Why We Were All Wrong About Financial Services
Does this mean that technology adoption is turning the tide from its original "let's cut costs" emphasis to something more positive for the top line? "The trend toward value creation in financial services is five years old...post Y2K. But people talk about things like this for a couple years before they start gaining momentum," laughs Sharma.
"Tools like the Internet were supposed to supplant all the other channels. But what actually happened is that they became an ADDITIONAL channel," points out Harris. "Here's the operational problem: you have millions of customers, some starting out as small investors, some wealthy and active investors, some retired and sort of in the middle, some inactive, but potentially valuable. And they come at you from all sides—paper, the voice channel, branches, the Internet... Now you're supporting several channels, and the most important thing...the customer touch...becomes even MORE important. Interestingly, the most valuable customers are coming through the Internet, which is the least expensive channel, while those small, low-value customers are calling through the call center, which is very expensive."
Severini also acknowledges the importance of customer knowledge. "In the offices of the business guys at investment management companies, they will have three 19" monitors on their desks. Two of them are connected to their portfolio management systems, but the other one, which they spend the most time on for their high net-worth clients, collects all the information on the individual—and their spouses and family—such as their current strategy in the market, their wealth, their latest business plan. When they're talking to you on the phone, they want to know your interests, your hobbies, your favorite restaurants, how old your kids are, where they go to school...that screen real estate becomes very important as a business tool while they're having those conversations."
Acquiring that customer information has become part of the value proposition for content management, and other tools that originally started out as simple workflow systems. "There's a lot of change that occurs over time with these systems," says Harris. "Sometimes it's by design, but sometimes it's incremental. For example, you might put in a content management infrastructure to support loan origination. You then find yourself building a virtual file of key documents pertaining to the individual as they're acquired. At some point, the customer may want to inquire about where they are in the process. It's that kind of demand from the customer that brings these things out of the process and extends the visibility into your internal system. That's the evolution that changes a productivity tool into a customer-facing tool."
"The issues that banks are facing transcend the current cadre of technology products," says Alan Horton-Bentley, director of industry marketing, financial services, at FileNet.
"The technology is always changing. It's a constantly moving platform. But the banking industry's challenges today are not dramatically different than what it has done, fundamentally, for the last 50 or 60 years.
"What I ask a banker is this: If you were to take a sheet of white paper and write down what you'd like your automation to look like in, say, five years from now, would you have silos of information in your checking system? And in your derivatives department? Then something different in savings and in credit cards? And multiple systems across your many lines of business? Would you design it that way, with customer information stored in many different systems, and then figure some way to get them to talk to each other? Would that be the grand design? Of course not; that would be ludicrous. It's a comedy, when you think of it," says Horton-Bentley.
"If you do an audit of the internal workflow of any financial services company," says Sharma, "you will find inefficiencies and redundancies. There's a lot of expenditure of time and resources in trying to make a process go from step one to step two. And these expenditures come at the expense of resources being spent on outbound service and customer contact. It's a zero-sum game; if you spend 10% of your time shuffling paper, that's 10% less that you have to satisfy the customer. That's a strategic calculation."
"If you have data replicated in five different repositories, you've already got a 5X problem," says Horton-Bentley. "That's the danger if you allow each line of business to decide how it will handle security, access, compliance and retention. And that's the way it is today; the guy in mortgages doesn't give a hoot how the person in derivatives manages customer data.
"Isn't it time to put a stake in the ground," asks Horton-Bentley, "and say ‘In X number of years, here is how I want it to look? Sure, but I don't know a single institution that's done that. I know plenty of institutions putting fires out. I know many that are putting out regulatory fires. I know banks are building branches because they shut them down a few years ago, and now realize they've lost contact with their clients. All these things are causing banking institutions to look at new technologies, but no one seems to have a vision of how they want it to be in two or three years," he says.
"There needs to be more awareness that as you introduce technology that it should also be leading you somewhere. It should be moving you in a general direction...and that is missing," argues Horton-Bentley "The banking infrastructure, and the de facto architecture that supports it, was an evolution, not a plan. You've got to be high enough in the organization to look across the fiefdoms and go back to that blank sheet of paper to create a plan that makes sense."
Sharma concurs: "Executives don't get rewarded for putting out fires. They get rewarded for making strategic change and improving the bottom line. Tactical moves are OK for quarter-to-quarter, but you can't grow a business long term that way."
As we've often learned in these White Papers, tactical technology purchases can lead to inefficient, underused boat anchors. "A lot of asset management companies, whether they're investment firms or private banking organizations, have invested hundreds of millions of dollars in CRM systems, only to find them obsolete," says Severini. "It's because they're not considered part of the business process"...instead they are considered merely call center systems that only serve the organization at the final touchpoint, not as part of a holistic approach. "They often fail to consider how critical these (CRM) systems are to how they relate to their clients, and how the maintenance of information about their clients helps them continually provide high levels of customer satisfaction."
"It makes so much sense, it's almost embarrassing when you explain it concisely," says Horton-Bentley. "The customers say to themselves: ‘Wow...why aren't we doing that already?'"
Much of what you'll read here may seem self-evident to you, too. But as our panel here will tell you, it's very easy to fall into bad habits. But even the worst habits can be cured with best practices. Read on.