Never before have Britain’s banks been under greater pressure. Faced with public scrutiny over historic practices and pressure from some quarters to jettison operations harbouring systemic risks, many are grappling with a more fundamental challenge: How to reform their own structures and operations to meet the longer-term competitive threats posed by emerging challenger banks.
Echoing earlier David and Goliath-like battles in other industries, the new kids on the block could be the catalyst for market reform similar to that witnessed by some of Europe’s flag carriers, which were left languishing in the jet stream of fast-growing low-cost airlines. Over the last three years, the ‘challengers’ have nearly doubled their share of the retail lending market, including mortgages and unsecured loans, while differentiating themselves from the big banks in several ways. Metro Bank is attempting to compete on convenience, with branches open up to 12 hours a day, seven days a week. Virgin Money is prioritising service, while the latest entrant, Charter Savings Bank, is vying customers with attractive easy access account rates.
The challengers are lithe, resourceful and unencumbered by older established processes and routines, free to harness technology without the overhead of legacy systems. As a result, their business models offer greater scope to develop agile and flexible customer-focused operations.
For traditional banks, a customer-centric approach creates major demands on their legacy line of business systems (LOB) and processes, originally designed for internal access, with limited connectivity and rarely intended for customer interaction.
Most legacy retail banks have accumulated a broad customer base. From SMBs and large corporates, to working families and retirees, these institutions are now forced to tackle some of the greatest targeting and operational challenges ever seen, as they bid to remain competitive.
So what are the options available to these banks? In particular, how do they take into account the need to deliver customer-centric quality growth, which meets the disparate expectations of a hyper-connected Generation Y and the baby boomers, and everyone in between, while remaining profitable and keeping regulators and other stakeholders on side?
Customers demand and expect ever higher levels of service and value. Social channels add further to the mix, offering the customer the ability to communicate openly about their experiences, often to the exclusion of the bank involved.
Operational overheads are proving hard to contain, while growth and returns on equity remain low minimal. Compliance, regulation and legislation compromise traditional business models, with technology presenting itself as a key differentiator in both front and back-office processes. Fast and effective operational manipulation of ‘big data’ is critical, providing key customer insight and experience analytics upon, to shape the business vision and strategy.
It is in such environments that enterprise content management (ECM) solutions come to the fore, by providing an agile middleware layer of renewed functionality, which helps increase user productivity through the elimination of application switching and the automation of costly manual tasks. With the benefit of increased transparency into document, information and processes, executives and managers can also gain improved visibility into the status of projects and processes, while empowering staff to focus on assisting customers.
Efficiency, cost-savings, integration and fewer steps in a process are all potential benefits when considering the wider IT strategy. However, this value proposition could be lost when installing a new system that adds more work for every other system. The interaction of the ECM system and how the implementation environment works with existing systems will, therefore, play a key part in how legacy banks can make significant headways in this area.
Take for example a traditional mortgage management solution. More often than not, this requires input from multiple sources, possibly paper, email, in-house account details, with the mortgage clerk expected to know and access multiple systems, just to be able to operate. Imagine the number of screen changes and system swapping actions required when answering a client query, even worse if it is a telephone call. As every single system that touches the customer needs to be updated, and sometimes the systems do not talk to each other, it becomes a manual process of re-keying information many times. Aside from this process being time consuming, it leaves far too much room for human error.
This places a significant premium on staff operating costs and challenges staff retention, while doing little to improve the customer experience.
In a seamlessly interoperable environment, the ECM strategy will allow legacy banks to go beyond simple data retrieval, where customers may provide the initial data electronically via an eform, a mixture of electronic and paper documents or even as a transferred file from the account transfer agency. Data can be captured simply; auto-filled and indexed across the required legacy systems; updated and linked to relevant documentation stored within the ECM, while providing management information and reporting dashboards, without the need to switch screens, rekey information or train staff on multiple systems. Just fast efficient interoperability, providing effective and secure data delivery.
Such interoperable environments expedite and improve business decision making by delivering immediate access to supporting documents, while minimising training costs and accelerating user adoption.
The market threat posed by challenger banks requires a new approach. By tackling the value proposition of such competitors – efficiency, cost-savings, fewer steps – legacy banks can focus on reshaping their own processes and operations through a solution-focus that enables ‘problem owners’ to quickly resolve their process issues, without the requirement of new systems that require extensive specialist IT consultancy, developers and support.
Colin Dean is account manager EMEA insurance and financial services of Hyland, creator of OnBase. www.onbase.com