Banking on Failure: How Outdated Back Office Banking is Bleeding Profits and Trust

In an increasingly competitive banking industry, the focus is often on improving front office solutions: desktop and mobile banking applications. However, a critical, yet frequently overlooked aspect is the back office – the core systems that keep the bank's engine running. According to a World Economic Forum report by Bain & Company, only 1% of $1.2 trillion digital transformation investments will achieve their targets. This stark statistic points to a crucial oversight: the neglected state of banks' back-office systems.

We are seeing noticeable improvements in the customer experience in mobile banking apps, with many of them winning design awards. Yet, behind the scenes, outdated core systems are causing operational chaos and customer dissatisfaction. This dichotomy is not just a minor inconvenience; it’s a ticking time bomb that can erode trust and bleed profits.

The Unseen Danger

Consider the infamous case of Citibank in August 2020, where a colossal $900 million was mistakenly transferred due to a clerical error. This wasn’t a simple human mistake but a failure rooted in an antiquated user interface. Citibank’s Flexcube system, untouched since 2001, violated basic design heuristics, leading to an avoidable error that cost the bank $500 million in non-recoverable funds. This incident underscores a critical truth: the state of a bank's core systems can lead to significant financial and reputational damage.

In an era where digital natives are driving 80% of market capitalization growth among top companies, banks remain entrenched in manual processes. The stark contrast between the front-office polish and back-office decay is like a modern-day Titanic – the gleaming exterior hides the lurking iceberg of legacy systems.

The Culture Conundrum

Richard Branson famously said, “Clients do not come first. Employees come first. If you take care of your employees, they will take care of your clients.” This philosophy is glaringly absent in many financial institutions. Employees are forced to navigate cumbersome, outdated systems that not only slow down their work but also contribute to frequent errors and poor customer service.

Take the example of a new bank employee, struggling to memorize complex codes and processes just to perform basic tasks. This not only reduces efficiency but also erodes employee morale. When employees are demotivated, customer service inevitably suffers. Modernizing the back-office systems is not just a technical upgrade; it’s a strategic move to boost employee satisfaction, which directly impacts customer experience.

The Importance of Employee Experience

What about creating a user experience for employees that would result in customer satisfaction? Here are 10 typical examples of the poor Employee Experience in outdated banking back-office system that that were detected in one of European banks by UXDA UX architects:

1. Priorities Stuck in Legacy. Banks prioritize digital customer interfaces while neglecting core systems, leading to inefficiencies. A beautifully designed mobile app cannot compensate for a back-office system that takes weeks to process simple requests, frustrating customers.

2. Icebergs in Banking. Customers see the polished front, unaware of the outdated back-office chaos. For example, a major bank invests in a sleek mobile app and customer service but continues to use a 20-year-old system, leading to frequent transaction errors and delays.

3. Serving Money Over Customers. Special treatment for high-balance customers can lead to policy breaches and inequity. For example, new employees follow outdated procedures, causing frustration for regular customers while high-value clients bypass standard protocols.

4. Features Instead of Solutions. IT departments add functions without considering employee experience. An employee cannot find a newly added cash operation feature because it’s hidden in an unintuitive menu, causing delays and customer frustration.

5. Ignoring Employee Innovation. Banks overlook employee feedback, missing out on valuable improvements. Front-line employees have great ideas to improve processes, but their suggestions are ignored, leading to continued inefficiencies.

6. Complexity Overload. Outdated and overly complex systems overwhelm employees, leading to mistakes. Employees juggle multiple systems with different interfaces, increasing the likelihood of errors and slow service.

7. Provoking Human Error. Manual processes and complex systems increase human error rates. For example, a client’s deposit agreement was filled out incorrectly due to complex coding requirements, necessitating a frustrating return visit.

8. Working in the Dark. Lack of system guidance leads to employee mistakes and delays. An employee misses a crucial field in a form submission, requiring the customer to return to the branch to correct it.

9. Paperwork Nightmares. Paper-based processes lead to lost documents and delayed services. A client misses a business trip because expedited payment card request gets lost in the paperwork shuffle.

10. System Bugs. Frequent software bugs disrupt service and erode customer trust. A system crash during a large transaction forces business clients to wait hours, damaging their trust in the bank's reliability.

