Banking & Financial Services. White Paper. Organizing the Retail Bank for Omni-Channel

Transcription

1 Banking & Financial Services White Paper Organizing the Retail Bank for Omni-Channel

2 About the Authors K Krithivasan President, Banking and Financial Services (BFS) Business Unit, TCS K Krithivasan (Krithi) is responsible for strategic planning, sustained financial performance, enhancing customer mindshare, and market positioning, as well as driving collaboration among the BFS sub-units and competency development of his team. In his career of over 25 years, Krithi has held various key positions in sales, delivery, technology, and strategic planning. He has a master's degree in industrial and management engineering from IIT Kanpur and a bachelor's degree in mechanical engineering from the University of Madras. S Varadarajan Global Head, Banking and Financial Services Practice, TCS Srinivasan Varadarajan (Varada) is responsible for championing innovation in the BFS space, improving the domain competence of the team, enhancing the TCS BFS brand, and bringing the power of collaborative domain knowledge to each engagement. In his career of over 24 years, Varada has held various management roles in IT, operations, and products. He has successfully led multiple transformation engagements, focusing on improving the readiness of banks and financial institutions (FIs) for future growth, business process simplification, and margin improvements. He has a bachelor's degree in electronics and communications from Aligarh University. Tonya McKinney Head Customer Experience and Digital Strategy Solutions, TCS Tonya McKinney heads the Customer Experience and Digital Strategy Solutions at TCS. She leads a team of digital domain experts who help Fortune 1,000 companies create and execute compelling customer experience solutions. Tonya is an experienced executive team member from both multi-billion global enterprises and innovative startups. She is also an author and frequent speaker on digital and customer experience topics.

3 Abstract The right organizational structure enables even the most complex financial institutions to build omni-channel customer experiences. A group of banking executives explored this topic in-depth during a roundtable hosted by The American Banker and Tata Consultancy Services (TCS) and this paper documents the omni-channel topics, challenges, and organizational models these banking experts shared. Historical customer usage trends have made it challenging for banks to justify the expense of building omni-channel customer experiences, as these advanced capabilities are only demanded by a small percentage of customers. Instead, the business case for omni-channel has to be made in terms of increased efficiency and reduced costs through the rationalization of IT development across channels. By doing so, banks can deploy new features more quickly, across an expanded universe of mobile ecosystems and form factors. To achieve these objectives, banks will have to transcend the existing organizational barriers to effective budgeting and planning. Channel initiatives are often difficult for multidivisional banks. This paper describes three models for addressing the omni-channel challenge from an organizational design perspective, and suggests an enablement model for directing the omni-channel effort throughout the bank. In the emerging technology environment, the most successful banks will be those that can deploy services rapidly across a wide range of devices. Changes in consumer electronics, location-based services, and development standards are challenging the existing assumptions about omni-channel banking. Through an organizational effort to omnichannel, banks will be better prepared to deal with the impending transformation in channels.

4 Contents 1. Introduction: The promise and reality of omni-channel 5 2. Solution: Organizational structures that support omni-channel development 6 3. Benefits: Changing channels, changing customers 7 4. Conclusion 8

5 Introduction: The Promise and Reality of Omni-Channel The enticing vision of omni-channel suggests that bank customers should have anytime, anywhere access to all services through any channel be it a personal computer (PC) or a laptop, a mobile phone or a fixed line phone, or an ATM kiosk. Whether at home or on the road, whether speaking to a bank employee or using a kiosk the omnichannel bank delivers unified messages, seamless services, and contextual responses, all in real-time; seamlessly across channels. The reality: Building an omni-channel bank can be a messy and expensive proposition. With legacy technology deployed across a complex organizational chart, it's extremely challenging for a multiline financial institution to serve the mythical customer who expects to initiate a complex mortgage loan online, check on its status at the ATM, follow-up with a customer service agent over the phone, and finish on the mobile phone in rapid succession, without any of the separate channels skipping a beat. Even if omni-channel capabilities are available, research has shown that the demand comes from a very small percentage of customers. At present, customers interact with their bank channels according to three related 1 behaviors : Channel inertia: : Most people are fairly predictable in their channel choices, and tend to use the same channels for their regular activities. Channel context: People expect to be able to conduct all their transactions in the channel of choice, but how those transactions are conducted varies by the context of the channels. Certain features are available on mobile phones, on tablets, and on PCs, so how people open an account, check their balance, or deposit a check should take advantage of those features. Channel failover: People switch channels because they're not able to do something they like on their preferred channel; and as a corollary, they're not happy about making the switch. As a simple example, if the ATM isn't working, the customer will step inside the branch. If the website's down, they'll pick up the phone. These behaviors imply that investments in an omni-channel strategy are hard to justify given the way people actually interact with their banks. From the customer's perspective, their preferred channels should be available and should work as expected; they're only going to switch if there's a problem. In turn, banks have catered to these varied customer behaviors by dispersing responsibility for channels across separate functions of the bank, an approach that has led to high development and maintenance expenses. Each channel serves its own distinct customer segment with its own contextual requirements, and channels have been developed in relative isolation from the others, with low levels of code reuse. Banks still have a strong business case for building a uniform channel architecture based on the sheer inefficiency of managing multiple channels separately for a wide range of products. TCS research indicates that customers [1] Tata Consultancy Services, Omni-Channel Banking Customer Experience: Forget What You Thought You Knew about Channels (April 2014), accessed December 1, 2014, 5

