Making omni-channel a reality – Part 4: Assess your operating model

Any bank embarking on a journey towards omni-channel service delivery will have many questions to answer and challenges to overcome along the way, as I explore in this whitepaper.

One of the key stages of an omni-channel transformation is assessing your existing operating model and looking for ways it can be improved. This is likely to involve building up a clear picture of your business capabilities (and opportunities for developing them), optimizing process architecture, evaluating your product portfolio, and understanding the strengths and weaknesses of your physical distribution network.

Understanding business capabilities

There are many benefits to be gained from having a clear, in-depth business capability model and understanding your organization’s ability to perform key activities. This will give you a more holistic view of the company’s capacity and maturity, as well as highlighting your key strengths and weaknesses.

Capability maps can also improve your ability to anticipate and respond to change, prioritize investments and spot potential challenges and opportunities in the planned change agenda.

Here is an example of a high-level capability model for the retail bank distribution network:

The next step, after defining a high-level overview of your capabilities, is to conduct a more detailed examination of each capability, which will require interaction with senior and mid-level leadership. Equipped with a solid understanding of specific abilities within your business, you can compare with industry benchmark data to ensure you stay ahead of the competition.

A next-level capability overview might look like this:

It’s important to remember that more detailed capability maps might look different for different banks. An established financial institution that places a strong emphasis on its physical distribution network, for example, will have different priorities to a purely digital provider.

Once your business has come up with a thorough assessment of its capabilities, another useful step is to introduce standard reporting capability such as executive dashboards, which can make it easier to visualize changing capabilities and to track and plan investments.

Here is what an executive reporting dashboard could look like:

Optimizing process architecture

In financial services, processes are defined by the use of specific inputs to achieve key outcomes for the organization and its customers, with minimum use of resources. Taking account opening as an example, one of the goals of omni-channel delivery is providing a seamless experience across channels – so customers can start to open their account online and finish the process in a branch, for instance.

However, there are some significant obstacles to achieving these objectives, one of which is the existence of manual operational processes within many banks, which can raise the risk of inefficiencies, human error and compliance failings.

It’s important to have a clear view of your processes and to identify where improvement is needed by dividing them into logical categories and measuring performance in each area. Possible performance metrics include the percentage of ‘straight-through’ processing vs manual processing, turnaround time, number of variations and defects, and number of internal and external complaints.

Once you have a strong grasp of how your key processes are functioning, the logical next step is to look at methodologies to optimize your process architecture. A Lean Six Sigma approach, for example, could help your business to be more customer-focused while reducing waste and variation.

To deliver a truly customer-centric operating model, it’s important to look at these processes from an outside-in perspective as well. That’s where customer journey comes into the picture. According to The Financial Brand’s 2017 Retail Banking Trends and Predictions report, the single most important trend for the retail banking industry this year will be the drive to remove friction from the customer journey.

There are various ways of creating and documenting customer journeys. However, the system must capture the customer segment, customer objective, the high-level activities the customer needs to do to achieve the desired outcome and the time it takes them to do it. Most importantly of all, it should connect back to your operations. Here is an example of a customer experience journey:

It is critical to understand a customer’s ‘Moment of Truth‘ and to re-design these end-to-end customer journeys in order to remove friction and to create a seamless customer experience that is personalised and contextualised in real time. This would also help retail banks to meet their compliance requirements, whether it’s AML, fraud or customer conduct risk.

Analyzing product portfolio

Evaluating your product portfolio will be an important part of an omni-channel transformation, for the simple reason that having more products and associated services makes it more difficult to remove barriers between the channels that make up your distribution network.

One of the questions banks need to ask relates to the viability and value of legacy products, which can increase complexity, cost and risk through the number of people, processes and technologies required to manage them.

Identifying and taking opportunities to simplify your product portfolio can result in benefits such as a more agile operating model, reduced regulatory difficulties and fewer operational challenges.

“A move to a customer-driven approach will require banks to rationalize and simplify their product sets. By breaking products into their component parts, banks will enable customers to tailor-make products to suit their needs. Banks that achieve this will be able to provide customers with truly differentiated offerings.” [Defining the New Core of a Bank – EY]

Getting maximum value from physical distribution

Despite the growth of digital channels, physical distribution – primarily through the branch and ATM – still has an important role to play in retail banking today. Having a branch network allows banks to engage with customers on a face-to-face, human level, which could be crucial in building trust. This is particularly important when people are seeking advice or taking out new products.

However, it also needs to be acknowledged that branch networks are costly to maintain, and footfall has been declining steadily in recent years.

When it comes to optimizing and deriving maximum value from your branches, one common pitfall to avoid is focusing on individual sites in isolation, or conducting only a partial assessment of your network. By taking a holistic approach and reviewing your distribution network as a whole – based on methods such as analysis of customer segments and behaviors – you will be in a better decision to make strategic decisions about the value and viability of your branch network.

“Customers are adopting mobile and digital banking at a pace we’ve never seen before. But the importance of having a branch in a convenient location is as important as ever for consumers. For those who want to offer genuine competition in the future, the ability to meet that customer demand is crucial. The focus for banks shouldn’t be in deciding between branches or technology, but in investing in branches and the service they offer, alongside a first rate digital offer.” [Why Branches Matter in a Digital Age – TSB]

Of course, physical distribution also encompasses ATMs, a channel that mustn’t be forgotten in your omni-channel strategy. According to forecasts from Global Market Insights, the ATM market is set to grow at a compound annual rate of nearly ten percent up to 2023.

The ATM remains one of the most visible and heavily used banking channels around the world. It has the flexibility to function as everything from a simple cash dispenser to a full sales channel, with users interacting with tellers via video. There is clear potential for the ATM channel to continue innovating over the coming years, so we can expect it to play a central role in omni-channel transformation for many financial institutions.

Finding the right balance between the physical channels that so many customers continue to rely on and the latest innovations driving forward digital and mobile banking – and striving to ensure that one channel is not prioritized at the expense of any other – should be one of the key goals at the heart of any omni-channel strategy.


Image: iStock/Rawpixel

Written by Aamir Janjua

Aamir Janjua

Aamir is NCR's Global Business Transformation Leader in financial services domain, supporting customers across the globe to optimise and transform their business to achieve desired business outcomes. He has 20 years’ experience in business and IT change management, business consulting and transformation covering banking, financial services, manufacturing and government verticals. He provides thought leadership and proactively share ideas and learnings from various global engagements via white papers and blogs to support successful transformation of the financial services industry into the digital era.

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