Retail Banking

Retail Banking

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

How multi-channel operating models support the digital banking revolution

It is very difficult to register an online savings account from the comfort of your own home, particularly if you have no customer history with a bank. This is a surprising constraint given the increasingly digital age we live in, and the fiercely competitive landscapes within which retail banks operate.  This topic has made us reflect on the significant operating model changes taking place within sector, as banks look to transform to provide a comprehensive digital portfolio of services to retain and attract customers as well as reduce their operating costs and meet regulatory obligations.

Most banks began their digital journey years ago and have a clear strategy, but even those face major challenges and changes. In particular, as customers become ever dependent on mobile banking and omni-channel moves to the forefront of financial services’ hot topics, the mobile banking experience is becoming a significant feature of digital strategy that banks must focus on. We have seen that banks such as Lloyds Banking Group have committed to reducing their number of branches by 400 by 2017, having seen a 15% decrease in their usage by customers. This change in behaviour is contributing to the growth of online on-boarding and servicing platforms, as well as a real push to build the capabilities needed to execute the change. In order to keep up with the fast changing market, traditional banks will have to adapt their operating model with focus on IT changes and new products and services.

That said, re-designing and implementing an operating model to facilitate shifts in strategy in such a manner similar to Lloyds and to such a large extent, will bring significant challenges. And so, careful management of the transformation of operating models is the key to providing new services that provide real value for everyday banking customers – the people, the technology and the management must all be in line.

Taking the workforce with you

Part of the workforce will need up-skilling or replacing to provide more digital capabilities. For example, servicing a mortgage customer need via a remote conversation requires a different set of skills compared to a traditional Mortgage advisor that works with customers face-to-face.

A change in the organisation of the bank to fit a multi-channel servicing strategy will also lead to uncertainty for the workforce in terms of their deployment and skill set, and the transformation of the workforce is no small undertaking.

Here, banks could learn from the airline industry which has been through a similar transformation; an increasing proportion of the check-in capability provides assistance to multiple customers simultaneously, with mobile and self-service check-in (as opposed to focussing on one customer at a check-in desk).

Transforming the technology

As banks look to change their customer facing environment in order to retain and capture customers, their technology needs to adapt to enable this. The vast majority of banks have legacy systems that cannot adapt quickly – it would also be expensive to change them before their natural retirement. An approach that has been gaining ground in recent years is to develop new front-end technology capabilities such as developing new web-sites and mobile applications quickly, to cater for changing customer needs, whilst keeping hold of legacy back-end systems. Banks are using sophisticated and relatively cheap “middleware” software to connect the two ends seamlessly.

Taking this one step further, some banks are looking at their IT departments to change the way they provide services to the business – to provide services in specific units of standard capability that business units and mix and match according to their needs – called Service Oriented Architecture. For example employees are only provided with one way of signing onto applications throughout the IT estate reducing duplication and effort, and allowing greater investment in state-of-the-art, strategic services that banks need to move ahead quickly.

Managing the transformation

Designing and implementing operating models in rapidly changing environments requires superlative programme and project management techniques as well as a business change capability to facilitate the transition. Managing change is not without its challenges as the majority of governance and transformation in banks uses a waterfall approach, which has a number of shortcomings:

  • Projects are difficult to land and often encounter resistance from affected areas.
  • Changes are obsolete by implementation because of lengthy design and then rollout phases.
  • Customers (internal or external) affected by transformation are often left unsatisfied by a combination of a) and b), as well as shifted expectations and market conditions.

The transformation can be made easier using agile ways of working – attempting to focus on value to the customer, delivering value faster and passing more decision making power to delivery teams to make faster decisions. However, introducing agile delivery methodologies into a waterfall environment is not a simple exercise – the topic is usually politically sensitive and can cause friction within the business if not embedded carefully. Banks are relatively new adopters of this approach; however more are investing in their ability to deliver projects in an agile way.

The reality is that a multi-channel strategy is key to long term survival in retail banking, but funding is likely to come as a result of cost cutting from more traditional capabilities (e.g. branches) as well as increased overall digital transformation spend. Using these funds wisely and managing the transition to a more modern strategy effectively will be just as important as making sure the correct strategy is selected in the first place, to ensure the best outcome is achieved for both Customer and bank.

About the author

Joe Whitehead & Nirav Ghantiwala
Joe Whitehead & Nirav Ghantiwala
Joe Whitehead is a Consultant in the Strategy and Operating Model team, having joined Capgemini Consulting in January 2015. Joe has worked across a number of sectors in digital transformation roles and has a specific interest in Digital Banking. He studied at The University of Manchester.

Nirav Ghantiwala joined Capgemini in 2014 and is part of the Strategy and Operating Model team. Nirav has worked across a number of sectors in digital transformation roles and has a specific interest in Consumer Products and Retail. He studied at the University of Bristol and University College London.

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