Why banks need customer-centric digital collaboration
Every area of the financial services industry is undergoing significant digital transformation.
However, as well as driving new product innovation, improving regulatory compliance or profit margins, technologies such as automation, the greater use and analysis of data and more are also enabling banks to transform their customer experience.
This, says McKinsey in its How digital collaboration helps banks serve customers better article, is taking on ever greater prominence as a result of the impacts of COVID-19.
The global pandemic, it says, has meant that “remote and mobile access have shifted from conveniences to necessities for many millions of customers”.
It adds: “Going forward, we expect digitisation to play an even more central role, as banks find innovative ways to serve their customers during the crisis.”
Digital collaboration and process workflows
Automation has been a key technology for financial services business process digitisation, says McKinsey.
It posits that the technology could have a greater impact than it currently does.
For example, it is estimated that between 10% and 25% of work across bank functions will be carried out by machines over the coming years, which will allow employees to focus on more value-driven tasks.
With this in mind, McKinsey explains, “embedding digital collaboration into process workflows will unlock the next S-curve in employee productivity.”
Such a step-change could generate new value of $30bn or more.
Commercial banking and customers
Digital collaboration could bring significant benefit to the customer onboarding process, as an example.
Typically, this consists of initial consultations, documentation, approvals, customer training and testing, and eventual go-live.
If this were to be developed, online or digital portals would be a best-suited method of improving the customer experience, McKinsey says.
Similarly, this portal can then act as a central hub through which customers can engage with points of contact at the institution.
According to McKinsey, collaboration platforms that connect customers with relevant internal teams and reduce cost per customer by 15% or more, and cut the overall onboarding time by as much as 20%.
Digital collaboration: actions
There are several steps banks should consider. In the first instance, for example, it is essential to identify the business processes that will be most improved through the adoption of digital collaboration tools and technologies.
Further, a full technology roadmap is essential. This includes use cases and for each technology to determine how to address pain points or areas of concern.
Any technology adoption must be undertaken in an Agile way, says McKinsey, and should be improved and driven by user feedback.
User adoption must play an important role in the rollout of digital collaboration tools.
Specifically, McKinsey recommends that banks prioritise training, publicising the benefits of adopting such technologies and show how they improve the overall strategic position of the organisation
Zafin: Banking is now in the era of the tech ecosystem
The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?
John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.
Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:
Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?
It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started.
While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk.
Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand.
I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.
When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic.
Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?
I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.
Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.
The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC.
I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives.
Q. Are there any other bank tech trends you'd like to discuss?
Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement.
Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.