Has COVID-19 shown retail banks the art of the possible?
To ensure critical services are provided throughout the COVID-19 crisis, retail banks have accelerated the pace of digital transformation and shown that when the motivation is right, they can deliver change quickly. What can banks do to make this the new norm?
A change of pace
If it was not clear what it meant to be a digital bank before COVID-19, it certainly is now. Pre-COVID-19, retail banking has typically been slow to change, and whilst investment in digital transformation was increasing, the pace at which it has been delivered has often lagged.
2020 is a different story. COVID-19 has hit the UK hard, with lockdown disrupting every aspect of life. As a provider of services critical for society to function, the banking industry has had to find ways to respond rapidly to this changing environment. Although branches have not closed entirely, access to them has been significantly restricted and major marketing campaigns have been undertaken to encourage customers to use digital channels for their banking needs. Over the last few months, we have seen the industry make a whole swathe of changes to support this agenda. A few examples include;
- TSB launching its smart chatbot in just five days, enabling customers to ask about COVID-19 measures being taken
- HSBC launching smart mobile onboarding enabling customers to apply for select accounts via mobile
- Santander launching a cross-border payments application “PagoFX” allowing customers to transfer money abroad without fees for the next two months (up to £3000) no matter who they bank with
It is likely that many of these digital initiatives were already on organisation’s digital roadmaps, however, a cocktail of macro-economic conditions and internal drive to respond have pushed the delivery pace to levels never seen before.
Why is this happening?
An external force, a common goal, and critical mass
COVID-19 is an external force driving change globally. As a result, banks have had to throw caution to the wind and provide products and services that would otherwise wait longer to be released. Organisations are unifying behind a common goal of safeguarding people, resulting in an instinctive focus on customers as well as employees. Whilst COVID-19 is undoubtedly a challenge, to some extent banks have benefitted by having their change agendas decided for them. This has simplified the problem statement to “do what is right for customers and do it now”. This has created critical mass allowing banks to respond to change quickly.
Banks can learn from this crisis what the art of the possible is. Three key attributes are being demonstrated by banks, if these can truly be embedded within the organisation, the chances of sustaining this delivery acceleration will increase. These attributes are:
- Genuine customer focus
- Clear prioritisation
- Rapid delivery
Genuine customer focus
What is the value for our customers?
Genuine customer focus should be more than rhetoric. It should be deeply ingrained into the organisation at every level. It is sometimes intangible, but when an organisation is single-minded towards pleasing customers and is working cohesively to that end, the reward can be substantial. When customers trust that banks are operating for them, they become loyal, and with loyalty comes longevity and recommendation, spurring growth, and financial reward. Operating in this order of motivation is the hallmark of genuine customer focus that banks should be striving towards.
The digital-only banks are mastering this. For example, Monzo is frequently praised through top customer scores and satisfaction surveys and can now boast 4 million UK customers, and for the first time ever, have the highest number of current account switches in the UK.
Do we prioritise the change agenda consistently?
If banks can truly adopt and internalise a genuine customer focus, clear prioritisation becomes easier. This is particularly true now with regulators lowering the first hurdle and showing more flexibility during this crisis. For example; the FCA has extended half-yearly reporting and annual reporting by one and two months, respectively, and the Bank of England has cancelled 2020 annual stress tests for eight major UK banks and building societies. Once you excuse this first regulatory barrier, a simplified framework could ask the following for any change initiative;
- Does it improve the customer experience?
- Does it make employee’s activity easier?
- Does it reduce costs or increase revenue?
Digital transformation and banking change in general, are of course, far more complicated. Initiatives need to be evaluated objectively, appropriately factoring in investment and risk; however, the ability to reduce complexity through a simplified evaluation methodology is invaluable. Doing this in a manner that is easily digested by the organisation will also ensure alignment across functions.
Are we organised for efficient time to market and do we have the technology to realise it?
So, your bank has a plethora of genuinely customer focussed and prioritised projects. These projects will often take a year or longer to deliver. This typical reality for change projects often results in missing the opportunity and therefore reducing the envisioned benefits and even costing the bank.
Rapid deployment is vital to avoid this scenario. Where banks have adopted SAFe (Scaled Agile Framework) methodology, the structuring of development is carried out through development value streams. These value streams represent cross-functional steps that an organisation uses to deliver value to customers. It is a method of structuring people and teams by outcome rather than by independent functions.
The key benefit of organising banks in this way is to accelerate the time to market. It achieves this efficiency by reducing the number of handoffs and subsequent delays. It enables long-standing, steady teams to be established that are organised for the same value-adding outcome. This approach can replace normal start-stop projects allowing much leaner and autonomous delivery cycles.
However, no matter how banks structure themselves for rapid delivery, the underlying technology will ultimately determine the speed to live. Technology is a great enabler when utilised effectively and whilst banks are moving in the right direction, this uptick in technology projects will undoubtedly unearth further technical debt that needs resolving to enable digital transformation objectives to be realised at pace.
“The only constant in life is change…”
Much like the regulatory steam train running since 2008, digital transformation is just the latest paradigm that banks are contending with to operate in today’s competitive market. New waves of change may come and go, but ultimately it is a bank’s ability to embrace and deliver change that sets it apart from the competition.
A genuine customer focus, clear prioritisation, and rapid delivery are not new concepts, but they each require organisational shifts in structure and culture. There is a heavy dependency on strong leaders who can make decisions that are then realised by an empowered workforce who support the agenda.
So, will COVID-19 be the wakeup call for incumbents? Riding out the pandemic may have an end goal, but digital transformation will be on-going and banks that are designed to embrace and deliver change will win over those who do not.
At BCS, we can make change happen. Whether through our delivery accelerators, our technology expertise, or operating model frameworks, we can be the partner to drive forward your digital transformation agenda and realise your digital objectives.
If you need support or want to discuss your digital transformation journey, please get in touch.
 HSBC mobile account application https://www.finextra.com/pressarticle/82045/hsbc-launches-mobile-onboarding-in-china
 Santander cross border payments app https://www.finextra.com/newsarticle/35637/santander-takes-on-transferwise-with-uk-launch-of-pagofx
 Bank customer scores https://www.which.co.uk/money/banking/bank-accounts/best-and-worst-banks-a3q5d8c6dj7y
 Current account switching statistics https://www.wearepay.uk/wp-content/uploads/Q1-2020-CASS-Dashboard-issue-26.pdf
 FCA reporting extensions https://www.fca.org.uk/firms/extending-deadlines-publishing-fund-reports-and-accounts
 Bank of England Stress testing cancellation and IRB extensions https://www.bankofengland.co.uk/news/2020/march/boe-announces-supervisory-and-prudential-policy-measures-to-address-the-challenges-of-covid-19