Just as Customer Experience (CX) focuses on the journey and satisfaction of the customer, Employee Experience (EX) centers on the journey and satisfaction of the employee. It encompasses everything from the tools and systems they use to the culture and environment they work in. A positive employee experience is crucial for several reasons:

• Productivity: Efficient, user-friendly systems enable employees to perform their tasks swiftly and accurately, reducing frustration and increasing productivity.
• Engagement: When employees feel supported by their tools and valued by their organization, their engagement levels soar. Engaged employees are more likely to go the extra mile for customers.
• Retention: High levels of frustration and inefficiency can lead to high employee turnover. Investing in EX helps retain top talent, saving the significant costs associated with recruitment and training.
• Service Quality: Happy, engaged employees provide better service. Their positive demeanor and efficiency directly enhance the customer experience, fostering loyalty and trust.

The Financial Impact

Investing in modern core systems is not just about avoiding errors; it’s about capitalizing on efficiency gains. McKinsey & Company estimates that automating and improving banking back offices can lead to overall cost savings of up to 30%. This is a substantial figure that can significantly impact a bank's bottom line.

Moreover, a streamlined back office can accelerate service delivery, leading to higher customer satisfaction and retention. In a competitive market, where customers have numerous alternatives, a bank’s ability to deliver swift and accurate services can be a decisive factor.

Here are TOP 5 approaches to improve Employee Experience in banking back office. By implementing these approaches, banks can significantly improve the employee experience in their back offices, leading to higher productivity, reduced errors, and ultimately, better customer service:

1. Implement User-Centered Design for Core Systems

   Why: Antiquated, complex systems are a major source of frustration and errors for back-office employees. By adopting user-centered design principles, banks can create interfaces and EX that are intuitive and aligned with employees' workflows.

   How:

   • Empathy Mapping: Conduct thorough research to understand employees' needs, pain points, and daily tasks.
   • Prototyping and Testing: Develop prototypes of new interfaces and test them with actual users to gather feedback and make iterative improvements.
   • Consistent Design Language: Ensure all systems have a unified design language to reduce the learning curve and cognitive load.

2. Automate Repetitive Tasks and Reduce Manual Processes

   Why: Manual processes are not only time-consuming but also prone to errors. Automation can streamline workflows, reduce errors, and free up employees' time for more value-added tasks.

   How:

   • Robotic Process Automation (RPA): Deploy RPA to handle repetitive tasks such as data entry, form filling, and transaction processing.
   • AI and Machine Learning: Use AI to predict and prevent errors, and to offer intelligent suggestions and decision support.
   • Integration Platforms: Implement integration platforms that connect disparate systems, allowing data to flow seamlessly and reducing the need for manual intervention.

3. Enhance Training and Support Systems

   Why: Effective training and continuous support are essential for employees to adapt to new systems and processes, reducing resistance and enhancing productivity.

   How:

   • Interactive Learning Platforms: Use e-learning platforms with interactive modules and real-time simulations to train employees on new systems.
   • On-Demand Support: Provide on-demand support through chatbots and knowledge bases that employees can access anytime.
   • Mentorship Programs: Pair new employees with experienced mentors who can provide guidance and support during the transition period.

4. Foster a Collaborative Work Environment

   Why: A collaborative work environment enhances communication, knowledge sharing, and problem-solving, leading to a more engaged and productive workforce.

   How:

   • Collaboration Tools: Implement digital collaboration tools like Slack, Microsoft Teams, and Asana to facilitate communication and project management.
   • Cross-Functional Teams: Encourage the formation of cross-functional teams to tackle complex projects, fostering a culture of collaboration and innovation.
   • Regular Feedback Sessions: Establish regular feedback sessions where employees can share their experiences, challenges, and suggestions for improvement.

5. Prioritize Employee Well-Being and Work-Life Balance

   Why: Employees who feel valued and supported are more likely to be engaged and productive. Prioritizing well-being and work-life balance can reduce burnout and increase job satisfaction.

   How:

   • Flexible Work Arrangements: Offer flexible work hours and remote work options to help employees balance their personal and professional lives.
   • Wellness Programs: Introduce wellness programs that include mental health support, physical fitness activities, and stress management resources.
   • Recognition and Rewards: Regularly recognize and reward employees for their hard work and contributions, fostering a positive and motivating work environment.

Conclusion: Start Human-Centered Back Office Transformation

The path to successful digitization begins at the core and UX design approach could be very helpful here. It’s time to dismantle the outdated systems and replace them with user-centered, modern interfaces. This transformation is not just a technological necessity but a strategic imperative to maintain trust and profitability in an increasingly digital world.

Banking executives must champion this cause, understanding that true digital transformation is holistic – it spans from the back office to the customer’s palm. The time to act is now, before the next clerical error or system failure makes headlines.

Renewing the financial product interface is not just an option; it’s a survival strategy for banks in the digital age. Let’s turn the spotlight on the unsung heroes of the banking world – the back-office systems – and give them the human-centered upgrade they desperately need.

Check out my blog about financial and banking UX design >>