In my first blog on the future of banking operations in a post COVID-19 world, I examined why banks must reduce their operational costs dramatically just to stand still. In this follow-up post, I zero in on how to achieve the scale of cost reduction required – while also building the intelligent, growth-enhancing operations function of the future.

First, some history. For years, operations has been regarded an essentially back-office activity that contributed a lot of cost but little value. As a result, it was asked to reduce costs year-on-year. But it’s now clear that this across-the-board cost cutting has not been getting to the heart of the problem and that underinvestment has had long-term ramifications for retail banks globally, as our recent study Fast-track to future-ready performance reflects.

Meeting four aspirations…

So, what to do? While efficiency remains key for UK banks, it’s now time to bring operations out of the back-office – and give it a new role as a proactive driver of customer experiences and revenue growth. To play this new role, I believe operations needs to fulfil four key aspirations.

First, drive efficiency and cost savings. Following COVID-19, banks may need to reduce their costs by as much as 40% just to maintain current margins. This can be achieved through lowering cost-to-serve, enabling straight-through-processing and using digital to unlock investment capacity.

Second, remain compliant. This is ensured through good conduct and remaining steadfast in the face of new regulatory interventions.

Third, elevate the customer experience. This means harnessing customer and transactional data in operations, and applying technologies like predictive analytics and AI to create a seamless servicing experience.

Last but not least, start to fuel growth and generate revenue. It can do this through delivering improved customer retention and conversion, while also providing data-driven intelligence to inform front-line decision-making.

…through four characteristics

 To deliver these aspirations, the operations function of the future will need four overarching characteristics. It will be:

  1. A lean organisation with a variable cost structure and agile delivery model, driving value for the business through an automated and intelligent transaction layer.
  1. Supported by a skilled, future-ready workforce that’s increasingly liquid and multi-skilled, and focuses on delivering insights to enable a digital-first customer experience.
  1. Powered by intelligent, digital technologies that enable operations to be data-driven and highly automated, and to leverage AI and cloud to create largely ‘touchless’ processes.
  1. Harnessing an extended ecosystem of partners, bringing complementary skill sets and technology to add value and power innovation across the business.

Making it happen

This may all seem a long way from your current operations function, but it probably isn’t as far as you think. We’re already working with banks worldwide to apply a wide array of non-traditional transformation levers that can reduce costs sustainably while digitising and building for the future.

Levers like driving STP through end-to-end ‘digitisation by design’. Proactively reducing front-office demands on operations. Transforming processes end-to-end to bring customers event-driven responses. And implementing natural-language virtual agents that can automate the servicing of 80% of calls for personalised advice.

Smart use of levers like these is already delivering results. For examples, we’ve helped a European bank identify savings of 25% on its commercial operations through process and data simplification, digital automation and workflow. And away from cost reduction, we’ve applied deep learning and sentiment analysis to another client’s inbound customer communications, helping it identify and remediate churn and drive revenue retention.

Funding the way forward

“This all sounds great,” you might say. “But how will we budget for it?” The good news is that building the operations function of the future can effectively fund itself.

How? The answer lies in a carefully targeted three-year roadmap. Year one involves reducing costs using the new levers while starting to build optimised, intelligent operations through reinvesting savings and capacity in value-adding capabilities. Year two, expanding and sustaining the savings while scaling the new capabilities. Year three, delivering on the future aspirations while focusing on continued operational excellence and agility.

We know from experience with clients that this approach works. And we have the proven capabilities to help your bank navigate the same journey – including our unmatched extended ecosystem of intelligent automation partners.

Time to act

A final word. If you’re thinking about building the operations function of the future, don’t think for too long. COVID-19 has combined with myriad operational pain points to put many banks on a burning platform of rising costs and falling margins. The time to act? Now. Before it’s too late.