IDC Snapshot: Improving operational excellence and customer experience in retail banking

Most banks have recognised the importance of having a digital transformation strategy to be successful today and in the future. Enhancing the customer experience often begins with improving the operational processes in place and providing tools to employees to share information, ensure compliance, and resolve issues.

Steven D’Alfonso, research director; Marc DeCastro, research director; and Jerry Silva, research VP at analyst firm IDC Financial Insights share their expertise with ServiceNow and FinTech Futures:

What are the meaning and role of “operational excellence” when it comes to digitally transforming a bank?

Operational excellence is about taking a bank’s disconnected customer experience, siloed legacy applications, and inefficient front- and middle-office processes and moving them onto a platform that can monitor and alert the institution to opportunities for efficiency gains. This means that banks must operationally transform from the front office to the middle office and, ultimately, all the way to the back office.

Previously, banks focused their overall transformation strategy on improving the digital customer experience without paying much attention to the needs of the middle and back offices. Addressing this investment gap will require current and future processes to be developed in a manner that is more transparent and better connected to internal and external systems, improves the customer experience, and reduces risk for the organisation. The bank must be willing to create changes in the industry’s business model to become more agile and efficient.

What is the benefit of an operational excellence approach to improving the overall customer banking experience?

Today’s customer experience is shaped by digitally native solutions. These solutions remove friction from the experience first and then develop additional features and tools to handle support, compliance, and risk mitigation. Bankers do not have this luxury. Instead, they must create an experience during the customer life cycle that mimics that of digitally native solutions while adhering to constantly changing regulatory concerns and protecting the customer.

In addition, third-party solutions that disintermediate the banking experience may limit the frequency with which customers can engage with a bank through its digital channels. To combat this, banks must remain steadfast about creating the best experience possible by providing modern solutions with a focus on putting the customer’s needs first, especially when the customer is trying to resolve a problem or is having trouble with a bank product or service. These issues can be self-service client inquiries or more complex account origination and onboarding end-to-end lifecycle management. Either way, the bank needs to focus on reducing the time to resolution, which will lead to improved customer satisfaction, brand loyalty, and trust.

Ultimately, an operationally excellent bank delivers a seamless and connected customer experience because all the institution’s channels are connected. Rather than having a disjointed interaction, the customer experiences one bank as it easily progresses through its journey.

How important is this operational excellence approach when addressing enterprise solutions used by the bank’s employees?

In most environments today, the employee tools in place are often legacy solutions that have been developed internally, provided by a third party as a spot solution, or deployed as part of the bank’s core banking platform offering. While this approach is certainly understandable, it has created an environment that can best be described as complex and inefficient, resulting in numerous unstructured processes with no centralised areas for employees to share best practices, especially around compliance. The same investment and effort to remove friction from the institution’s customer-facing solutions need to be duplicated for the employee to help reduce costs, improve performance, and create structure while providing tools to identify areas in need of improvement.

In addition, employees who are enabled through a connected and frictionless environment are better able to serve and satisfy their customers.

Who are the key stakeholders involved in setting the digital transformation strategy for a bank?

The entire C-suite should be involved in setting the transformation strategy. However, it is important to note that some key stakeholders will have different mandates. Executives in the lines of business will want to improve issue resolution times for both customers and front-line employees and remove friction from their respective experiences. Improving operational efficiencies will be of great interest to the COO, CRO, and CSO as inefficiencies often lead to gaps in adherence to compliance and regulatory mandates.

The CFO is always interested in improving the overall profitability of each customer as well as the organisation, which can be achieved through an improved experience during the customer life cycle. Successful digital transformation must be driven from the top to ensure competing interests across lines of business are not inhibitors, which would potentially continue the silo problem. The message from the top should emphasise the benefit of creating a unified platform from which business units across the front and middle offices can strategically transform.

What are the characteristics that make up a successful digital transformation strategy for a bank?

The digital transformation mission of a bank is driven by the need to enhance customer engagement, improve its brand trust through a more transparent and secure environment, and to disrupt its own business model to align with the lifestyle of its customers and employees. To realise this mission, banks need to take a more efficient and agile approach when responding to customer needs and identify areas for improvement that break down existing silos and streamline fragmented processes.

Enterprise programmes that benefit more than one line of business and provide real-time compliance monitoring and alerts with improved digital workflows will help achieve operational excellence by reducing costs and potentially avoiding steep fines.

IDC has found that organisations that have a common business and technology roadmap have had more success than those that operate under separate plans. Aligning goals and strategies across the enterprise will help drive toward digital transformation and operational excellence.

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.

Jerry Silva, research vice president, IDC Financial Insights 

Jerry Silva is vice president for IDC Financial Insights responsible for the global banking research programme. His research focuses on technology trends and customer expectations and behaviours in retail banking worldwide. He draws upon 35 years of experience in the financial services industry to cover a variety of topics, including banking infrastructures, back- and front-office systems, technology workforce optimisation, security and fraud, IT work resources, enterprise mobility, and payments.

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.