Globally, leading banks have already pivoted and rebooted their strategy, capitalizing on the COVID-19-led change, by innovating business models and tweaking their strategies for FY21 and beyond.
Consumers’ digital behaviors and expectations have undergone a rapid transformation. The large global banks have traditionally led with technology to manage at scale, but the need for platform modernization is universal as all banks seek to stay competitive, find new revenue streams, and increase profitability. Recently, many banks have launched digital transformation initiatives and this trend is continuing to gain momentum rapidly. Beyond COVID-19, many factors are converging to challenge the banking industry, including:
- Expectations for a new customer experience, wealth transition from Baby Boomers to Millennials and a younger, more mobile demographic.
- Increased business risk, a flat or inverted yield curve, and ongoing regulations pressure margins, reducing market value.
- New technologies like Artificial Intelligence (AI)*, Machine Learning (ML)*, Natural Language Processing (NLP)*, Mobile Banking, Analytics and Cloud* are enabling non-traditional competitors to disrupt banking, and facilitate a shift towards Open Banking.
- Increasing concerns about Cyber-Security as more banks transition to an online or multi-channel environment.
Forrester Analytics’ Consumer Technographics® data shows that 14% of US adults banked online for the first time as a result of the pandemic. Banks are refocusing to drive customer and employee engagement through online experiences and new digital behaviors which are going to be the norm for FY2021 and beyond. Banks today are exploring a move to the a secure Cloud environment, partnering with FinTechs and Open Banking providers to upgrade their ecosystems, and leveraging advanced analytics to gain far deeper customer insights to proactively serve and position the right services for their customers.
The transition to a digital-led platform built on strong data management, that leverages Cloud, Artificial Intelligence, and FinTech Solutions, is a major undertaking that is very expensive, and with extended timelines. A digital journey is a commitment to change the way banks will operate in the future and has repercussions in all areas of their business. There are many important factors to consider before embarking on any transformation initiatives, including:
- Who are our customers today, and how will their demographics and expectations evolve over time?
- What are our core business differentiators, now and in the future?
- Is our strategy to grow and expand our footprint, or to increase our market valuation and profitability?
- What is our capability for delivering on these initiatives, either in-house or using a partner?
- How do we measure and monitor business outcomes and ROI to ensure that transformation is working?
Haystream helps bank develop and implement thoughtful strategies that will position them for success on the digital path, in a way that realizes short-term and ongoing business benefits, while building up the foundational capabilities necessary to make a longer-term transition.
Every bank has its own unique challenges, and Haystream helps identify and focus on the transformation opportunities that are best aligned with your business goals and priorities. Even banks with constrained abilities to launch new initiatives, there well-defined opportunities, that provide significant benefit to banks, often in less than 3 months. Some potential areas to consider are:
- Customer Experience and Revenue Growth: Build trust with customers by anticipating their expectations and providing an enhanced experience that is proactive:
- Use analytics to optimize how you offer new products, such as credit cards and loans.
- Automate customer on-boarding and KYC process.
- Make Customer Service Center predictive and efficient, and increase self-service using AI, ML, NLP, Analytics and Intelligent Chatbots, which also reduce servicing costs.
- Deploy behavioral analytics to predict and prevent customer attrition and increase assets under management (AUM).
- Focus on differentiators but leverage selected Open Banking* capabilities by connecting to Third Party Providers (TPP) for specific functions such as Payments, Auto Lending, Credit Cards, Portfolio Aggregation, Book-keeping and other Treasury Functions.
- Operational Efficiency and Cost Reduction: Use AI, ML and related technologies to automate manual, paper or spreadsheet driven processes that include reconciliation and integration with external data sources, such as for loan processing and customer on-boarding.
- Commercial Loans and Funding Requests, PPP applications, Mortgages and Auto loans.
- Legal documents, account opening forms, and loan/mortgage agreements in a variety of formats, including PDF, faxes, spreadsheets with embedded macros, and handwritten.
- Other due diligence (e.g., securitization).
- Regulatory Compliance and Risk: Regulatory requirements, such as ISO 20022, continue to intensify. Most banks are proactive, but it is a costly process, with a constant threat of deadlines and fines. Significantly reduce risk to business, operational complexity and costs by focusing on simplifying the compliance process
- Automate Data Lineage tracking for auditing and easing CECL and other reporting. This also helps in tracking account level exposures for commercial loans and retail customers for products such as student loans, auto loans, credit cards, and mortgages by using readily available AI and ML technologies.
- Enhance Anti-Money Laundering (AML) and Fraud Detection using Machine Learning solutions.
- Automate tracking and prediction on Exposures and Defaults using analytics.
- Banks can realize significant short-term and ongoing business benefits by leveraging a secure cloud environment. This can:
- Reduce spend and move expenditures from CAPEX to OPEX.
- Enable scaling resources up or down for better performance and improved cost efficiency without paying for idle resources when not needed. e.g., peak volume days.
- Fortify cyber and data security and improve business continuity.
- Facilitate innovation, testing new markets and offerings affordably.
- Provide a platform that facilitates integrations during an M&A event.
Banks have run their businesses “more or less” the same way for decades. But change is coming, and fast, as many factors converge and challenge regional banks. Banks can greatly benefit from discrete transformation opportunities that will provide significant immediate benefit, and position them well for future growth.