Ready for retail revival
Today, maximising profit is harder than ever for banks. The large retail banks have been forced to sell off branches and their investment arms are under increasing scrutiny, writes Tim FitzGerald, finance & banking sales manager, Casewise.
The need to change – be it adapting to newly-imposed regulatory frameworks, to differentiating yourself from the competition and growing organically while also encouraging customers to switch to you requires agility never before experienced in the financial sector. Organisations that can change quickest will win.
All this requires financial institutions to examine how they might better interact with their customers, see how best they can improve service to their customers whilst making it more cost effective to process once a piece of business has been initiated – be that a trade, a payment, selling a product or indeed introducing new products.
For the financial services sector, successful use of software and IT systems should mean more than just being able to maintain a good working relationship with your customers; it’s about continual improvement, offering more to your existing customers while attracting new ones and growing.
The banking sector relies heavily on IT – electronic trading and settlement is a mainstay of the industry. However it is this myriad of siloed systems and their complexity that makes it hard for management to visualise an end-to-end business process.
We have to ask what the bank is, and what does it aspire to be? How do you make the journey from ‘as is’ to ‘to be’ without mapping it, planning it and making best use of your resources? How do you do Basel III? How do you cope with RRP? How do you introduce that new mortgage product? How do you separate investment from retail?
We only have to look at recent calamities in the financial sector. The Libor scandal, mis-selling PPI, rogue traders, liquidity inadequacies, bank bail-outs and system outages leaving customers unable to access their accounts or pay bills. All of these are down to a lack of proper process or adequate process rigour.
Everyone is responsible for process rigour, but the bank’s board and senior directors are accountable.
Financial institutions operate in a highly regulated industry and it is everyone’s responsibility to follow the right process. But is that process properly documented? Is it published, accessible and digestible by those who need to follow it? Is it auditable? Is it relevant and up to date? Is it aligned with the need to change or operate differently? I suggest that often the answer to most or all of those questions is “no”. Then how can any financial institution effectively mitigate against operational and reputational risk unless this is put right?
You have only to recall the day the London Stock Exchange’s rules changed – 27 October 1986. It was dubbed Big Bang because of the aggregation of measures designed to precipitate a complete alteration in the structure of the market. Traders no longer walked the floor of the exchanges but conducted business electronically from their desks. The introduction of ATMs, BACS, CHAPS, Faster Payments, SEPA, credit card authorisation and Chip & PIN, contactless technology, as well as the information for traders to understand the market, such as services provided by Bloomberg and Reuters and now ‘Bank 2.0’ – the advent of mobile banking services – all these require a heavy reliance on technology. Without this technology enablement we would never have seen the services provided today.
However, for banks to be truly competitive there has to be not just better system integration but better visualisation of the business processes. Better visualisation of how the business process of selling a mortgage interfaces with a current account, better visualisation how a trade is influenced, how it is settled and better visualisation of how the transfer of funds occurs. Who owns that process, when was it last reviewed? What different geographies and locations does that process encompass? Who is involved in that process? Where are the bottlenecks, where are the risks? What else runs on those systems hosting this process? What happens if a location is closed, individuals leave the bank, get promoted, roles made redundant that operate within your process but are outside your remit?
There are three key elements the banking sector should take from the recession:
• The ability to adapt to change will separate the winners and the losers;
• Better process visualisation is the only way to remain competitive;
• Better process rigour is the only way to survive.
Transformation and adaption are the watchwords of today’s financial sector. However, one should not look at this downturn of the economy as being where the bloodletting will occur. Unless an organisation can effect agility and be adaptable when the upturn comes; if an organisation isn’t capable of seizing the new opportunities a resurgent economy brings; if it cannot cope with new invasive regulation while simultaneously growing its business; if it cannot attract new customers and launch new products quicker than competitors – that is when it will die.
Organisations need the tools in place to see the ‘bank on a page’, to be able to stand at the chart table in the captain’s cabin, to be able to plot the course and know immediately the hazards along the way. Because if you can’t, here be dragons.