North American banks are under pressure due to declining net income but bullish in their outlook. They face rising client expectations and regulatory requirements, as well as aggressive new fintech competitors. To combat these challenges, banks need to move towards future-ready operations, grounded in the latest technology with people who know how to use it. That’s a lofty goal but one worth aiming for. Banks that are fully committed to digital innovation realize market valuations that on average are 18% higher than less digitized peers in 2019, and 27% higher in 2020.
At a recent Accenture Future Ready forum, I sat down with Alan Kronovet, a managing director at Wells Fargo, to chat about how successful banks are striving for operations maturity. Alan leads a commercial mortgage servicing team of 1,000 employees, supporting a portfolio of about $600 billion of assets under management. He believes that to get to future-ready operations, you need to start with a roadmap, enable AI and unite business and technology.
Start with a roadmap
Most banks have committed to steadily improving the efficiency of their operations, but too often, they’re moving slowly and simply reacting to forces such as regulatory and compliance priorities. Today, that’s no longer enough. Plugging holes won’t enhance competitiveness. Banks must become agile and resilient in order to deal with the challenges of tomorrow: another pandemic, a financial crisis or cyber-attacks.
As Alan said, you need a transformation roadmap that can adapt as new technologies and regulations come along and the business environment changes.
Embrace the transformative power of AI
It’s not just automation that will drive transformation. It’s predictive artificial intelligence (AI). We’ve all been guilty of using our gut versus data to drive organizational decisions instead of relying on data. That’s starting to change. In our future-ready banking research, we found that 71% of banks say they’re now designing their operating model based on data, rather than on executive experience or intuition.
Alan pointed out that AI can augment your intuition. The big challenge though is making sure you have good data. Then you can bring it into the AI environment and make it predictive. One example is in credit underwriting. AI can look at say 10 qualities of loans, predict which ones are going to pay off early, and make sure your relationship managers can get in front of those clients before they move to another bank. Employees thrive in this flow of high-quality data.
Machines are nothing without people
Achieving intelligent operations is about finding the right mix of innovative talent and technology. The banking industry has made great strides in automating manually intensive and repetitive tasks, but it needs to go a step further to use automation to really augment human talent at scale.
Alan observed that banks are building their human capital by breaking down silos and trying to get a well-rounded view into view into what employees are doing—where are they making decisions, and where they are delegating authority. Ideally, knowledge workers should focus on judgment-based work.
Business + tech, happy together
In our Future-Ready study, we found that in order to be more innovative and make better use of both talent and tech, banks need to improve the collaboration between business and technology. This is starting to happen. For instance, in many leading banks the Chief Technology Officer and Head of Operations now report into a single executive who can take a holistic view of how technology can enable an effective operations transformation.
Alan shared that he has found that in practice this partnership of business working shoulder to shoulder with the technology team is critical to success. The importance of collaboration holds true when it comes to ecosystem partners too. If you get your technology partners to understand the business needs, and help the business understand what the opportunities are in technology, that will drive success at a faster pace than if they’re not on the same page.
So, arm yourself with a roadmap. There will be twists and turns. For banking operations success, it’s imperative to embrace AI and find the right mix of talent and technology. Enjoy the road trip.
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