Modern bank customers are spoiled, but not by their banks. Because most banks cannot provide what customers have come to expect in the “digital industries”: access to the service portfolio over “their” mobile devices, real time settlement of transactions as well as comprehensive order transparency at extremely fast reaction speeds upon requests or complaints. Anyone who orders from Amazon or buys music from the iTunes Store experiences purchasing processes without media disruptions and based on a digitalized value-added chain. Customers can view the processing status or delivery status at any time and confirmations are delivered to their e-mail inbox immediately. And at the next synchronization or delivery, their chosen product is available. These digital experiences and consumer-oriented services have become normality, and not just for so-called “digital natives”. And so it has become hard for bank customers to come to grips with the fact that even simple services like opening a bank account, setting up installment loans or changing an address cannot be completed immediately, channel-independently or on-the-spot, or that the processing status of a request or complaint cannot be traced even after asking again and again. Even if this is achieved in the customer perception, supposedly digital processes often entail further manual work for banking staff. The application to open an account is printed from the online process, manually recorded and subsequently scanned for archiving. This process is neither efficient nor does it allow tracing of the order status, which would also be in the interests of the bank for managing their production processes.
New Service Mentality
Many actors in the banks are aware of this challenge, however, only very few seem to have found comprehensive solutions. This new service mentality has still not arrived in operational business. This is surely partly to do with the burden that banking crises and the subsequent wave of regulation have put on important resources, both in terms of money and also management capacities. This represents a risk for traditional banks that is growing with increasing competition. Competitors that were established digitally at their roots, such as direct banks or new competitors with digital business models such as PayPal, are closer to their customer demands in terms of service and also work more efficiently.
Without a doubt, projects under the buzzword “digitalization” will surely stand on the (management) agenda in many European banks, but the focus of these projects is often purely for the customer-bank interface and thus on the enhancement of the online or mobile banking service portfolio. Completely digital processes, which are channel-independent and prevent extra manual work from customer access to archiving, are uncommon. At the same time, “self service”, which customers already know from other industries, offers the opportunity to provide a win-win solution, while also solving the classic contrast of convenience from the customer perspective and the bank’s strive for efficiency. For a bank, such an approach requires the digitalization of their entire operating model and implies far-reaching and sometimes significant changes such as the new design of bank-specific processes, the reorganization of the supporting IT systems and new interaction models between front and bank office units. On the other hand, digitalization can bring major benefits with it: The reduction of costs for transport and distribution of former paper-bound business transactions by up to 80%, the halving of processing times as well as the increase of productivity in back office by up to 15%… These are not theoretical potentials, but rather project results which have already been achieved. Which control levers does a bank actually need to move in order to achieve digital customer experience and efficient settlement of transactions at the same time. Firstly: The digitalization of all information which is needed for the settlement of transactions should be digitalized as early as possible—This plays a major role. Regardless of whether the customer opened their account online, in a branch, via a call center or through mobile sales, all information required is available digitally in the same format. Secondly: Once this requirement has been met, a channel-independent processing can occur based on unified processes, ideally for many business transactions in one go or “straight through”, i.e. without further manual entries. Thirdly: In order to successfully implement the first and second steps, one crucial obstacle needs to be removed. Many business transactions require a signature from the customer. Wherever possible, this should be completed electronically (of course, this depends on the legislative situation. In Germany loan contracts are one exception) or otherwise, the entire process is initiated with a paper basis.
Integration is indispensable
Fourth: Because not all business transactions can be completely automated, an integrated work flow system is indispensable. This manages the work orders according to their order type-specific requirements and considers the current utilization in the appropriate processing team. How can the described control levers now be operationalized? Digitalization of paper-bound orders is technically based on the combination of mass scanning and digital order routing. Incoming forms are scanned, indexed for further processing and read with help from a learning text recognition tool (OCR). Depending on the type of application and the necessity for follow-up work, the digitalized forms are forwarded to the specialized processing unit. However, it would be even better to completely avoid paper-bound orders or media disruptions. Common ways to significantly reduce the amount of paper-bound transactions include electronic authentication systems such as a SignPad for customer signatures in branches or in mobile sales, the new electronic identification card or a legitimation of orders over video chat. The ultimate way towards extremely fast and low-cost services would lie in the complete automation of business processes. This is not only possible for simple processes such as changing an address or preparing an application for tax exemption, but can also be realized for more complex tasks such as paying out construction loans. Project experiences have identified repeated patterns, which lead quicker towards the goals and for larger IT projects considerably reduce the common risks. A successful realization of the potentials associated with the issue of digitalization requires that available processes are questioned to their foundations and also monitored as a whole and from the customer’s perspective. Of course, there are limits to the feasibility based on the legal requirements or the possibilities for further enhancements of the individual (old) IT systems. These restrictions should be assessed in a secondary step however. The close collaboration between banking and IT units becomes much more important here. Often, because there is no completely new establishment of the IT systems planned, creative solutions need to be found together. This is not possible without a joint understanding of content. This requirement may sound obvious, but is not experienced yet in many banks.
Further, a cultural change is necessary: Banks are now required to implement innovative approaches very quickly (“rapid prototyping”), test them directly on customers and then develop further or, in some cases, give up immediately. This requires adjusted governance structures and methods which allow creative ideas, quick decisions and parallel developments. Some companies establish separate parallel organizations that look like start up companies, with representatives from subject units, operations and IT. To reach quick market-readiness, in the mold of Amazon and co., it is sensible to bundle packages which can be implemented independently of another and thus can be developed and implemented in parallel. Banks will only be able to look eye to eye with the new digital competitors when they learn to master new digital challenges and change in terms of their way of reacting to them—also and especially in their operational units.