Back-office digitalisation is now a priority
But with back-end legacy systems consuming up to 90% of banks’ IT budgets, few banks can undertake a radical investment. A more pragmatic approach to transformation is required.
Redundant tasks, excessive manual processing and slow response times are driving process failure and customer dissatisfaction. For example, the average mortgage application goes through 35 manual handoffs and it is estimated that up to 50% of the paperwork submitted in account opening is rejected.
This is having an adverse impact on banks’ customer experience with 60% of customer dissatisfaction originating from back-office processes and between 10%-20% of all contact centre volume generated by back-office execution issues.
Process improvement is one of our core competencies and we have helped clients achieve improved performance and reduced costs
There is a real cost to operational inefficiency. Australia’s Bank of Queensland had to refund $34.5m to its 4% of customers after interest rate and fee errors, caused by overly complex products that required too many manual process, were discovered. It cost them an additional $11.5m to clean up the problem.
Bank and middle office processes are having a detrimental impact on banks’ cost income ratios, with the top ten global investment banks now employing two middle/back-office staff for every one front-line employee.
Implementing new technology such as automated processing, Document Management Systems and up-grading core banking can yield significant medium to longer-term savings, but banks are cautious about embarking on ambitious transformation that are subject to long lead times and concerns over maintaining the integrity of the bank’s core systems during transition.
Working with clients we have found that processes become fragmented due to the need to add additional tasks without considering the overall design efficiency and impact. Handovers have increased due to regulatory/AML requirements and new front-end technology that has been ‘bolted-on’ rather than re-engineered and adds tasks or complexity to already overstretched processes. The result is bottlenecks, unnecessary duplication of tasks or too many handoffs that causes increased error rates, re-work, increased cost and ultimately customer dissatisfaction. This is often exasperated by a general lack of process transparency, oversight and controls.
A less risky solution, with a relatively quick payback, is to re-engineer processes to reduce processing and error remediation costs and improve the customer experience. This also then ensures that the most efficient processes are then digitised and automated.
We have found that re-engineering and standardising processes and the organisational structure, can yield 30%-35% cost savings in a relatively short period of time, without the need for technology solutions.
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