Sponsored The traditional banking industry is in a perilous position. The speed at which it can change to rapidly unfolding situations, perform tasks and the way it handles relationships with customers are under close scrutiny.
Like every other sector, the accepted models for working are being turned on their head by new, faster, more agile challengers. Take the simple act of opening an account: with a high-street bank you need an appointment, multiple forms of ID, you sign forms and await approval before your card arrives in the post days later. With a challenger bank, forms are completed and proof provided online, the acceptance takes minutes and your “card” is delivered to your mobile phone - in just a few hours.
And that’s a relatively simple transaction. When you get to more complicated issues such as handling approvals on loans or running mergers and acquisitions, the paperwork and the processes with traditional banking can really pile up. Take mortgages: a loan officer in the US amasses so much information and so many signatures that the finished application can run to more than 500 pages and take around 50 days to complete. The time and expense required to execute a mortgage has gone up by 80 per cent in the last eight years.
Covid-19 has added a more urgent dimension to digitalisation: working from home. The number of individuals working from home had been on the rise in recent years for a number of reasons this has seen a spike following the Covid-19 pandemic. A recent snap poll by Gartner of HR chiefs found 91 per cent had implemented work-from-home arrangements as a result of the outbreak of the virus.
Home working can be a challenge for banks because of the need to maintain existing processes and to deliver continued, good experience for the customer while - at the same time - continuing to adhere to rules of security and regulation. It’s one thing for bank IT teams to install systems in the controlled and centralised context of a handful of the corporate offices. But it becomes more difficult when rolling that out over a wider area to a network of smaller sites such as peoples’ homes that will have less robust infrastructure such as networking.
That snap poll by Gartner found poor technology and/or infrastructure had proved the biggest barrier to effective remote working during the Covid-19 crisis.
Give us the tools
When it comes to banking and financial institutions we are talking specifically about the presence of legacy technology and processes. Banks can be many decades old and have ingested generations of technology that have - to a greater or a lesser extent - become siloed. That can mean data fragmentation and documents and applications living in a tapestry of systems that banks have partially integrated, or that have been wrapped by succeeding generations of once-new technology. Processes and workflows – initially paper-driven but latterly digital - attempt to achieve a business outcome by navigating their way through these different systems and silos.
Sure, banks have survived for generations, enabled through the intake of new technology waves. But how much longer can this continue?
Gartner forecasts in a separate report that by 2030, 80 per cent of these “heritage financial services organisations” will have gone out of business, become commoditised, or exist in name only, unless - of course - they adapt to use new technology but - crucially - change the way they work.
You’ll have heard of digital transformation, but Gartner reckons this is a myth for those with “institutional mindsets, processes and structures. Established financial service providers will have to move faster on digital business, building digital platforms or finding niche products and services to sell on others’ platforms,” according to David Furlonger, Gartner vice president and distinguished analyst.
You need a new platform
Digital is a problem for the heritage set because, increasingly, it’s the way people expect to interact with financial service providers.
According to an FIS Global survey, digital channels are now the most popular way for people in the UK to check their bank balances, make payments and deposits, and interact with customer services. Forty per cent of millennials choose their bank on the strength of its mobile banking app, rather than the number of its high-street branches. The challenge of legacy runs much deeper than opening an account in a retail bank, though; it pervades wholesale banking.
Take mergers and acquisitions. Transactions may entail a vast paper trail of hyper-sensitive documents and the legacy IT used for completion includes third-party, so-called virtual data rooms that were designed as transaction data repositories. Workflow and collaboration have not been built in – or is difficult to adapt. This can make it very hard for employees to work together on the documents.
For example, items such as audit trails and rules to enforce lifecycle management of data might not have not been built in or, again, are difficult to change and customise to changing circumstances. Employees involved in a merger or an acquisition will also invariably end up storing files on their own devices. This introduces further problems of governance and security with the additional difficulty of version control and email boxes becoming congested with multiple copies.
Let’s now consider wealth management and custody. Here, departments want to share the documents internally and with customers and partners. Also, customers want to easily share documents with their provider but the earlier generation of systems that houses documents and data integral to customer financial products and services may lack the collaborative features to facilitate this. Systems fail to provide adequate levels of security to protect documents or to police data retention. They might lack the ability to audit who has seen sensitive documents and be missing workflows and integration points that would otherwise help different entities involved in the financial product share relevant data – such as bank-account information, stock details, tax information and so on.
Then there’s the ordinary, day-to-day business of working with – or knowing – your customers. This work can often be outsourced to third-party providers, who provide operations such as call centres, or be run around the clock in internal operations that span time zones and geographies. Outsourcing or dispersing such services can lead to the fragmentation of individual customer’s data and content as those in the call centres work on emails with multiple message applications.
