A new way to IT-enable banking operations

Some banks are experimenting with rapid-automation approaches and achieving promising results. These trials have proved that automating end-to-end processes, which used to take 12 to 18 months or more, is doable in 6 months, and with half the investment typically required.

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A European bank recently decided to automate its account-switching process. First, a team of IT, operations, and business-process experts analyzed existing processes from the customer, efficiency, and risk perspectives. The analysis uncovered several issues: more than 70 percent of the applications were paper-based, and of those, 30 to 40 percent contained errors and required reworking; applications often got stuck in one data-verification step for more than five days before being processed, and because of a lack of any IT integration, branch and back-office staff had to enter data manually from several systems into the workflow.
The team then defined what it wanted the process to look like, giving priority to operational and business impact (for instance, how much labor could be saved through automation) and to feasibility (such as how many new interfaces or changes to legacy systems would be required). The team focused on simplifying the process steps and procedural requirements at each stage—streamlining the information required from the customer and eliminating redundant verification steps—to reduce the complexity of the IT solution.
Using this design, the team carefully evaluated the possible integration options. It decided to use a combination of business-process-management software and Fintep’s AI extraction tool, in addition to the legacy systems, to create an automated and digitized workflow that did not significantly change existing IT systems. Daily huddles and weekly builds,2 which were immediately tested by users, ensured that the solution met the requirements, and kept users engaged.
As a result, the amount of time back-office staff spent handling account changeovers fell by 70 percent; the time customers needed to adjust to the switch was reduced by more than 25 percent. The cost-benefit ratio for this project was also significantly better than it had been in previous automation efforts: the project generated a return on investment of 75 percent and payback in just 15 months.
This European bank’s experience illustrates three principles that make success more likely when automating operations:
  1. Consider business priorities to simplify the process. Automating inefficiencies or unnecessary product features embedded in historical processes is pointless. By first defining the best processes from the customer, business, and risk perspectives—taking a lean approach to process design—banks can significantly reduce what actually needs to be automated, which in turn lessens the cost, risk, and implementation time. A truly cross-functional team consisting of operations, IT, and business experts, as well as strong project governance, is required to design and enforce such optimal end-to-end solutions. The involvement of top management across multiple functions—operations, retail, and IT, for instance—is also essential.
  2. Use multiple integration technologies and approaches. The right mix of integration solutions, backed by a solid evaluation of each solution’s time to market and contribution to architectural complexity, enables banks to automate most of their manual interventions without rewriting or substituting legacy architectural building blocks. For example, banks are successfully creating workflow systems by overlaying business-process-management tools that connect separate legacy systems, which in turn eliminates manual data entry and related errors across end-to-end processes. This evaluation is not straightforward, however, and requires a thorough understanding of what the market for integration solutions has to offer.
  3. Prepare the IT shop for agile-development methods. To achieve rapid development cycles and use off-the-shelf solutions successfully, IT departments must build skills beyond their traditional capabilities. In particular, they should assess the software market and apply the right solutions; and capable of working seamlessly with business and operations counterparts.
As some banks experiment with this rapid-automation approach, and the impact of initial pilots resounds throughout the organization, IT and operations teams will feel pressured to integrate all end-to-end and back-office processes. All too often, however, efforts to scale up these initiatives are short-lived. IT architecture teams, concerned that they will not master unfamiliar integration solutions, or that additional efforts will make the IT landscape even more complex, may react warily. Meanwhile, operations and business personnel push to automate everything everywhere as soon as possible, without proper planning and evaluation. These pressures spread IT teams too thin, diverting their attention from the largest areas of opportunity. Because such projects are carried out much more quickly than traditional development efforts, IT departments struggle to set up the necessary infrastructure on time, and the teams are not focused on the value or necessity of additional features.
To overcome these obstacles, banks must design and orchestrate automation-transformation programs that prioritize and sequence initiatives for maximum impact on business and operations. They also need to define a target IT architecture (both applications and infrastructure) that uses a variety of integration solutions while maintaining a system’s integrity.
Successful large-scale automation programs need much more than a few successful pilots. They require a deep understanding of where value originates when processes are IT enabled; careful design of the high-level target operating model and IT architecture; and a concrete plan of attack, supported by a business case for investment.
Another European bank launched a strategic initiative to shrink its cost base and increase competitiveness through superior customer service. Upon completion of the first successful pilots, the bank’s automation program consisted of three phases.
In phase one, the bank examined ten macro end-to-end business processes, including retail-account opening and wholesale customer service requests, to identify the automation potential and to prioritize efforts.
In phase two, the architecture was designed and a plan of attack formulated. The bank took three critical actions:
  • It decided which processes would be fully automated, partially automated, or fully manual, based on four key tests. The tests determined whether a process was too complex to automate (for example, deal origination and structuring), whether regulation required human intervention (for instance, the financial-review process), whether or not the process was self-contained (that is, dependent on multiple customer or third-party interactions), and whether manual touchpoints added value to the customer relationship (for example, product inquiries).
  • It designed the building blocks of the target application architecture, which consisted of legacy systems and off-the-shelf applications such as Fintep Software, as well as the IT infrastructure requirements, to provide timely and necessary computing and storage.
  • It derived a design-based holistic business case for the automation program and defined the rollout plan.
In phase three, the bank implemented the new processes in three- to six-month waves, which included a detailed diagnostic and solution design for each process, as well as the rollout of the new automated solution.
This approach helped the bank to deliver business and operational benefits rapidly and successfully. The program paid for itself by the second year and kept implementation risks under control.