Financial services organisations have long known they must transition to a digital future. Hampered by legacy systems and threatened by the rapid rise of digital-native competitors, time is critical. But there are plenty of things they can do to find an immediate fix
The Covid-19 pandemic has forced financial services firms’ hands. Digital adoption among consumers and businesses accelerated as lockdowns took hold in societies around the globe.
Remote working and service provision became the only way for most businesses and individuals to maintain a semblance of business and life as usual.
In an article in May 2020, McKinsey & Company summarised the position: “Recent data shows that we have vaulted years forward in consumer and business digital adoption, in a matter of around eight weeks. [For example], banks have transitioned to remote sales and service teams, and launched digital outreach to customers to make flexible payment arrangements for loans and mortgages...”
The consulting firm went on to set out a 90-day digital transformation plan to enable organisations that hadn’t moved quickly enough, to catch up.
Overhauling the past
Despite significant steps forward in recent years, and during the pandemic, financial services organisations – and major banks in particular – face major digital challenges.
They must deliver their services to very large customer bases. In addition to that, they have often been laggards in their uptake of new technologies, hampered by the very size and complexities of their organisations.
However, technologies such as robotic process automation (RPA) and artificial intelligence (AI) are now being deployed to overcome these legacy issues and to help them remain competitive – and could actually provide the perfect mix of security and agility.
“A lot of bank IT infrastructure is getting on for 40 years old,” explains Martin Keelagher, CEO of Agile Automations, which uses RPA bots to help banks overcome the limitations of their legacy systems.
“When you ring up a telephony team and they’re bringing up your data, the systems they’re working on were probably put in place by the likes of IBM when IBM was the real powerhouse.
“But while these things might be old and clunky, and horrendous to use from a user interface perspective, they are actually bombproof, and the banks don’t want to lose that element.
“In fact, it’s the envy of newer challenger organisations which, although they may not be hampered by legacy systems, lack the big banks’ presence and power in the marketplace.”
Keelagher says the key is to add a “robotic workforce” to make those systems become faster and more agile, without losing that bombproof element.
“These robotic workforces shunt, push, pull and do the hard work, the menial tasks, the everyday repetitive roles that are rule-driven, that can be easily predicted within a business,” he says.
Much of this is associated with accessing, manipulating and analysing data – and that is key to delivering customer-facing services instantaneously, Keelagher adds.
He suggests it is the speed, accuracy and security of data handling that will play an increasingly vital role in large financial organisations in the coming years.
That will certainly be the case for the long-established banks, as they face ever-increasing competition from younger, more flexible organisations that have grown up with a digital culture – challengers such as Monzo, Revolut and Starling, to name a few.
Integrating change
Both RPA and AI can be central to unlocking the integrated systems of financial services organisations – but they are not the only tools in the digital transformation toolbox. At corporate and fiduciary services provider Ocorian, based in Jersey, Stuart Geddes is Group Head of IT and is leading the firm’s transformation programme.
Ocorian is seeking to modernise and improve its services – but also to integrate its business, which is highly acquisitive.
The merger last February of Ocorian and Estera caught the headlines, but it was only one of a series of mergers and acquisitions over the past five years, and Geddes says that means successful integration is vital.
Standardising technology solutions – across legacy systems and technology processes – to deliver better services to customers and clients is key to integration, he says.
And application programming interfaces (APIs), which help systems and technologies relate to each other, underpin that strategy. They enable straight-through processing and assist in the production of timely management information.
They also provide direct, open access for clients who need quick access to information to do their business – with minimum human interaction.
Bringing about such transformational change in an organisation, and a rapidly growing one at that, poses particular process challenges. Geddes provides some pointers on where to begin.
“You need to prioritise,” he says. “Having a very short and clear set of priorities that everyone in the team is aware of is absolutely critical. And for everybody working on your transformation programme, from the most senior to the most junior staff member, being 100% committed to what it is we’re doing in terms of those priorities, is essential.”
