as 40% of their office space as an easy way to make savings when bank profits have been crunched by the pandemic.

But there are concerns that remote working does not benefit everyone. Junior staff miss out on socialising and learning opportunities and there are also risks home working can entrench gender inequality.

At investment banks, where long hours in the office were the norm pre-pandemic, bosses say they want most people back where they can see them.

HSBC plans to almost halve office space globally, as it aims to squeeze more use out of the remaining space and increase the number of staff per desk from just over one to closer to two.

Britain’s biggest domestic lender Lloyds plans to shrink its office space by a fifth within three years. Standard Chartered will cut a third of its space within four years, while Metro Bank said it would cut some 40% and make more use of branches.

“We’ve had a period where flexible working has been tested in full, with about three quarters of people not based in offices as we used to call them, and the business has performed remarkably well,” Andy Halford, Standard Chartered CFO, said.

But major investment banks take a different view, with Goldman Sachs Chief Executive David Solomon pouring cold water on the potential of remote working.

“It’s not a new normal. It’s an aberration that we’re going to correct as soon as possible,” he told a Credit Suisse conference on Wednesday.

Barclays CEO Jes Staley, who last year said he thought the days of 7,000 employees trudging into its Canary Wharf headquarters were numbered, is also unwilling to commit for now to large office closures.

The Barclays boss has said the bank had “no plan” to make a major real estate move as Britain’s prolonged third lockdown had shown the strains of working from home.

Nick Fahy, CEO of online lender Cynergy Bank, said working over screens often could not compete. “You might have a disagreement on this, that or the other but actually over the coffee machine or over a glass of wine or a bit of lunch, issues can be resolved.”

UNINTENDED CONSEQUENCES

Some banks have acted quickly because they are used to flexing workforces in line with economic cycles, particularly in investment banks, Oliver Wyman principal Jessica Marlborough said.

But some are waiting on analysis of staff productivity changes before making final decisions, while others were mindful junior staff may still prefer going into offices, she said.

Banks are also concerned women may lose out from the shift to remote working.

“We thought the pandemic would be a big leveller for women. But actually what we’re starting to see is it’s extremely challenging to get women to move jobs in a pandemic,” Marlborough said.

“Banks were making progress in hiring a more balanced workforce in terms of gender and other metrics, but they’re actually struggling now (as banks are finding) they (women) are less likely to seek out a new job.”

Union leaders said part of the reason was that some women are juggling more childcare responsibilities during the pandemic.

Dominic Hook, national officer for UK union Unite, said banks must ensure working from home is voluntary, use of surveillance tools is limited, and employers respect staff hours so work does not spill into evenings and weekends.

“Our concern is that it won’t actually be a choice and that banks will pressure staff to work from home,” Hook said.

There are also concerns hybrid working will favour employees who visit the office more regularly, as they can spend more time in person with colleagues and managers, said Richard Benson, managing director at Accenture Interactive.

The staff most likely to go back to the office are traders, bank executives said, while back-office functions such as finance, risk management and IT will spend more time working remotely.

In Germany, Deutsche Bank said it had been challenging to adapt home office spaces for traders and expected many will want to return, but not all.

“We will pay more attention to the personal circumstances at home. Dealers also have children or parents in need of care. We have become more sensitive,” said Kristian Snellman, Deutsche Bank’s head of investment banking transformation for Germany and EMEA.

The trend to shed offices predated the pandemic as many banks made cuts after the 2007-09 financial crisis. Some have already made moves as a result of the pandemic, such as NatWest, which shut its tech hub in north London last summer.

Retained offices are being remodelled, with desks removed to make way for collaboration and break space such as coffee areas, gardens and libraries, property consultancy Arcadis said.

“It’s not just about adding a ping pong table and table football and hoping it will work, it’s about making sure people get downtime,” said Sarah-Jane Osborne, head of workscape at Arcadis.

David Duffy, CEO of Virgin Money, said the bank is among those planning to strip out office cubicles.

“The world of large-scale populations returning to a tall skyscraper building to come in and do their e-mail in the office doesn’t make any sense,” he said.

(Reporting By Lawrence White and Iain Withers in London and Muvija M in Bengaluru, Additional reporting by Patricia Uhlig in Frankfurt. Editing by Rachel Armstrong and Jane Merriman)

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Banking

Bank of England’s Haldane warns inflation “tiger” is prowling

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Bank of England's Haldane warns inflation "tiger" is prowling 3

By Andy Bruce

LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, adding that central banks may need to respond.

In a clear break from other members of the Monetary Policy Committee who are more relaxed about the outlook for inflation, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.

“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online.

“But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”

Haldane’s comments prompted British government bond prices to fall and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation.

“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.

(Editing by David Milliken)

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