IDC Snapshot: Establishing operational resilience to achieve customer excellence

Operational resilience gives banks the ability to simplify and streamline technologies supporting important business services, leading to better customer outcomes.

Steven D’Alfonso and Marc DeCastro, research directors at analyst firm IDC Financial Insights, share their expertise with ServiceNow and FinTech Futures:

What difficulties face banks whose digital customer experiences are burdened with disconnected operational processes?

One of the biggest obstacles that banks are faced with in creating a coherent, frictionless customer journey is the fragmentation of business processes and capabilities from the front office to the back office and across channels. Many banks have created digitised customer-facing applications, but the underlying legacy systems have not been transformed, leading to many manual workarounds. It’s like having a sleek sports car with a compact car engine under the hood.

Legacy risk and compliance functions are often the compact car engine behind customer experience applications.

Risk and compliance processes must be transformed to meet regulatory requirements at a sustainable and adaptable scale and speed. Many “fintechs” are offering point solutions that solve some of the problem, but they effectively create another fragment. To truly address the issue and streamline the customer journey, fintechs must provide solutions with controls that are digitised and embedded within workflows.

What are the key challenges in establishing operational resilience?

Operational resilience requires a shift in traditional thinking about risk in which a likelihood of system or process failure becomes an expectation that an important business service will fail. Operational resilience also requires banks to identify critical business services and map all supporting systems and processes connected to them. Mapping should be split into resource pillars such as people, processes, technologies, facilities, and third parties. Identifying the critically important business services, out of potentially hundreds of them, is a challenging task for any organisation. A crucial part of meeting that challenge is getting control of all data, which will bring immense value as a foundational part of the journey to achieving operational resilience.

Another significant challenge is capital expense budgeting. Budgets are often consumed by cybersecurity, risk, and compliance, which often leaves little investment available for true digital transformation. This is one reason why an operational resilience focus on critical business services can help align budgets with the digital transformation of the systems and processes that support them. A business process on its own may never attract the attention needed to obtain technology investments until it is viewed as part of a critical business service. Digital transformation budgets will then be better aligned.

Operational resilience gives banks the ability to simplify and streamline technologies supporting important business services, leading to better customer outcomes.

How can operational resilience enable customer excellence?

An operationally resilient bank is one that has a full understanding of the supporting systems and processes for vital services upon which its customers rely. Operational resilience necessitates understanding of what the impact tolerance is for that service. In other words, how long can a service be down before it causes harm to a bank’s customers or the banking ecosystem? An operationally resilient bank has a plan for proactive customer communication when an outage occurs. It also will have identified alternative ways in which products and services can be delivered if the business service outage extends past the impact tolerance.

Customer excellence is achieved because the bank knows when and how to communicate to customers. This transparency instills confidence in consumers that their bank can withstand disruptions and continue with business. Operational resilience also gives banks the ability to simplify and streamline technologies supporting important business services, leading to better customer outcomes. In the end, as banks become more agile, they can more quickly adapt to market, ecosystem, or environmental changes and thereby serve their customers better and more efficiently.

Why is it so important for customers to have outstanding experiences when dealing with their bank?

The importance of the financial services sector to our daily way of life is never more on display than during a crisis. However, even in normal times, the need for banks has not been lost on consumers. Routine transactions such as depositing money, paying a bill, or using a credit card have become so seamless that customers do not understand the complexity required to make these activities as frictionless as possible. Overall, consumers would agree on the importance of banks. Over 80% of current customers agreed that banks are vital and serve a necessary role in their lives, according to IDC Financial Insights’ US Consumer Banking Channel Preference Survey.

Customers’ expectations are often shaped by forces outside of the banking industry. For example, experiences with digital technology have led customers to demand uninterrupted access to their account information and that everything to work perfectly. When things do go awry, customers become angry or embarrassed, and they may begin to look for alternatives to their current financial institution, whether a challenger bank or perhaps the bank down the street.

Digital experiences have become not only critical to support customers but also the cornerstone in maintaining the overall relationship. In fact, IDC Financial Insights’ US Consumer Banking Channel Preference Survey found that 44% of consumers would change where they banked if their online and mobile experiences were not satisfactory, more so than any other channel the bank offers. For that reason, the resiliency of digital channels is critical. They must provide a consistent and always available way for customers to interact with their banks.

What are the key technologies driving operational resilience and customer excellence?

Getting control of data is a key factor in meeting the operational resilience challenge. Once a bank has good, structured, and connected data, it should implement next-generation digital workflows that have risk and compliance controls embedded within them. With this solid foundation, advanced analytics using machine learning can then be applied over those workflows to generate new and deeper insights from important business processes.

Implementing a digital workbench enables risk managers and business line leaders to monitor and manage controls and processes related to important services. Embedded controls within workflows provide a deeper understanding of the “health” of a service. Advanced analytics applied to digital workflows enable business lines to extract meaningful insights that can be used to enhance customer journeys and produce better customer outcomes.

Perhaps the most important factor is the role advanced technologies can play in working together to minimise customer harm when a service disruption occurs. These technologies can position the bank to recover quickly or to be agile enough to deliver needed service in an alternative matter.

About the analysts

Steven D’Alfonso, research director, IDC Financial Insights

Steven D’Alfonso is a research director with IDC Financial Insights responsible for the compliance, fraud and risk analytics strategies service. His coverage area includes research on technology solutions aimed at solving key issues facing financial institutions around GRC regulations, financial crime, and risk management.

Marc DeCastro, research director, IDC Financial Insights

Marc DeCastro is a research director for IDC Financial Insights responsible for the consumer banking engagement strategies practice. His core research coverage includes the complete omni- experience journey for the retail customer, including branch transformation, digital product strategies, and onboarding. Based on his background covering the consumer banking space, DeCastro’s research also includes a particular emphasis on how consumer trends and habits are forming the next-generation products and services that utilise current and emerging technology.

About ServiceNow

For over ten years, ServiceNow has been helping institutions improve experiences and increase the resilience of their technology. With 19 of the top 25 global banks as customers, we have deep expertise in enabling the digital enterprise. In recent years, our capabilities have extended beyond IT to create a powerful platform for transformation, and our latest financial services product drives even closer alignment between our customer needs and the outcomes that we deliver.

To learn more about ServiceNow in financial services and our Financial Services Operations product head to www.servicenow.com/finserv.