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Digitalisation: Don’t Be Distracted By The Shiny Front End

In the run up to Sibos 2016, I wanted to use this blog to talk about some of the lesser known impacts of digitalisation, particularly in corporate banking. There’s been so much written about digitalisation that it’s easy to lose sight of the bigger picture. The vast majority of attention (and action) has centred on the retail banking customer experience at the front end, but a recent IDC survey of 250 retail and commercial banks found that 40% have only digitised their front-end applications. Just one in four has a holistic end-to-end digital transformation strategy in place.

It’s important not to be distracted by the shiny new front end. It masks the problem. If the back office isn’t agile, then you’re simply investing in omni-channel inefficiency. The real prize is how a pervasive end-to-end digital process across the whole of the bank will up your game. If implemented well, digitalisation will remove the need for human interaction on transactions, will be based on real time information, and help mitigate risk. When this happens, what impact will it have on the interaction between clients and relationship managers? And with the ongoing disintermediation of the value chain, how do we now re-define where the true value of banking lies?

Like most things associated with change, it’s an opportunity. As end-to-end digitalisation becomes more pervasive, the role of relationship managers will shift from selling more products to adding more tangible value, such as helping customers grow, increase revenue and manage disruption in their own markets. Over time, we will see these roles morph into enabling value-added partnership models between banks and their corporate clients.

For this to happen, you need to keep your eye on managing two critical elements: managing the technology change and the cultural change. Take the on-boarding of a new customer, for example. This should all be quick, easy and automated with all underlying transactions, sanctions checks, risk assessments and limitations seamlessly moving from one bank to another with no manual intervention. The only break in the process should be at a customer request or if there is an exception. It might sound like utopia now, but in a couple of years, there will be no excuse (or market tolerance) for latency or batch input and output. But you can’t do any of it without a digitised, agile back office.

Likewise, the cultural shift is just as important. Shifting the focus from transaction execution and product selling to adding value requires a different mindset. And given the inevitability of distributed networks, figuring out how to make your services more ‘sticky’ to clients and foster loyalty means you should be thinking about this now. Of course, cultural change must come from the CEO down, and we’re already starting to see compensation plans being restructured to reflect this type of value.

Blockchain is a great example that reflects the new definition of value in this end-to-end digitalisation shift, as well as the pace that it’s happening. At last year’s Sibos, blockchain was bleeding edge technology. This year, it’s not a decision of ‘if’ but rather ‘when’. And while it accelerates both process and efficiency, it’s also adding value by enforcing transparency and verifiability across the supply chain. When you think about scenarios where the importance of ethical, verifiability is important, it becomes transformative. Diamonds in Africa, fair trade relationships, organic sourcing, and second hand car purchase (transparency into service history, instances of accident and repair across the life of the car, and fraud detection), are just a few scenarios that come to mind.

End-to-end digitalisation may be delivered incrementally, but it has to be driven by a pervasive transformation strategy across the whole of the bank. It’s redefining interactions, client relationships, and moving the needle of value from ‘faster’ to ‘better’. It requires both a technology change and a new mindset - and is so much bigger than a pretty front end.


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