Then there is the age-old problem of adhering to legislation and regulations. The Markets in Financial Instruments Directive (MiFID II) legislation implemented in January 2018 imposed a raft of new reporting requirements and scrutiny across the sector. Such regulation can create the need for additional content when it comes to customer data. The rules must be applied to the systems responsible for the customer’s data so - therefore - systems need updating with each new piece of regulation. This is a challenge in a world of siloed and legacy systems, and banks that have not complied with the new rules run the risk of being fined when caught.
Finally, we have the new scenario of home working on a massive scale. The systems you institute must allow staff and processes to function either the same - there must be no breakdowns or degradation in efficiency for the company or experience for the customer. This is a challenge for a sector of the economy that, despite the broader trend in the economy towards home working and the rise of cloud-based productivity tools, remains overwhelmingly centralised and paper-driven.
Survival of the 20 per cent
So how does a heritage bank make sure their business is one of the 20 per cent that Gartner thinks will survive and how does the organisation embrace and enable greater home working?
Figures from Box show that by using a cloud content management platform as the foundation for digital, banks can help overcome the issues and deliver the experience their business units and customers expect.
According to Box, such a platform can accelerate M&A cycles by 38 per cent and shorten the contract review and approval process by 29 per cent. Ameriprise Financial is one customer who moved its client on-boarding and loan-application system to a platform running on Box, moving more than 60TB of client files and decommissioning two data centres in the process. The new content platform has seen Ameriprise cut its loan processing times in half and reduce annual costs by $1m.
Morgan Stanley Wealth Management used a cloud platform to help streamline the communications process between clients and its advisors, while also maintaining security and compliance. Working with Box, Morgan Stanley Wealth Management has developed a digital vault that lets clients store and share important personal and financial documents used to apply for products and services. The vault is encrypted and it allows two-way sharing; it employs Box KeySafe to manage encryption keys and control privacy, with Box Governance used to manage lifecycle compliance fundamentals such as length of retention of documents.
Stepping into cloud content management
But how does a heritage bank begin the process of change? Pete Redshaw, Gartner global financial services research and advisory practice vice president, tells us that technology has never been the problem for banks. The challenge in going digital runs a little deeper. “Banks have a relatively poor understanding of where they are heading in terms of new visions for their business model (how they will make money), value proposition (why bank with us) and operations (how to execute on this). It’s these issues they need to solve.”
The first step towards change, therefore, is to understand the existing processes and systems to see what can be replaced or refined with a view to streamlining workflows and overcoming data fragmentation.
A key part of streamlining is to look at how data and documents are stored and shared. These will need to be passed between departments and across and between companies for review and approval and so on. Any new system must therefore include an ability to set customisable rules over access, audit trails and include the capability to manage the security and lifecycle of data – for example, how long you are allowed to keep hold of a customer’s information.
Unfortunately, the tools currently used by heritage banks are one of the main inhibitors of change. Legacy enterprise content management systems typically lack modern collaborative capabilities, they are costly to update, do not scale easily and are not intuitive to use or integrate.
The answer is to introduce new tools with a cloud platform as their foundation; this lets you obtain the kind of functionality and achieve levels of change demanded. These tools should alsoprovide quick and simple ways to achieve these goals, too. Covid-19 is forcing companies to respond quickly with new ways of working - ways that look like becoming permanent. “We are being forced into the world’s largest work-from-home experience and, so far, it hasn’t been easy for a lot of organisations to implement,” says Gartner senior director of advisory Saikat Chatterjee.
Banks therefore need a partner able to work across different tools and who has an open and API-driven platform capable of bringing together legacy and new tools. The platform should let people use existing tools such as Office 365 or G-suite, so as not to interrupt the way people work, and provide integration with collaboration workspaces like Slack, Microsoft Teams and Google Hangouts.
Banks must work with staff – and any third parties such as those in the call centres – to provide the right tools and to also ensure the new tools and platform works for them. Financial services is a people-driven sector while enterprise IT has a history of building big systems to serve a business need or outcome but failed to accommodate people.
This history is littered with expensive flops that failed because they didn’t work the way users needed - so the users didn’t, or couldn’t, use them. The new cloud-based content platform should, therefore, be application and device agnostic at the front end. So, for example, if a line manager gets an email notification on their mobile that a contract needs signing for a loan approval, they should also be able to read, approve and sign it on their mobile rather than have to wait until they can find a laptop that has Acrobat and DocuSign installed. Integration with line-of-business applications such as Salesforce should also be a given.
Banking has a history of challenges and change, with companies moving from paper to mainframe, from mainframe to computer and computer to cloud. Decades of survival, however, has produced a layered legacy of technology and practices that makes it difficult to respond to the challenges of now - of disruption caused by competitors and unforeseen events like massive working from home with Covid-19. Digital delivery requires a nimble approach - and collaboration founded on an open and customisable cloud is the only way to overcome silos, data fragmentation and the complex processes of old to ensure customer satisfaction and employee productivity in what are changing and challenging times.
Sponsored by Box