Traditional high street banks that were already under pressure from challenger digital banks are now under more pressure as an impact of the global COVID-19 pandemic. In Europe, especially, where there has been an extended lockdown by the Government, banks have been left with no choice but to rely on digital methods to service new and existing customers.
One simple example where some banks have taken the hardest hit is increased cost for their customer service. The primary reason for this increased cost is some banks are forwarding calls from their customer service numbers to mobile phones that they provided in an emergency to their customer service staff. Had the banks migrated to a cloud-based contact center solution, it would have been a lot easier for the banks to deal with the situation.
To take the customer service example further, banks need to think of integrating AI/ML lead chatbots that can deal with the majority of the customer queries and only requiring a fraction of them needing human interaction. The overall impact is reduced unit cost for customer service.
The other end of the spectrum which is much more complex for the CIOs to solve is the mix of legacy systems.
Banks with legacy Systems need a major transformation but involves alignment with stakeholders (business) to review their existing transaction and business processes. These processes need a major overhaul prior to implementing advanced digital capabilities.
Let’s take an example of mortgages which is a highly profitable and sustainable business for banks. Though banks have digital banking, for most banks, one has to apply for a mortgage from outside their digital banking platform. The reason, the mortgage technology is a legacy platform on mainframes. This means that even if the banks have all the personal information about an existing current account holder, he/ she has to start by filling in basic information such as name, date of birth, address, etc to go through a mortgage application process.
It is, therefore, no surprise that the fall-off rate for banks is between 80% to 90% meaning that only 10% to 20% of applicants who go online on the bank’s platform to apply for a mortgage, actually complete the process.
As an effect of all this, even in the current digital age, over 60% of the mortgage applications for banks are via intermediaries.
This is a huge opportunity for banks to engage directly with customers and generate new revenue channels such as life insurance and home insurance products that you may be offering and very likely that the customer needs these product purchases along with the mortgage.
The CIOs in the financial services industry also have another hurdle or challenge that they have been grappling with for a number of years. Business stakeholders often make decisions on which software product or services to buy leaving the CIOs and their team to then figure out the complexities of making the product work in the bank’s technology ecosystem.
Having proprietary technology that only the OEM can support or maintain is a big challenge for the CIOs and have the CIOs need to be part of strategic discussions, where they can influence or challenge other executives’ thinking on how the business can best use technology.
The main difference between the challenger banks / FinTech and the high street banks is that the challenger banks do not carry the burden and complexities of legacy platforms that high street banks do.
The challenger banks and the FinTechs run on flexible, scalable, relatively simple software foundations that enable the CIO team to bring out products quickly and efficiently—a practice that delivers immense value to the business.
To support this flexible/agile way of working, it is equally important for the CIOs to ensure that they are no tied into long-term contracts with their technology providers.
Technology providers often incentivise financial services organisations to sign longer deals – 5 years or sometimes 10 years license agreement.
On the face of it, this may seem an attractive proposition for the bank, however, what it does is taking away the flexibility to change or increase the cost of change which can act as a deterrent to your ambitions or strategic objectives of enabling or enhancing existing digital services.
A few years ago, the Information Security role sat within the CIO’s remit, but many organisations now have a Chief Information Security Officer (CISO).
Organisations have also learned the importance of Data and Chief Data Officer (CDO) roles have also evolved.
The implications of all these in the current environment is that the CIOs not only need to work and collaborate with business stakeholders but also with other technology stakeholders such as Chief Information Security Officer, Chief Digital Officer, Chief Data Officer and Chief Technology Officer to name a few.
Several reports indicate that the role of the CIO will not exist over the coming years. I would differ on this.
The IT operating model needs to change from its historical structures so that it can deliver a seamless operating environment (normally referred to as customer/user experience (CX / UX) in the current world) that delivers new value.
The CIO role will not go away but instead, transform where the new age digital CIOs will need a much higher level of competencies and skills that was required a few years ago.
The prior focus was on running the IT operations or keeping the lights on (infrastructure, ensuring applications are maintained and in compliance, etc.).
Although those functions remain, the new age digital CIOs will focus on building and operating the new digital and data platforms and new digital operating models that are reshaping the competitive landscape in the financial services industry globally.