‘Fast fail’ is a second important principle, Geddes adds. “You don’t have to sit in a dark room, build something and try to launch it as one big event,” he says. “Start small, work with smaller teams to be more agile, deliver quicker and don’t be afraid to say: ‘Okay, that doesn’t work; let’s change this and change track’. If we’re trying something we’ve never done before, I don’t think it’s realistic to expect that it’s always going to work the way we intended.
“There is a balancing act. Don’t be afraid to admit if something’s not going to work – and do so quickly to save time and resources.”
Communication with, and management of, stakeholders – in terms of taking them along on the transformation journey – is important too, says Geddes.
At the same time, having a team comprised of the right people, with the right skills, is crucial to executing the strategy. Geddes points to the high level of skills and availability of staff and contractors in the Channel Islands, for example.
Rise of the challengers
To illustrate the importance of digitalisation, and the challenge that a new technology-based business can pose to traditional providers, consultant and former CEO at Jersey Finance Geoff Cook describes a service offered by one of his clients.
“Digital Swiss Gold enables you to buy or sell gold, in grams, through a smartphone app,” he explains, “challenging the traditional way of accessing gold bullion through a bank or a bullion dealer.”
The digital approach to this traditionally physical transaction brings possibilities of speed, convenience and reduced costs. The full service covers all aspects of the payment, acquisition and storage of gold.
Importantly, this business could have been located anywhere in the world, but as Cook explains: “The business chose Jersey because of its reputation as a global centre that upholds the rule of law and has a good administrative and regulatory environment.”
In principle at least, this opens up many other avenues for business to be conducted from the islands, where there are native skills and efficiency in financial services, as well as regulatory and fiscal attractions.
“I think that you’ll see more of this kind of thing in future,” Cook adds. “The important thing to say is: it’s nothing to do with crypto. It is utilising digital technology to buy a traditional safe harbour asset.”
Trust and the digital future of banking
So where could the digital transformation journey lead large financial services firms, especially those based in the islands?
“I’m optimistic that the future will see more partnerships with companies that are digitally native and can move at pace, to deliver great customer experience,” says Jamie Broadbent Jersey-based Head of Digital and Innovation at RBS International.
Like other commentators, he sees personal and business data – and what financial firms do with it – as the Holy Grail.
“Financial firms sit on mountains of customer data and yet they aren’t really delivering a hyper-personalised service,” he says. “All banks need to quite quickly get to the place where we are not just doing spray-and-pray and saying: ‘Here’s an offer, we hope you’re going to like it’.
"They are actually using a customer’s data to understand them as a segment of one – and then delivering the right message at the right time and in the right channel that they will respond to best.”
Moreover, in addition to the requirement to quickly adopt new technologies to meet the needs of customers, data and digital access to it is an enduring asset.
“Digital is eternal,” says Broadbent, adding that digital transformation does not have an end-game, but a continuous path of change and improvement towards ever more personalised customer experience.
An important element of this is trust – specifically trust of the customer in his or her bank. Yet, while older generations may feel uncomfortable with handing over more data and more permissions to their banks, the post-Facebook generation is already used to living their lives online and sharing information about themselves.
“So, I say that the bank’s role is really to be a trusted partner that not only looks after people’s money but looks after their best interests, helps them improve their relationship with their money, helps them improve their relationship and their digital capability,” Broadbent says.
“That’s fundamentally the role we see. My hope is that there’s evidence we’re starting to get that right and certainly that’s what we’re looking to prioritise as we move forward.”
For Channel Islands financial services businesses, digital transformation does not involve having skyscraper offices in London, New York or Tokyo, nor having a high-street branch network to deliver services to customers.
What counts is having expertise and trusted counterparties in well-regulated jurisdictions, using state-of-the-art technology, to deliver services to customers wherever they may be located.
In these areas, the islands punch well above their weight. So there is plenty of evidence that digital transformation will benefit the financial services sector on the islands, while less nimble competitors in jurisdictions that lack the islands’ progressive mindset are left playing catch-up.
• This article was first published in the Digital Edition of Businesslife in December 2020