Breaking product siloes in the banking sector
Anyone who has worked in a bank in the last ten years would have heard words like customer obsession, customer centricity or customer journeys at some point in time. These terms commonly underpin some form of technology strategy, usually expensive and tasked with delivering a shift from product to customer. The reality though, these often end up improving existing product origination processes, such as end-to-end home loans, or optimising channels like contact centre or branch refresh. Despite the best intentions, rarely do banks genuinely approach the change from the customer out. Why is that?
This is due to several factors. The first being organisational siloes. These siloes interact with each other in ways that make it incredibly difficult to drive a holistic transformation program, these might include.
- Product siloes - usually a result of how a bank’s P&L is constructed around certain products, and the corresponding systems and channels that support them
- Divisional siloes - for example retail versus commercial, or operations versus technology. With each change in executive leadership, and inevitable resulting transformation program, the lines get shifted making it more difficult to disentangle all that was built previously
- Data siloes - pockets of information which are often hugely relevant to a customer-focused interaction, scattered across warehouses and systems of record, each with their own data dictionaries, taxonomies, and often business and technology owners
The second factor is the investment approach that is inherent in the way most banks operate. It is usually on an annual cycle, with a focus on rapid return, and is divisionally focused. This brings about two main consequences - a focus on quick wins to demonstrate early value and highlight the heroic progress, and the second is that while many critical banking processes for customers will cross divisional divides, the investment priorities of those divisions will vary depending on the accountability of the person managing it.
For example, a home loan for a customer may start in a retail distribution division, but the P&L might sit with the product division and fulfilment with the operations division. The distribution team will be focused on customer satisfaction and compliance, while product will focus on profitability, and operations will focus on time and cost to serve. All these factors are important and given the siloed nature of a lot of the channel or division-specific investments that have been made over the years, the flexibility to focus on all these factors, that are so important for a great customer outcome, can be very challenging.
Banks have lived with this for many years as product margins have been strong, and customer stickiness high, however in a world where these are now being squeezed, and consumer choice continues to grow and become easier to leverage with open banking, this is inevitably beginning to change. Increasing the number of products held by a customer, and therefore share of wallet, will be key as it reduces the cost to serve subsequent products sold to the same customer and increases stickiness for customers within a bank’s ecosystem. Banks will also need to embrace banking-as-a-service to open new avenues of revenue and increase focus on lean, efficient operations in a low margin banking environment with systems designed to be digital end-to-end.
Resetting the culture and investment priorities
Addressing these challenges is not straight forward, particularly given the heavy compliance and regulatory challenges several of the banks currently face. It will require a multi-thread strategy focused on resetting both the culture and the investment priorities, including how business and IT can collaborate better on building customer centric solutions while managing the changing expectations from customers.
The first thread is ensuring customer engagement moves from reactive to proactive engagement. In recent times, customers’ expectations of their banks have significantly heightened, and there is little tolerance for poor service. Banks need to recognise problems or opportunities early and be proactive and pre-emptive about how they react to them. For this to be effective, it has to work across channels and products so that it is seamless to the customer and works in real time. For example, there is little value in engagement solutions that tells a bank a customer is a retention risk after they have already left.
The second is the need to shift to an ‘as a service’ organisation where customers can truly get an end-to-end solution for their needs, rather than buying individual products. A good example of this is the ability to leverage credit across multiple lines such as mortgage, credit card and personal loan which can then be optimised against an overall limit. This will require a solution that can orchestrate and automate origination and fulfilment processes across multiple products, core banking and credit platforms, while weaving together technologies from legacy data systems, packaged software and applications developed in-house.
Finally, the banks need to ensure they have compliant and safe operations with consistent, auditable and automated controls across their customer processes, and are running agile and efficient operations where processes are linked to customers. The operations should be simplified by crushing complexity while still being able to handle variability within the platform.
Without these key threads, the ability to meet customer, regulatory and shareholder expectations will be compromised. A holistic strategy has the potential to deliver flexibility within a bank’s system to delight customers, be compliant while effectively managing costs and revenue.