Financial services institutions, notably banking, capital markets and insurance firms, are rapidly evolving in response to the explosive growth in digital technologies – particularly those related to analytics, cloud computing, social media and mobility. These innovations can help firms establish a more strategic market position, one that responds to customers’ expectations for online, always-available products and services.
In the banking industry, we call this the Everyday Bank – a bank that serves as a trusted partner for customers’ financial and non-financial life needs, providing advice, facilitating access to products and services and aggregating value. The bank, in return, gains new sources of growth and profitability.
In the journey to becoming an Everyday Bank, banks have to take a new approach to their Finance and Risk functions. Finance and Risk typically operate today within tightly defined roles, managing and reacting too often through manual processes and tasks, rather than proactively engaging with the business leaders to advance new products and services while identifying and mitigating the risks in order to be successful. Banks are now actively creating ecosystems that enable them to provide additional access and value to their customers and by default are also potentially exposing themselves to additional risk via these channels. It is not a question of whether to embrace the change, but rather how to do so effectively. The Finance and Risk functions therefore need to accelerate their roles and capabilities in order to take a more active role in guarding the bank’s reputation and assets – working together to help the bank deal in near real-time with issues as they arise, and defining solutions for the changing market conditions, not those of today or the past.
To accomplish this, Finance and Risk will need to raise its capabilities in the areas of mobility and security, analytics for budgeting and forecasting, and develop improved real-time key performance indicators (KPIs) and key risk indicators (KRIs) to turn voluminous amounts of data into actionable insights. To respond quickly and effectively to both compliance and market issues, Finance and Risk professionals need to be able to support the ability to offer the right customers the right products through dynamic credit risk management, while enhancing an embedded risk culture that emphasizes judgment, feedback and constant improvement.
Reputational risk management is another area where banks have to increase focus and understanding, as customer decisions are increasingly influenced by reviews and shared experiences on social networks. Analytics solutions can provide a cross-social media, integrated view of the bank’s brand perception and reputation, turning raw data into clearly defined issues that the bank can quickly address before they go viral. Or at a minimum, show they are listening as they respond quickly and publicly to issues as opposed to ignoring customer experience feedback.
These capabilities, however, cannot be developed overnight. First, banks need to make sure that certain foundational elements are in place, including:
- Modern data architecture and IT infrastructure. Banks need to spend less time on manual tasks that support regulatory and capital requirement compliance by identifying which processes and activities can be eliminated, streamlined or automated. An updated, more standardized platform that can provide real-time processing and enhanced controls can help achieve greater compliance efficiency and provide insights for revenue generating opportunities.
- Computing platforms for real-time processing and controls. These would include reporting dashboards that are incorporated into activities such as credit operations. Leveraging new digital technologies to enhance enterprise-wide operations can better provide transparency and improved controls to help address stringent regulatory requirements, while also delivering real-time alerts, limiting the damage from security or process breaches by proactively identifying suspicious behavior.
- Advanced analytics gained by straight-through processing. This provides greater customer and business insight by unlocking access to an increasing number of data sources. For example, banks can gain a real-time understanding of credit risk, allowing them to pursue attractive new business opportunities with a better defined understanding of risks and rewards.
In our experience, banks increasingly understand the importance of digital transformation and the need to make risk and finance process changes, supported by new technologies to make it happen. Banks early in their journey to becoming an Everyday bank should focus their efforts first on understanding the digital customer and create a vision for how they want to serve them effectively and in line with the overall market position the bank wants to occupy.
With that vision in place, the bank can move toward streamlining processes around a converged Finance and Risk operation that is capable of supporting risk-weighted decisions to help increase profitability while supporting the bank’s strategy. With more regulations on the horizon, they will need to also focus on enhancing the compliance management function. There are many good examples of banks adopting new technologies to create more effective and targeted solutions to compliance management.
Finally, by overlaying process and compliance with data and analytics, banks can identify ways to use the data they collect during heightened compliance mode to identify appealing Everyday Bank opportunities for their customers.
Finance and Risk is a key element to the successful adoption of an Everyday Bank strategy. In order to be competitive, banks need to move beyond incremental improvements in their Finance and Risk functions and proactively respond to new regulatory and compliance requirements to better manage their operations and improve profitability. Banks can benefit from a “test and learn” approach that incorporates proven practices while exploring new technology capabilities. By using digital technology to evolve the entire business model, the Everyday Bank can position itself as a vital part of customers’ daily lives.
This article was written by Steve Culp from Forbes and was legally licensed through the NewsCred publisher network.