Traditionally, delivering transformational change has not typically been an area of expertise for financial services providers. The need to compete based on operating model innovation and excellence was never a top priority in the industry, as increasing growth and steady interest rates allowed firms to increase profits without the effort and benefits associated with operating model innovation and transformation. In a post-financial-crises world, rapidly shifting industry dynamics have forced financial services organizations to transform as a means to both compete and in some cases survive.
Fundamental key changes have occurred in the post-financial- crises world. These changes have in many ways forced transformation initiatives to the top of the priority list. This shift in priorities has been driven by decreasing growth rates, slim interest rate margins, rapidly shifting technology changes and an empowered consumer. Though all of these changes have impacted financial services in a unique manner, the industry has faced growth and margin pressure in the past and has often dealt with these concerns with cost-control initiatives and transformation. Rapid technology changes and empowered consumers with ever-changing preferences are new forces of change, and the reaction to them will in many cases determine which financial services organizations remain competitive going forward.
The need for transformation
The pace and nature of the changes mentioned leaves most established financial services organizations in a reactive position. The nature of the transformation, challenges the financial services providers. Regardless of the business strategy or challenge an organization now faces, whether attempting to reduce costs, launch new products or rebuild in the digital era, now more than ever organizations must design for client experiences. Clients must be considered as part of the organization's strategy. Firms must move beyond simply finding ways to market and sell to clients, to a state where designing and delivering the client experiences must be part of the corporate strategy itself, and investments in core capabilities must be aligned around target client experiences.
It is vital to ensure that all operating capabilities enable a seamless client experience to avoid wasted resources. Further complicating the challenge, organizations are now facing the high number of client segments for whom they must design and deliver experiences; boomers, millennials and new Canadians are examples of the many client segments with their own preferences with respect to channel, process and method of product and service delivery.
Fundamental key changes have occurred in the post-financial-crises world. These changes have in many ways forced transformation initiatives to the top of the priority list.
Technology
It is an understatement to declare that technology is changing rapidly and that the impact of this change on the industry is immense. The growth of mobile technology and applications has redefined the manner in which consumers interact with the providers of financial services. In the past few years this interaction has quickly moved past the typical web-browser- based interaction to one driven by smartphone applications and wearable technology. “Digital” is now a priority for most organizations in the industry, yet what “Digital” means to each organization is often very different. Is digital simply about the front end of the process and the source of interaction and origination, or is digital about the end to end and how we not only interact but adjudicate and fulfill products as well? Regardless of their digital strategy, organizations must challenge multiple, if not all, aspects of their end-to-end operating models and processes to maximize return on investment. The digital revolution is forcing transformation not only from an ROI perspective but from the perspective of survival as well. The industry is under threat. Financial technology or “Fintech” companies are being launched on a daily basis. These companies have competitive advantages over most established organizations. Fintechs are small, nimble and customer-preference-friendly, and they are built from the ground up with core technology and processes designed to exceed client preferences and deliver enhanced client experiences, not just products and services.
Customers
According to Forrester Research, we now operate in the “Age of the Customer”. Clients have been enabled by technology and they are now in charge. Financial services providers can no longer design from the outside in and force an experience upon customers. If the target client experience is not fulfilled, clients have a strong propensity to switch providers and can do so easily given existing account opening capabilities in the digital organizations. Client preferences have shifted rapidly towards seamless and fully integrated client experiences. They expect to be served when and where they like. For example, the omni-channel experience we were hearing about a couple of years ago is now an expectation for clients. They expect to be able to start an application in one channel, such as a branch, and pick it up elsewhere and complete it at their convenience in another medium, such as online, with fully accessible information at their fingertips.
Employees
The client experience must be delivered and enhanced by inspired and motivated employees. Employees must be motivated to become “Brand Ambassadors”. Although there are intangible benefits achieved in attaining this desired state, tangible factors can be aligned to further employee cooperation and commitment to clients. These tangible factors can include incentives and overall compensation.
Processes
To exceed client expectations, employees need effective processes that can deliver information, decisions and data to them at the appropriate time. This state of alignment can only be achieved by examining end-to-end operating capabilities. Alignment of these capabilities in accordance with client preferences is critical. Processes must be designed with client experience as a key design criterion. Key operating enablers must be aligned along the end-to-end process to deliver the target client experience. Our view of process is broader than the typical view that process is merely a series of repeatable activities and the only way to improve a process is to find and eliminate waste in it. A broad view of processes seeks to transform operations by aligning factors that directly contribute to the success of a process. These factors include strategy, incentives and motivation, roles and responsibilities, culture, knowledge and support, technology and infrastructure and policies and rules. The alignment of these factors to the target client and enabling employee experience on an end-to-end basis allow for the efficient and effective use of capabilities while delivering service in a client-friendly and cost-effective manner.
Enabling Processes
Data
The future of successful organizations will be fundamentally driven by data. The importance of data is highlighted by recent trends to appoint Chief Data Officers amongst many financial services organizations and large Fortune 500 companies. To deliver upon the expected client experience, companies must be able to extract and deliver data to and from multiple systems in a manner that delivers usable data to systems and processes at the right time and in the right channel. This is a complicated endeavour in light of the number of data sources, systems and processes involved, and requires unique technology architecture to be developed.
Financial services organizations are now facing significant challenges as the industry and operating environments have rapidly transformed. Firms are being forced to rapidly transform in the face of limited growth, extreme margin pressure, technology threats and empowered customers. To remain competitive and relevant in the new operating environment, organizations must transform complete operating models to satisfy clients, return to growth and maximize return on investments the organization is making. To transform, we must design for experiences and align our operating capabilities against these experiences. BDO's Financial Services Practice focuses on the ways financial services organizations can make the most of their resources, thus allowing for better cost of ownership and return-on-investment.
BDO's professionals draw on extensive industry knowledge and experience to help clients manage the all-encompassing efforts that are required to implement lasting transformation. We provide guidance at every stage of transformation. We evaluate our clients' capability to implement change, and work to ensure that all aspects of a project are properly executed and managed.
Contact us today for a confidential consultation and a preliminary assessment of your business requirements.
Other articles in this series:
Feb 2016 - The Certification Process
March 2016 - Irreconcilable Differences
To learn more, contact your local BDO office or:
Sam Khoury
National Industry Leader, Financial Services
416 369 6030
skhoury@bdo.ca
Gerry O'Mahoney
Strategic Advisor, Financial Services
416 369 6065
gomahoney@bdo.ca
About BDO
One of the nation's leading accounting firms, BDO Canada providesassurance, accounting, tax, and advisory services. As a memberof the BDO international network, which spans more than 150countries and 1,400 offices, BDO provides seamless and consistentcross-border services to clients with international needs.
About BDO's Financial Services Practice
BDO's Financial Services Practice helps clients in the financialservices sector succeed in a changing landscape marked by regulatory reform, disruptive technology, and new service delivery channels. Our services, ranging from governance, risk and compliance to business process reviews and more, are tailored to meet the unique needs of financial services organizations.