6 2 generally expect the same nine banking transactions, no matter what the channel. For efficiency and contextual relevance, these transactions should be managed as consistently as possible, with shared procedures and code across platforms. By rationalizing the code base across delivery platforms and channels, IT organizations within banks can run a leaner operation, with faster time to market for new products, and the ability to deliver consistently across multiple channels. By this way of thinking, omni-channel for customers becomes not the end goal, but rather the byproduct of good hygiene of an IT development organization. If implemented from a single code base, changes required for new regulations and new features need only be deployed once. Similarly, a new mobile device that becomes popular can be connected to a single code base quickly and easily, without having to rewrite proprietary code. Solution: Organizational Structures that Support Omni- Channel Development Fixing an inefficient relationship between capabilities and channels involves a major technology development effort. However, the main hurdle is not technological, but rather organizational. At most banks, channels are owned and managed by the product teams, which in turn roll up into commercial banking and consumer banking divisions. For example, a bank's mortgage business unit, part of the retail bank, may have responsibility for channel functions including the section on the website corresponding to mortgages, a mortgage rate app, the call center for mortgage related questions, and for staffing the branch with mortgage experts. One can usually discern a bank's organizational structure by looking at its website. Often, different functions are made available from different parts of the site sometimes with separate login credentials for investments, mortgage, and retail banking. Within a rigid hierarchical structure organized by customer segment and product, there's no obvious place for someone with budgetary authority to take the ownership of omni-channel investments across the entire enterprise. At a recent American Banker's Digital Banking Summit, several attendees from the banking industry relayed their difficulties in finding the right organizational approach for managing customer experience across channels. Examples included having the digital group 'moving around the organization', various matrix reporting relationships, and the establishment of a 'digital innovation roundtable'. Generally, organizations tend to follow one of three models for addressing the omni-channel challenge: 1. Oversight: An executive is named the 'channel czar', head of customer experience. In managing customer experience programs, this role is responsible for securing alignment, commitment, and budget across multiple lines of business (LoBs). [2] The nine transactions that retail banking customers expect in any channel are, in priority order: Deposit, Open Account, Switch Banks, Close Account, Withdraw, Access/Manage Account, Use Automatic Bill Pay, Transfer Money, Apply for Credit Card Source: TCS Point of View - Omni-Channel Banking Customer Experience: Forget What You Thought You Knew about Channels ( 6

7 2. Enablement: The organization institutes a shared services model with a centralized approach to channel governance. Activities such as customer experience reviews establish baseline criteria that limits the extent to which lines of business can deviate with regard to channel deployments. 3. Authority: Budgets and decision making power are granted to the executive in charge of channels and customer experience. Financial services have a high number of customer channels as well as a large volume of highly complex products and services, making this approach rare in banking. The oversight model is the easiest to launch, but the lack of budget or control makes it difficult to deliver robust omni-channel services that span multiple channels, customer service functions, and lines of business. At the other extreme, the authority model has the best chance of ensuring that omni-channel capabilities are delivered according to plan, but it is hard to envision a large bank ceding so much responsibility to an executive overseeing channels, especially given the specialized subject matter expertise and regulatory knowledge required within each line of business. Accordingly, of the three models the enablement model has the best chance of delivering omni-channel capabilities within a multidivisional bank. In this model, budgetary authority and service responsibility still rests with the lines of business, but their activities are directed and choreographed through the use of standards, shared services, and common design principles. Executives from the various lines of business still retain control over their budgets and priorities, but are incentivized to build solutions that reduce the total cost of ownership (TCO) for the organization's IT department as a whole. In this way, channels converge upon interoperability and parity in a positive way, without having to usurp other important priorities for the business. Benefits: Changing Channels, Changing Customers Over time, banks will reap the benefits of a uniform channel architecture and centralized IT infrastructure by being able to transform their operations as the marketplace changes. As the channel mix evolves to include new devices and form factors, existing patterns of customer behavior are sure to change as well. The impending transformation in channels starts with consumer electronics. Mobile phones are being delivered with larger screens, greater connectivity, and increased functionality. Tablets have crossed over into territory formerly held by PCs, with networked devices drawing directly upon the storage and computing capabilities of cloud based resources. Meanwhile, location based services open up the possibility for new services with exciting possibilities that go far beyond what stationary PCs can do. As the mobile industry matures with more robust standards and a broader talent pool of developers, we should expect the low cost proliferation of advanced capabilities on a wide range of inexpensive devices. What's more, as evidenced by early stage deployments of wearable computing and smart watches, new devices will not be limited to traditional screens. Instead of channel inertia, we may see channel motion. Every time someone upgrades a device or purchases a new platform, whether switching from a PC to a tablet, from a tablet to a smartphone, or from a smartphone to smart 7

