Banking transformation accelerates

Efma feature

06 April 2020

Joël Nadjar is Wavestone’s Financial Services Worldwide Executive Partner. He writes that “while we still don’t know the impact of this major crisis on banks, one thing is certain: the banking industry is likely to emerge transformed.”

Remote working’s indirect impact on process improvement

This crisis is teaching banks how to quickly and effectively put in place processes that are more direct, less formal, and more digital in order to deal with high volumes of important business activities via remote working. Within a matter of days, physical paper copies and validation processes that were often slow and complex have disappeared. Now, digital documents are readily accepted and necessary for the continuing functioning of banks. More broadly, approval processes and levels of delegation have been quickly adjusted to speed up and facilitate business activity. Likewise, order confirmations sent by mail or telephone are accepted as validation with conclusive value. We are also seeing 2nd and 3rd level controlling procedures being reduced. 

Many banking processes are under examination. A first analysis conducted by Wavestone shows that of the 30 banking processes that represent 80% of the volume of work at banks, nearly 2/3 of them could be significantly reduced and represent a 30 to 40% reduction in workload. Chiefly, the processes involved in servicing credit, managing assistance for professionals and companies, and managing overruns are ripe for reduction. Also, administering bank accounts and executing on various account actions like notices served to third party holders could be curtailed. Banks such as Banques Populaires or Caisses de Crédit Agricole have already launched optimization initiatives around these processes as a result of the current COVID-19 situation.

Substantial savings can be realized in weeks based on optimization plans that have been in the works for years. Unquestionably, compliance departments of banks will have to evolve quickly to account for rapid process changes, but many bankers have told us that this is already happening in light of the exceptional circumstances and new remote working requirements. Compliance heads should not be overly concerned about potential new changes as we have not witnessed a significant increase in fraudulent activity.  

Lessons to be learned from the crisis

Beyond process changes, the COVID-19 crisis is going to accelerate transformations. This crisis has caused the industry to realize that growth forecasts are not merely an extrapolation of current trends but require thinking deeper about what’s going to drive growth in a world where the aspirations and priorities of people and societies are changing rapidly.

Banks are going to need to initiate future-oriented projects in order to better understand the global changes that are underway, how to be proactive, and find new “raisons d’être” that will open avenues to new services and value creation. Possibilities include health insurance, continuous training, multimodal mobility, protection of customers' digital identity, and controlling the individual carbon footprint. These lines of service could be added to the traditional offerings of banks to transform the value they provide to their clients. We already see several banks accelerating their projects aimed at developing a "data bank" to better manage their customers' digital data.

A new world with new growth models is on the way

Whatever the new growth drivers are, one thing is certain: organizations and information systems must prepare for an expansion of products and services to manage. Banks must open their IT infrastructures (PSD2) to integrate the range of offerings that external partners can provide. The reflections around open banking that were just beginning to take shape in the offices of CIO’s will no doubt be accelerated much quicker than anticipated.

Banks must quickly integrate services and manage the customer journeys involving several partners all while ensuring the security of their operations. These projects should also accelerate mergers and cooperation in order ensure financial solidity, investment capacity, and the ability to accelerate banking transformations. Cross-border and European alliances must also be considered in order to best meet the coming challenges in the financial industry. Just as the subprime mortgage crisis of 2008 profoundly changed the banking landscape, the COVID-19 crisis could very well accelerate a global transformation of banking services.

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Keywords : Covid-19 , Business strategy/Model

Geography : International