Digital Transformation
Generational turnover and an overall labor crunch are fast transforming the workforces of banks, credit unions, and other financial institutions.
PwC estimates that contingent or contract workers (temps, consultants, and contractors) now make up between 10 to 30 percent of the total financial services workforce. And that number continues to rise at a blistering pace. Executive search firm Smith & Wilkinson predicts that a “structural worker deficit” may last another decade.
The reasons for the shift from hiring employees to contracting guns for hire include:
- Challenges related to recruiting and retaining young talent
- Shift from branch banking to digital banking
- Quick and scalable access to specific skillsets needed to perform clearly defined yet transient projects
- Employee burnout and complacency
- Desire to reduce permanent headcount and related expenses (benefits, facilities, etc.)
Contract workers are appealing no doubt. But there is a downside that financial institutions, including banks and credit unions, should consider before they wade too deeply into the contract employee waters. Here’s why shared services in banking are so important.
Keeping the Customer Primary
Banking, regardless of how it evolves as new players and business models emerge, is a trust business. Customers trust their bank will let them transact when, where, and how they want to transact. This is especially true of customers with whom financial institutions want to establish a primary relationship.
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Customers trust financial services offerings will be tailored to their specific needs. A high degree of personalization is table stakes. And of course, they trust their money and their information will be safe and secure.
Sure, younger customers are significantly more comfortable with the anonymity of digital banking than the generation before them. (Ironically, digital banks probably know more about these younger customers than the bankers of yesteryear ever knew about their parents.)
However, younger customers are more technically sophisticated, a bit more fickle, and generally less loyal to brands. Plus, they will ghost a bank at the drop of a hat should the bank disappoint. And rightfully so. The solution to a bad relationship is often just a click away.
Institutionalizing Shared Services
Less direct contact with a younger, less loyal demographic that has different expectations and behaviors than traditional customers may spell trouble for institutions that embrace contingent workers but fail to institutionalize their services.
What do we mean by “institutionalize its services”?
Financial institutions that embrace large contingent workforces can indeed enjoy the benefits articulated above. But the downside of this shift can be inconsistent practices and performance that negatively impact customer service and compliance adherence.
Simply put, the more people rotating in and out of the organization, the greater the opportunity for discontinuity and instability.
To prevent this, FIs must doggedly pursue a digital transformation strategy that:
- Implements solutions that either serve as, or build on top of, a shared services infrastructure that all systems, people, and partners can leverage ensuring consistency and reliability.
- Embeds the organization’s best practices and brand support activities into the very DNA of this shared services infrastructure.
- Compartmentalize and, as much as possible, “black box” work done by contract workers. In other words, don’t give the keys to the kingdom to people outside the organization.
Smart organizations are adopting a “digitally enabled, human delivered” approach to financial services. But delivery can be a challenge if the human-based channel is fluid. Which is to say there is going to be more friction if you have workers coming in and out of the organization on a regular basis.
3 Keys to Making Shared Services in Banking Successful
The only way for financial institutions to deliver a consistent and compliant experience is to build what makes the institution special into the infrastructure that everyone uses.
This requires organizations to:
- Devise a holistic plan built to scale. This can be accomplished by implementing cloud-based infrastructure that scales with the organization as it grows, and industry standards evolve.
- Only implement point solutions that build upon the shared services infrastructure. Islands of functionality are invitations for inconsistency and insecurity.
- Automate, automate, automate. The more an organization automates, the less it relies on tribal knowledge and acts of heroism to get work done. Embed knowledge into the infrastructure, not solely in the heads of workers who may walk out the door tomorrow. As a bonus, automation forces the organization to agree on how a process should work and institutionalizes it, so that processes are performed consistently.
5 Potential Areas for Quick Wins
While we recommend financial institutions start small and accumulate quick wins and experience, there are some obvious areas where an organization can start to institutionalize its services. These include:
- Intelligent document processing. Banks transact in documents every bit as much as they do in currency. Intelligent document processing as a shared service ensures that documents are consistently received (regardless of the channel), processed (automatically classified and information extracted), logged and stored. No document should enter the institution’s bloodstream unless the intelligent document processing service is aware of it.
- CRM. Delivering a personalized customer experience with an opportunity to upsell and cross sell starts with a 360-degree view of the customer (who they are, what they do and what else can we provide for them). The only way to maintain this view is with an enterprise-level CRM service. If you’re managing customer lists in spreadsheets, you’re leaving money on the table and probably losing customers you could have kept.
- Know Your Customer (KYC and KYB). Now more than ever, banks and credit unions must prove that the folks doing business with them are legit. The ability to extend Know Your Customer/Business checks to every new customer touch point in every context and every transaction is a critically important part of the shared services infrastructure. Relying on point solutions to provide this functionality creates a compliance headache.
- Security. Most FIs are great at securing their internal systems. As they make greater use of third-party fintech offerings, it is important to ensure a consistent authentication and security model. If a customer authenticates one way to access a savings account, and another way to look at investments, that should send up a red flag from both a customer experience and compliance perspective. Make the customer feel you really know them regardless of the channel or product they are using. And let auditors know all transactions are handled in a consistent and compliant fashion.
- Automation. While an increasing number of point solutions are embedding automation into their offerings, they fall short when required to extend outside the application’s walled garden. Therefore, it is important to standardize on a toolset and methodology that can automate workflows in financial institutions across applications and systems. Since automation is an ongoing effort, a best practice is to establish a center of excellence within the institution responsible for defining methodologies in process mining, tool selection and production management. Even if the institution intends to outsource actual automation development, the blueprint regarding how the institution goes about automating should remain in house.
No doubt, the embrace of contract or contingent workers in the financial services sector has been a boon for an industry increasingly pressured to do more with less. However, it’s not ideal to have large swaths of the workforce beholden to contracts rather than the banks or credit unions they serve.
A shared services in banking mindset that institutionalizes best practices and processes will lead to stronger and longer-lasting primary relationships with customers.
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