April 22, 2022
Open banking and digital banking have given retail bank customers an appetite for true contactless, frictionless and personalised service at their fingertips 24x7, and easy-to-use apps that offer a broad selection of products and services from different institutions.
In contrast, the retail banking industry has been content with executing antiquated business processes that are far from frictionless. Hard copy documents and in-person visits to close loans or perform financial health checks are still standard in many institutions.
This has presented a significant opportunity for industry disruptors – the digital “direct banks” that have no physical branches and conduct all business online. These institutions have optimised their customer journeys to attract consumers that value frictionless, online processes over in-person interactions.
It’s clear that banks that cannot – or will not – evolve and offer frictionless processes will simply lose customers to those that can, especially as the challenger banks become more established.
The traditional retail banking sector, including wealth management with its range of person-to-person interactions, has had to step back and re-evaluate its processes: cross-channel functions, document needs and storage, data governance and security and, above all, customer journeys. Continuing to support person-to-person interactions, though, is a complicated challenge for banks that are juggling process automation, product development and placement, cost management initiatives and ever-changing regulatory compliance.
The journey to digital banking
As they attempt to become more digital, traditional banks will need to harness reliable data and analytics to formulate new product lines. But technology agility needs to extend equally to risk engines, core platforms, and relevant and timely reporting. Otherwise, the product lifecycle is too slow, and customers will wander. Automation must be interwoven with analytics and product placement to increase the efficiency of processes, maintain personalisation and generate customer modelling to offer online products that consumers want. This latter task involves concerns around personal data privacy and security. Trust in the data must first be established before being able to unlock and drive business outcomes, including cross sales.
The rise of digital banking and its increased reliance on data has translated into a growing exposure to cybercrime, too. Securing the user, the colleague (where remote working is viable) and the branch must be a priority.
Maintaining customer loyalty is also a challenge for traditional banks, as online customer onboarding, round-the-clock services and paperless processes make it easy for consumers to shop around for better credit lines and savings vehicles across various banking providers.
Traditional banks must also decide what products are commodity or transactional (or both), and which are strategic and high margin; they must then focus on efficiency (automation, AI, ML, straight-through processing) for the former, and on customer engagement (high touch, value-added interaction) for the latter. Managing this outcome demands better use of available data.
Behind the scenes, financial services companies must shift from cloud first to cloud right. The business defines what functionality should be in the cloud, as opposed to what application, but still there may be a struggle to migrate workloads and meet consumption targets.
An emerging issue that is critical for both digital and traditional banks is the priority being put on environmental, social and governance (ESG) initiatives. Increasingly consumers want to know whether their loan, mortgage or investment portfolio is carbon neutral, so organisations need to blanket-wrap product lines to monitor carbon usage and then refine nested operations to improve ratings. Banks must compile, analyse, select and report on market participants to allow for updated investment decisions.
Make retail banking better
DXC is helping the traditional banking sector work through these challenges. We run contact centres for many of our customers’ financial services, which is crucial for providing person-to-person contact as branch closures increase, and enable organisations to understand, trust and leverage data from internal and external sources to help inform how to adapt their offerings and establish better fluidity across retail, wealth and asset categories, and drive the formulation of new products. In parallel our engineering teams can focus on risk/evaluation engines and core back-office platforms to establish agility; without the backend, the digital channel will be dragged backwards.
Additionally, our Connected Bank-as-a-Service (CBaaS) provides a modular platform estate to finetune modernisation priorities. Our application transformation factory lifts banks’ functionality to the cloud while simultaneously migrating from high- to low-cost infrastructure. DXC’s ESG tools establish product line-level carbon monitoring, pinpointing hot zones for focus, while our BPO streams chase and eliminate the paper trail. Finally, our security practices span both the financial services and the public sectors, protecting our customers’ mission-critical operations.
It’s imperative that traditional banks begin evolving their business to match the expectations of today’s more demanding consumers. Time, after all, is money.
About the author
Andy Haigh is the head of Banking and Capital Markets, EMEA at DXC Technology. With over 20 years’ experience in the BCM industry, Andy's focus is spans across DXC's BCM portfolio, managing both client relationships and business development activities within our EMEA account portfolio.