The changing world of banking - a matter of process

For an industry which has been established as part of part of the bedrock of society for centuries, the degree and speed of change experienced in the banking sector over the past 15 years has been little short of astonishing.    

In the USA, of the Top Ten banks trading in 1995 only four remain as they were.  In Europe, the landscape has been similarly transformed with a rapid procession of high-profile failures and successes, together with an unprecedented level of merger and acquisition activity.    

So what has changed?  With the emergence of Windows 95, followed by Internet Explorer and the web, a view emerged in the banking world between 1995 and 2000 that online banking would largely replace high street branches, to the benefit of both internal operational efficiencies and external customer service. 

However, this is no longer the received wisdom among most senior bankers or industry observers.  Since 2005, there has been an increasing recognition that, at both a corporate and personal banking level, the role of financial advisor is one of those privileged relationships that can only truly take place face-to-face.  Put simply, people like to do business with people.

As a result, the internet has established itself as a valuable tool in complementing existing banking channels and not, as previously anticipated, a complete substitute.  So, whilst technology has helped banks become more efficient and operate with lower staffing levels, its impact in changing the nature of the relationship with customers has been much more questionable.  

There is, however, another aspect of the banks’ approach to technology at that time which has had to undergo an equally radical reappraisal.  In the drive put in develop internet banking initiatives as a replacement sales channel, just as in the early moves towards outsourcing other aspects of service, banks experienced similar problems. 

By failing to re-engineer the processes associated with each change programme the new technologies typically failed to work effectively in the new environment.  As a result, the customer experience was significantly compromised.  More recently, banks have started to better understand that, to optimise any technology investment, it is also essential to rethink the way that they do business, rather than just the business that they do.                           

The outcome of this change of approach, driven in large part by feedback from customers who have shown a greater willingness to switch banks in the face of unsatisfactory service delivery, has been a growth in the adoption of supporting business process management (BPM) and business process re-engineering (BPR) solutions. 

The role of BPM

In learning the lesson that a ‘technology for technology’s sake’ approach will not necessarily ensure business success, successful banking deployments have highlighted three ingredients as central to success:

• ·       a long-term vision for the future;
• ·       a technology that provides essential agility, enabling the business to vary the way this is achieved without compromising that vision, and
• ·       a technology that allows this to be undertaken in a controlled, step-by-step way in line with a defined roadmap and at a pace which suits the business.

In adopting a flexible approach which takes account of local cultural differences, for example, it is essential to maintain a disciplined deployment that maintains the enterprise core of the technology in order that the corporate vision remains unchanged.

The alternative is an unmanageable ‘free for all’, which results in a high degree of process duplication, a bewildering multiplicity of diverse components and applications, in which the organisation spends more time managing the technology than managing the business.  Such a scenario will not have sounded unfamiliar to many banks in recent years.

Following the rules

However, in order to achieve this crucial combination of centralised control with localised flexibility, there is another issue which must be considered.  At its heart, banking is dominated by rules and procedures – from head office instructions to branch handbooks and manuals – which act as the essential ‘glue’ binding the organisation together in order to operate effectively.  Further, in IT terms this means adopting a technology which all the elements of governance, including sets of rules, processes and other components, are held in one centralised place. 

A best practice marriage of technology and process combines a single global vision with the ability to manage local constraints and, not least, a commitment to listen and respond to customers.  In order for this to be fully effective, it is essential to identify the most important processes within the business and to understand how they work. 

Equally importantly, an intuitive, rules-based BPM technology must enable the business to manage and change this rapidly in response to changing customer need – avoiding the need to join the queue for IT to undertake complex coding changes.   

A snapshot of today                        

Back in 1995, the almost universal vision was of huge global institutions with the ability to undertake all aspects of banking in every location.  Today, by contrast, it is believed that banks operate more effectively and provide a better service with smaller component operating divisions, specialising in those aspects of the business for which they are best qualified and experienced.

In implementing change designed to benefit both customers and the business, banks are increasingly starting to recognise and accept the need to align technology with process.  In enabling banks to exercise centralised control with the flexibility to respond to local requirements therefore, a best practice BPM response is likely to include,

• ·       a layered infrastructure, which maintains a core enterprise rules set at the same time managing local differences,
• ·       unified policies and procedures, in order to ensure governance rules are in place, and
• ·       the ability to directly capture of objectives, allowing the business to manage rapid process change.