The financial crisis of 2007 to 2008 marked a huge change in the broader perception of banks. Following the crash, governments were forced to pump trillions of dollars into financial institutions to prevent the whole system from collapsing and with that the public lost the perception of safety and trust typically associated with a bank.
This change in public perception has led to increased scrutiny in the media as people allocate accountability to those visibly responsible for causing a crisis which had such wide social and economic implications. The FT reports that the 10 biggest misconduct scandals have cost Britain’s banks and building societies almost £53bn in fines and other penalties since 2000.
This mix of economic and regulatory constraints, as well as greater media scrutiny, has provided increased pressure on banks to change in order to remain profitable. A popular way to deal with these pressures has been to focus on cost reduction while trying to maintain and build on existing relationships with the public through marketing and communications; leveraging the trust previously associated with their brand and the industry more generally.
If not cost and trust, what levers can banks pull?
Although there is much focus on reduction of costs in the industry, it can be argued that not enough focus has been placed on investment in operations to digitalise processes and increase productivity; transferring the benefit back to the customers.
Banks are missing a trick by reacting slowly to innovation in process optimisation. A good example is the innovation in fintech such as mobile payments. This technology not only massively simplifies the payment process but also improves the experience of the customer. It’s time for banks to start effectively leveraging these technological developments to provide real value back to the customer. Innovation can be an effective tool to rebuild trust.
Why process automation?
Another area worth considering is automation, the simplest example of which is automating processes in a manufacturing assembly line. Once upon a time, employees would have to physically move products from one stage of the manufacturing line to another. The conveyor belt assembly line then automated this process, employees saved time as the products were automatically moved along the line, which increased activity allowing employers to refocus and use this resource to increase production.
Essentially, automation is a more than just a cost saving exercise. It also increases productivity through streamlining the end to end process in order to make it quicker and easier to manage. The “so what” in relation to banking is this: by investing in new systems and infrastructure to automate processes, the bank – and indeed any company – is freeing up what is typically the most important resource it has, its people. This gives the bank the opportunity to better use the time of employees who can focus on work that brings greater value, which represents a larger return on investment for the bank. The forgotten benefit of this is that the time can be reinvested in improving the products and processes which has positive impact on customer experience and increases loyalty to the bank.
Let’s put this into context: an average mortgage application goes through 35 manual handoffs before completion. The simplest example of an automated solution, in this instance, would be the use of electronic signatures. Considering 94% of financial services documents require a signature, the ability to digitalise this process would save a substantial amount of time and effectively reduce the time lag in the process - as well as making the process significantly more user friendly.
Improving the customer’s experience is the hidden value. As interfaces with retailers become increasingly digitalised and streamlined, banks cannot afford to lag behind. Quickquid for example has a loan process which is entirely digital. Customers can get approval for a loan within 30 minutes, with an estimated 10 minute waiting time for the money to arrive in their account.
The customer’s digital journey even includes the possibility of having a face to face chat with a representative over webcam. This marks a staggering change from a typical bank loan application process, but, in principle, it represents exactly the same service for the customer. While this example is subject to regulatory differences between the companies, it shows how banks could leverage innovations in fintech to digitalise processes.
The elevator pitch
Due to the sheer magnitude of a bank’s operations, changing their IT systems and ways of working can be an uphill battle. However, by investing in ways to improve your processes and IT infrastructure, you are saving future costs which will only increase exponentially as systems and processes become increasingly outdated.
These savings can be reinvested into other areas of the business, creating a cyclical effect of freeing up resources and thereby providing the organisation with the opportunity to continuously improve as their processes become more and more efficient.
Fundamentally, this will improve customers’ experiences and can be a real source of value within the industry; automating banking processes allows the employees to focus on what matters most, their customers. By focussing on improving the service the customers receive, banks have the opportunity of using innovation to stay ahead of the competitive curve and improve customer retention which has become critical in a climate that has become increasingly pressurised by both the public and the regulators.