Working smarter in banking

How is your bank responding to the unprecedented competitive and economic environment of today? Banks can no longer just work harder they must work smarter. Banks that use dynamic, collaborative and connected ways of working in the constantly changing banking environment are outperforming their peers.

In the 2010 IBM Global CEO Study, “Capitalizing on Complexity,” 79 percent of banking and financial markets CEOs reported that they anticipate industry complexity to grow significantly over the next five years, yet only 54 percent believe that they know how to deal with it. This 26 percent “complexity gap” means that banking CEOs increasingly see change coming, but feel ill-equipped to handle it. In addition to managing increased complexity, banks face intense pressure to get work done faster, cheaper and more effectively. Bridging the complexity gap and thriving in today’s challenging world requires a new way of working – a smarter way of working.

So what is a smarter way of working? To better manage complexity, banks must redesign their processes and operations for greater speed and flexibility. To deliver this business agility, banks will need to find new approaches to how work is accomplished. They will need to develop work practices that are more:

Dynamic - adjusting to rapidly changing business conditions

Collaborative - bringing together resources, both internal and external to share insights and problems.

Connected - enabling access to information regardless of time, distance or organizational silos.

And they will need to do it across three areas: people, processes, and information.

The IBM CEO study found that those banks that are succeeding in this new era are addressing complexity by designing elegant yet simple products, services and customer interactions. In the study 54 percent of banking CEOs said they are focusing on simplifying their products and operations to help them manage complexity more effectively. To accomplish this simplification, banks will have to:

• Easily identify and engage the right people to address the need
• Build processes that automatically reconfigure to reflect changing business conditions
• Deliver and display information to meet the needs of different audiences so it can be acted upon

One global bank, for example, collaborated across geographies and lines of business to decrease complexity in their numerous account opening processes. Their goal was to create a consolidated way to open an account no matter where the customer is and no matter what channel or product they choose. Using business process management tools, the business leaders were able to work with their IT colleagues across different geographies to choose best practice processes and implement them across the globe. In this way, they are able to eliminate duplicate processes and create a streamlined process that reduces the complexity of the business. (See Figure 1.) These improvements unified the account opening process for the customer making it easier to do business with the bank. With simplified processes, the bank was also able to introduce new products and channels more quickly and respond more rapidly to changing business needs. This simplicity and agility allows the bank to serve its customers better and beat the competition to the punch.

Figure 1. Account opening: Improving customer-initiated contact

Likewise, successful banks are harnessing the collective capabilities of their broader business network, and not just within the confines of the bank. Successful banks are facilitating discussions across and outside the bank to drive insight and promote greater productivity. Additionally, they are incorporating collaborative capabilities into the business processes to improve the speed and quality of decision making. Exploiting these capabilities is crucial if banks are to integrate and analyze timely information to gain insight, make quick decisions, and enable dynamic course corrections.

Banks that are outperforming within their industry are positioning themselves for growth by adopting smarter working practices that are dynamic, collaborative, and connected. In fact, the largest advantage lies in their ability to bring together disparate data for decision making. IBM’s recent survey of over 300 business and IT executives in, “A New Way of Working, Insights from Global Leaders,” showed that outperformers integrate different sources of data 3.5 times more often than lower performing peers. Similarly, outperformers use real-time information for decision making 2.6 times more often than their peers.

By adjusting to rapidly changing business conditions, by bringing together internal and external resources to share insights and problems, and by enabling access to information regardless of time, distance or organizational silos, leading banks are working smarter.

Despite some progress in reducing complexity, many banks find that they are typically restrained from working smarter by siloed processes and rigid IT systems that inhibit collaboration and agility. These inflexible and complex operations also prevent banks from focusing on their clients in a holistic fashion. Historically, banking processes have been bounded by the IT systems that drive them, and there is clearly an emerging need for horizontal integration of business processes. What is needed is horizontal transaction processing with the ability to define and manage long-running business processes in a transactional fashion and horizontally orchestrating the portfolios of existing finance solutions.

Figure 2. Inflexible, complex operations and siloed data prohibits banks from focusing on their clients

From a horizontal integration perspective, three capabilities are critical:

• End-to-end visibility and optimization: Providing timely visibility into the state and progress of business processes with business event processing
• Integrated user experience: Providing a user-oriented viewpoint with just enough information to make appropriate decisions.
• Robust and scalable integration environment: Providing optimized and reliable processes that can flex to meet rapid increases in use

To learn more about the importance of horizontal integration for smarter banking, achieving end-to-end process visibility, and reinventing the classical mainframe as a modern process aware platform, download the IBM Redguide publication, “Smarter Banking, Horizontal Integration, and Scalability.”

Banks have much to gain from working smarter. By becoming more dynamic, collaborative and connected they can rapidly and effectively respond to the increasing complexity inherent in this new era.

By Eric Jacobsen, Seattle, Washington. Eric is BPM Marketing Manager for Banking and Insurance in IBM Software Group.