Prior to the COVID-19 pandemic, banks were under increased strain due to slowing industry growth, a low-interest-rate environment, and the rise of Fintechs and other non-traditional players. Today, banks are still thinking about how to keep costs under control while providing a frictionless customer experience.
While the banking industry has gradually embraced digital tools and automation, those who effectively use tools to improve employee experience and collaboration to empower their employees to work more effectively together will stand out.
Microsoft has studied the operating environment and concluded that, even though banks and capital market firms have widely pursued digital transformation initiatives and business process automation, significant friction remains in the system. Internal and external digital communication and collaboration, as well as collaboration with customers and partners, continue to be significant challenges. Employees and executives alike are attempting to reimagine the “bank” or “firm” to compete with new market entrants as next-generation banks and Fintech firms demonstrate their competitive advantage through improved customer experience, increased operational efficiency, and faster time to market.
And the stakes are obvious. Traditional banks are under threat from new entrants, as well as slowing economic and industry growth. According to McKinsey, 60% of banks face going out of business during the next economic downturn because their returns are less than their cost of equity. It should come as no surprise that implementing digital technologies can help banks significantly improve their position. According to McKinsey, banks that successfully implement digital could see a 40% increase in profit due to improved top-line growth (e.g., increased revenues) and lower operational costs. Digital laggards, on the other hand, may see profits fall by up to 35%.
While most banks have made large, symbolic investments in consumer-facing technology, business process collaboration remains largely manual and inefficient. Collaboration has the potential to improve operational productivity and the chief experience officer’s relevant KPIs in three ways: customer experience, employee engagement, and organizational productivity.
For starters, today’s customers have higher expectations. Millennials and Generation Z are accustomed to a certain level of customer experience and digital aptitude throughout their customer journey. Banks have begun to lose their customers’ trust, and as a result, their share of wallets is shifting to next-generation banks and Fintechs that provide a better digital customer experience.
According to studies conducted in the United States, more than a quarter of customers trust a Fintech firm more than their primary bank, and more than half trust a Fintech firm more than banks in general. Customer experience, unsurprisingly, is a key differentiator in the banking industry for attracting and retaining customers. Furthermore, banks with higher net promoter scores (NPS) have higher revenue. Leaders in NPS have higher net interest income growth rates and higher deposit growth rates than laggards. High NPS scores can be driven not only by the level of service customers receive but also by the efficiency and ease in which they went through the process, which can be boosted by their digital interactions with a firm (e.g., through customer portals that help connect customers and employees).
Like changing customer expectations, employee expectations are also evolving. In the current environment, supporting employees and culture are very important. As potential or current employers, banks are now compared to tech companies, with their agile workplaces, digitally-minded cultures, and modern technologies. In addition, and according to McKinsey; “employee experience shapes customer experience. This is even more true in a crisis”.
Digital engagement tools for customer interactions help effect positive change aligned to customer needs. Employees are still critical in overall processes and make a material difference in outcomes. Keeping strong employee connections is crucially important through virtual events, town halls and team-based interaction.
When it comes to organizational productivity, stringent compliance, security, and privacy requirements, inefficient, human error-prone business processes, or unsanctioned digital communications tools can impair productivity, create operational risks, direct compliance (and remediation) costs, and negatively impact reputation if not executed correctly. In terms of culture, digitization is currently being used to boost productivity by incorporating an agile mindset and changing traditional hierarchies. Aside from culture, increased productivity and an agile workforce increases the speed with which employees complete tasks, thereby accelerating time to market.
To summarize, Microsoft’s research indicates that cross-group collaboration is especially effective when embedded in critical business processes that require high levels of collaboration and specific cross-company use cases. This is demonstrated by delving into two processes as well as other banking use cases, such as virtual banking and crisis management. Inefficiencies in the mortgage origination and commercial customer onboarding processes, for example, are frequently caused by poor internal and external coordination and communication, as well as a general lack of transparency throughout the process. Embedding collaboration has been shown to reduce costs per loan/customer by 10%.
Furthermore, cross-group collaboration such as Microsoft Teams can be used to streamline and improve customer experience and operational efficiency through remote sales and service, crisis management, and knowledge management, resulting in frictionless interactions, real-time communication, and information that is properly codified and used to support decision making.
Microsoft recently announced the release of Loan Manager, a solution designed for the financial services industry, to address some of the issues raised above. The solution is intended for use in financial services to enable automation, a collaboration between front and back offices and improved business-to-consumer communications to accelerate lending processes, reduce errors, and improve customer experiences. Banks’ customer service can only improve.
This opinion piece is by Kendi Ntwiga – Country Manager, Microsoft Kenya