What can banks do to reimagine their operating models

Customer experience is a wide-ranging term that encompasses many elements. For banks, it not only means providing for their customers in the best way possible through direct customer interactions, but also all the behind-the-scenes elements that go into making those interactions smooth and effective. This means that for banks, improving customer experience also means improving their organization’s efficiency, risk and control operations, and cost transformation programs. To drive a successful transformation requires every element to work to enhance the customer’s experience, from end to end of the bank’s operations.

With customers’ expectations constantly shifting, operational transformation is no longer an option, it’s a necessity. This is particularly true since the outbreak of COVID-19. Our Future Consumer Index identified that the crisis has radically impacted customers’ behavior with 43% of respondents saying the way they bank has changed due to the pandemic.

One global bank with large operations in the Asia Pacific region had already recognized the need to fundamentally transform their operational processes before the pandemic hit. In its planning, the bank decided to collaborate with a trusted partner that had the right set of technological capabilities and deep understanding of banking operations to chart the course together.

As a result, the bank turned to EY to help it implement an innovative operational transformation program – one that would ultimately underpin the bank’s response to the COVID-19 crisis.

The EY team anchored key elements of the bank’s operational transformation program in an intelligent operations framework. Our framework focuses on reducing cost, waste, and latency issues to the minimum amount possible. By examining each operational lever and its influence on key parts of the bank’s operating model, our team was able to identify and offer a blend of process re-engineering proficiencies, technology and data capabilities, and workforce competencies.

However, our operational transformation journey with the bank swiftly accelerated once COVID-19 hit and government lockdowns began to be put in place across some of its key markets. The EY team quickly mobilized and, within 48 hours of one national lockdown, set up a fully functioning remote team to support the bank through the crisis. With the bank’s needs shifting rapidly – often on a daily basis as government policies responded to the progression of the virus – the EY team quickly pivoted its model of intelligent operations to underpin and improve the bank’s processes, controls and workforce capacity.

Prioritizing during a crisis

The bank’s initial objective was extending credit and forbearance measures across its mortgages, personal loans and SME lending space. However, on top of this, the bank had also started to act as a funnel for crucial government assistance payments. It's effort to cater to its customers and help the national government dole out a large-scale program of fiscal aid, began to place severe strain on its operating model. With competing priorities and a rapid response vital to help its customers get through the crisis, the bank knew it had to act quickly and draw up a plan.

For instance, the government’s COVID-19 response plan included the provision that customers in need of credit relief from personal loans and credit cards could obtain relief from making loan repayments and also withdraw a certain sum from their superannuation funds, both in this financial year and the next. This provision legislated that any request to a financial institution for these funds had to be completed within five days of receipt, placing an enormous responsibility on the bank to deliver on time.

At the same time, other national lockdowns meant that the bank could not rely on its offshore teams – including those in India and the Philippines – to support them operationally, as in some cases they were offline and unavailable.

With requirements rapidly shifting and resources uncertain, the EY team set to work with the bank to swiftly resolve the soaring number of customer requests. Together with a team of developers working from home and the deployment of bots to support the number of requests, EY helped the bank to clear the entire backlog – which equated to thousands of high priority requests in a matter of days.

Operating parties: a redirection

The COVID-19 crisis has highlighted the risks – and also reinforced the benefits – of leveraging off-shore parties for back-office operations. Many banks have needed to, at least temporarily, bring elements of their operations back onshore and closely review business continuity planning arrangements. EY is currently exploring ways to help the bank improve the productivity of its existing resource base.

Workforce partnering is a core component of EY’s intelligent operations framework, so this is the core of our assessment of how processes work end-to-end, and how the bank could cross-skill resources to meet new demands in the coming months. This framework is starting to help the bank see not only how technology can enable a better customer experience – at the same time as reducing costs, increasing productivity, enhancing controls, and improving risk processes – but also who they can and should engage with to deliver against their evolving strategic priorities. “Operational transformation is not about single point solutions. It requires a focus on business outcomes first and foremost, a broad approach and a strong understanding of what levers to pull in what order and why,” says Andy Gillard, EY Asia-Pacific Financial Services Operational Transformation Leader.

These capabilities will prove extremely relevant in the new normal. The purpose of this approach is to ensure the migration of operational processing capacity from one service offering to another, at ease. For example, if there is a spike in home lending, the bank may need less operational capacity in business lending.

This approach is based on and driven by operational data and challenges a number of norms that typically exist in banks’ operating procedures. It contests the entire concept of a service level agreement (SLA) culture. Instead, the focus is on gaining solid capacity improvements, which directly relate to productivity. Through this process, a bank can look at the productivity of its workforce – including where there is scaled remote working – and how elements such as technology enablement, virtual leadership, and processing confidential data with a dispersed workforce come together to ensure not just compliant, but enhanced customer service.

Our uniquely broad, adaptive approach to operational transformation, together with a strong relationship with the bank has not just helped the bank start to achieve the kind of operational transformation it needed, but set it up to be able to respond rapidly to one of the biggest challenges any sector has ever faced when the COVID-19 pandemic hit.

So far, this has resulted in:

• Thousands of priority COVID-19 hardship requests processed within days with future process scalability
• Restructuring of consumer and SME loans
• Provisioning of thousands of debit cards for pensioners to access their accounts during COVID-19
• Zero processing errors
• Rapid technology configuration 
• Full remote working

As the bank’s operations leaders evaluate what changes have occurred since March, it is clear that end-to-end digitization in banking operations will be a driving force behind the bank’s customer experience offering. An increased focus on contingency capacity, multi-technology automation including AI and analytics, will have a fundamental knock-on effect on costs, as well as risk management.

Despite the unknown outcome of COVID-19, the crisis has made clear that singular operational solutions are not optimal in this environment. Instead, a broad program of operational transformation – focused on understanding the interconnections and dependencies from end to end – is necessary to build resilience into banking operations, to help reframe how banks will succeed in the world today and in the months to come.