8 glasses, customers will expect services on the new platform equivalent to what they had on the older platform. In the past, channel migration was driven by banks seeking to lower the cost of servicing a customer. In the future, customers will undertake the migration themselves in order to take advantage of preferred form factors on improved devices. Instead of channel context, we may see channel independence. Banks will be hard pressed to keep up with the diversifying range of form factors, devices, and development platforms being adopted by customers. In response, they will need to build a unified set of capabilities that can be deployed across devices in different combinations. Capabilities will have to be developed that can work equally well on multiple endpoints, and at a sufficient level of information security. Instead of channel failover, we may see provider failover. When a customer cannot rely upon banking services through their preferred mix of channels, they will easily find another bank that can deliver more reliably upon the digital banking promise. The providers of the mobile computing ecosystem have a strong incentive to find the most capable banking partners to increase the usage and improve the utility of their devices. Therefore, if mobile customers have a problem with their bank, it's a problem for the entire ecosystem. If you can't deliver, someone else will. In the emerging environment, the ideal situation for a bank will be to maintain a single library of digital functions and capabilities that can be assembled as modules and delivered to any number of devices on a personalized basis. The most successful banks in the digital era will be those that can quickly adapt new devices to support existing capabilities, while also rapidly deploying new products across a wide range of multiple devices. Conclusion In creating a uniform channel architecture (and experience), the technology is the easy part. For this type of technology to take hold, banks will need to have centralized organizational structures that unify product managers and line of business executives around the need to deliver consistently positive customer experiences. As new technology begins to blur the lines between commerce and communications, customers will begin to compare banks not just to other banks, but also to other prominent retail service providers in the digital world. For banks, the question isn't whether you're as capable as a competing bank in digital commerce, but whether your customer experiences are on par with the channel flexibility and ubiquity of companies such as Amazon, Facebook, and Twitter. It's not impossible for a bank to make that leap in customer experience. However, such a leap requires every line of business to coordinate their efforts such that the organization can traverse the gap as one. 8

9 About TCS' Banking and Financial Services Business Unit With over four decades of experience working with the world's leading banks and financial institutions, TCS offers a comprehensive portfolio of domain-focused processes, frameworks, and solutions that empower organizations to respond to market changes quickly, manage customer relationships profitably, and stay ahead of competition. Our offerings combine customizable solution accelerators with expertise gained from engaging with global banks, regulatory and development institutions, and diversified and specialty financial institutions. TCS helps leading organizations achieve key operational and strategic objectives across retail and corporate banking, capital markets, market infrastructure, cards, risk management, and treasury TCS has been ranked #2 in the 2014 FinTech Rankings Top 100 of global technology providers to the financial services industry, by both - FinTech Forward (a collaboration of American Banker and BAI) and IDC Financial Insights. TCS has also been recognized as a 'Leader' and a 'Star Performer' in Everest Group's 2014 PEAK Matrix reports for Banking and Capital Markets Application Outsourcing (AO). Contact For more information about TCS Banking and Financial Services Unit, visit: bfs.marketing@tcs.com Subscribe to TCS White Papers TCS.com RSS: Feedburner: About Tata Consultancy Services (TCS) Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled infrastructure, engineering and TM assurance services. This is delivered through its unique Global Network Delivery Model, recognized as the benchmark of excellence in software development. A part of the Tata Group, India s largest industrial conglomerate, TCS has a global footprint and is listed on the National Stock Exchange and Bombay Stock Exchange in India. For more information, visit us at IT Services Business Solutions Consulting All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties. Copyright 2015 Tata Consultancy Services Limited TCS Design Services I M I 02 I 15