The very core of what it means to be a traditional financial services institution is dissolving. While many of the ongoing changes address customer experiences and new technologies, one piece is still missing: operations. A majority of organizations continue to rely on the same old operational model.
The previous “bastion of stability”, banking and financial services, is experiencing a state of flux never imaginable in the past. The transformative forces are now pushing the boundaries of banking experience: overnight change from negative interest rates to near-stagflation, digital challengers with niche offerings targeting more specialized customers, the expectation of the customizable services for consumers, the move from Quantitative Easing (QE) to Quantitative Tightening (QT), cloudification of the banking business.
All of these factors, and many more, are challenging the very essence of what it means to be a financial services institution, the required basis for decision-making and how to steer steady on the way forward.
Despite changes, operations remain
Many of the challenges have addressed customer experiences, with new digital ways to encounter customers, such as mobile banking, advanced payment solutions and instant credit approval processes. Behind the curtains, not that visible to customers, there have also been significant changes in the technology stack; updated data solutions, injection of cloud services and cloud-native applications, modernization of the software technology stack and updating of technical architectures.
A lot has happened for sure, but it seems that something is missing.
That missing piece is operations. After all the adjustments, many organizations continue to operate with fundamentally the same model as before the transformative forces started to challenge the fiber of financial services. What’s the risk with that then? I think my colleague Ben Hicks is right on spot: “What I see are companies moving heritage on-prem controls into a cloud-based way of working, an approach where they may end up with the worst of two worlds.”
His comment refers to cloud transformation specifically, but it goes for most changes. To become truly digital, the operations also need to change.
Traditional operating models hamper development
Let me draw a parallel. A hundred years ago, electricity entered the manufacturing processes. In the beginning, the impact was neither transformative nor significant. The new technology was simply added to the same operations setup as the earlier generation of steam engines. Only after the operations changed the way of working and the workspaces were built around electricity-powered engines, the leap in productivity became revolutionary.
Currently, the same situation applies in banking transformation: the technology and business models are there, but the operational model is limiting the full benefits of the transformation.
However, changes are underway. Many financial institutions are exploring different ways how to operate in the digital age. What seems to be common to these new ways of working is that the digital skills are not a separate department or role, but an integral part of the fabric of business: across the organization digital helps reduce the time from idea to delivery, with a quicker understanding of what is possible to achieve, incremental deliveries, and a “try-and-fail-fast- approach”.
As banks bet big on digital, they are looking at technologies such as AI, advanced analytics, and automation to provide personalization, prediction and speed in creating powerful customer experiences. Banks are also increasingly relying on machines to automate repetitive tasks and make complex decisions, creating demand for human skillsets that complement intelligent machines.
In the process of transforming existing operations, many banking and financial institutions turn to intelligent process automation (IPA) (a field where Cognizant is named a leader by Everest Group) and business process services (BPS). This eases the burden of everyday processes and speeds up digital development by using an external partner for designing and deploying efficient operating models.
At Cognizant, we have had to opportunity to partner with some of the world’s largest financial services institutions and help them on their journey towards a brighter digital future. Please visit our banking and financial services section to learn more.
Responding to changing customer expectations, higher operating costs, new technology and an evolving regulatory landscape, Financial Services organisations now also face the uniquely challenging environment created by COVID-19.