Banks steer through a maze of customer interactions: Business Process Management takes the wheel

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	Amazing complexity
	Helping hands
	The road ahead

Amazing complexity

Customers experience a bank through multiple channels and interaction points

Given that self-service channels typically cost between one and two orders of magnitude less than attended branch services, banks have been employing electronic service delivery technologies aggressively for the past 20 years. Thus, automated teller machines (ATMs), for example, have long become a ubiquitous feature not confined to bank locations. Besides the efficiency motives that drive banks to push these new technologies, they are responding to a younger generation of customers, which has embraced electronic channels wholeheartedly. As retail delivery technologies have become widely available, customers have grown used to accessing their bank services virtually everywhere, 24 hours a day, any day of the week (although most consumers are still transacting with bank employees at a branch at least once a month). While electronic networks power hundreds of thousands of ATMs, an even larger multitude of point-of-sale terminals and other electronic devices have cropped up at retail merchants' outlets. Traditional telephone access has given way to sophisticated call centers and interactive voice response. Thanks to the Internet and wireless technologies, online banking has been growing steadily since its inception. Contactless devices now link customer accounts for highway tolls, transit, and other proximity payment purposes. Push channels such as snail mail, e-mails, and faxes continue to be important conduits of banking delivery.

Best practices in other industries are raising customer expectations

Despite their technological prowess, banks have trailed behind other consumer services and product industries in terms of customer satisfaction. The average satisfaction with banking services hovers around the 75-percent level, meaning there is a gap of 15 percent less than the average for leading companies in other industries. Customers now expect dependable, responsive, and high-quality services that are available anytime, anyplace. Oblivious to internal fragmentations along functional, product, and geographic lines, customers have a habit of aggregating all their interactions with a financial institution across all channels, products, and services. Therefore, banks must overcome internal barriers and articulate an integrated flow of business processes and technologies that is consistent with the customers’ unified perspective of the bank. Figure 1 depicts such a holistic perspective of workflow and systems functionality that mirrors the customers' view of a bank and pervades organizational and technology silos. To streamline and automate business processes in a cross-functional manner, banks must identify and establish relevant performance indicators that reflect the overall value of their products and services to the enterprise and most importantly, to the customer.

Figure 1

At most banks, each functional area ticks by a narrow set of parochial metrics (for example, sales is driven by revenues, and financial control is occupied with cost containment). Consequently, adopting more holistic performance indicators entails major cultural shifts across the organization.

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Helping hands

Silo business processes and systems add further complexity and inefficiency

Operational errors, lapses in internal controls, manual handoffs, continual workarounds, and reprocessing efforts amount to billions of dollars in wasted performance for the banking industry. These hefty operational expenses add to an already high cost of maintaining fragmented legacy IT systems. Across the industry, the structural cost to produce a dollar of revenue is too high: To earn $1.00, leading banks have to spend about 55 cents. From a technology perspective, the challenge is to carve out holistic system functions that enable streamlined business processes and straight-through transactions. Fortunately, banks are introducing a powerful breed of service-oriented architectures that are based on Web services standards and enterprise applications. However, the structural flexibility and integration capabilities underlying these technologies can be only as effective as the business processes they support. Two interesting precedents illustrating the limitations that haunt a software-driven approach are customer relationship management (CRM) applications and data management middleware. Although many banks have implemented integrated IT solutions, these were seldom aligned with valuable business purposes.

Banks tap BPM to drive the customer perspective

In a recent poll of financial services institutions, TowerGroup found that business process management (BPM) platforms are recognized to have the most potential to optimize business process flows and simplify the supporting IT systems. When employed in conjunction with customer-focused, cross-functional improvement methods (for example, Lean Six Sigma), BPM provides a consistent enterprise view, facilitates change to existing processes, brings best practice workflows that can be deployed throughout the enterprise, and increases operational efficiency. BPM tools allow their users to specify business logic at a higher level of abstraction that encapsulates common taxonomies and semantics and serves as a highly flexible and reusable foundation. Over the years, BPM has evolved from its role of optimizing vertical and often narrow processes onto a broader dimension of enterprise enablement. Thus, it is high time that banks embraced BPM to adopt, adapt, and roll out best practices embedded in adept vertical processes to the benefit of other company locations and functional groups. Figure 2 illustrates how the horizontal perspective of BPM features optimizes banking processes across the enterprise and maximizes customer value.

Figure 2

The benefits of business process management are exemplified in the use of BPM in call centers. To serve a wide range of products and markets in their call center interactions, banks have adopted typical BPM functions such as workflow, activity monitoring, and automated exception management. They have focused mostly on managing incoming calls effectively and optimizing the productivity of call center representatives. Still, there is much potential to extend these BPM tools. By presenting an external view that masks the complexities of the underlying IT and procedural architecture, BPM tools help in the paced integration and transformation of discrete business operations and technology components. Similarly, as banks struggle with a swarm of regulatory mandates, they blend BPM into an integrated enterprise framework to strengthen business processes, consolidate processes around best practices, and automate their operational controls.

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The road ahead

Streamlined processes are critical to satisfy complex customer needs

Even for common day-to-day functions such as account opening, loan origination, and customer service, business processes take different shapes and forms. BPM enables the reengineering and continual improvement to remove wasteful process steps, reduce cycle times, and maximize the value to both the customers and the bank. For example, relationship management is a pivotal interaction where spending "face time" with customers and prospects is critical to customer satisfaction and revenue growth. By employing BPM to offload routine activities from relationship managers and route exceptional situations appropriately, banks are maximizing the productivity of a precious resource. Besides freeing up time, the streamlined workflows provide a straightforward focus on demanding and complex customer needs. Another typical example is the credit approval process, as this often involves analyzing several customer facilities, obtaining information from third parties, and transiting through multiple control and sign-off steps. BPM facilitates redesigning the credit administration process to remove duplicative steps and automate these manifold approval steps for optimal responsiveness. Additionally, BPM flows are visible and clear to all. Such visibility promotes business ownership and alignment of technology resources to fulfill customer needs as a matter of priority. Automated workflows are also extensible to business partners. As banks get increasingly interconnected through a federated network of financial services institutions and providers from other industries, optimized utility flows begin to transcend the enterprise boundaries.

The ultimate frontier: Adaptive, dynamic, and personalized business processes

Banks should mind their customer needs consistently across all interaction channels and process variations. BPM will play a pivotal role in streamlining business processes and maximizing the value of core competencies at individual banks. Competition within and outside the industry is already prompting banks to invest wisely in enterprise process and IT improvements and stagger them along with a comprehensive transformation road map. Banks may build on their success with automated best practices to leverage their experience in other business functions, processes, and locations. As banking services open up to multiple interaction points and business partners, the customer experience will no longer be confined to traditional channels. Striving to catch the attention of customers and prospects, service providers will become more responsive to individual situations and needs. Business processes and IT systems will have to adapt swiftly to such multiple and ever changing demands. Changes that occur in quasi real-time would leave little room for hesitation, inline analysis, or manual interaction. Features such as dynamic product-configuration parameters, automated filters, controls and exception management thresholds, and proactive transaction alerts will be built in to the new process design to enable a personalized yet efficient customer experience. As a holistic set of banking resources aligns with such dynamic customer needs, BPM will take the wheel.

Guillermo Kopp is vice president of financial services strategies at TowerGroup, a leading advisory research and consulting firm focusing on the global financial services industry. He can be reached at gkopp@towergroup.comTowerGroup.

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