A report Accenture released Tuesday puts numbers around something widely acknowledged across the industry: Legacy systems get in the way of banks offering a better customer experience. And middle and back offices have to be part of any effort to put customers first.
Three-quarters (74%) of bank operations leaders surveyed said improving the customer experience is their top strategic priority. Fraud and risk management was next, cited by 70%.
Survey respondents also said their core systems are holding them back from making needed improvements: Almost 40% said that the limitations of their legacy systems are among the top three impediments to digital transformation.
Five years ago, this same group of people would have said compliance and cost management were their top priorities, said Alan McIntyre, senior managing director for banking at Accenture. Traditionally, operations people haven’t had to worry about the customer experience.
“Now customer experience is No. 1 and fraud and risk management right after that,” McIntyre said. “That comes from a growth mentality. We’re seeing that as a lot of our clients pivot towards direct digital models, they’re far more worried about identity fraud and things like that than someone who walks into a branch and presents their driver's license.”
Back- and middle-office operations are becoming, by necessity, part of providing quick responses and transparency to customers. For instance, some banks want to give consumers the ability to see the status of their mortgage application the way they can track a FedEx package.
“Traditionally banks have not had to provide that type of information,” McIntyre said. “Back-office functions that have been hidden in the past will have to be upfront and visible to the customer in order to create that experience.”
But though these operations executives consider their old technology to be an impediment, McIntyre doesn’t expect to see many core replacements in the coming year. Bankers are hesitant to replace their core technology because they’re uncertain where the technology is going, he said.
“Many clients look at blockchain and distributed ledger on a five- to seven-year horizon,” he said. “There’s a question about whether these underlying technologies will ultimately move to that type of system.”
In the meantime, some are creating middle-tier data layers that pull updates from legacy systems and provide them to a customer facing chatbot, call center or mobile app.
Most, 70%, of the surveyed bankers said they think their operations hold trapped value that is not currently being accessed. This refers to things like analyzing a small-business customer’s cash flow and how long it takes to pay its vendors, information that could be used to make decisions about the customer. Or making suspicious activity reports from anti-money-laundering efforts available earlier in the process to make better decisions about what products to offer at what price.
An example would be using AI analysis of the customer to realize other businesses that look like this one didn’t use much of their credit line, so the bank might want to offer a smaller credit line, saving the customer money and the bank capital tie-ups.
“That’s coming off the interrogation of operational data about what those lines have done in the past, which traditionally was just a reporting piece of the business, but now we’re finding it’s pushed back to relationship managers to change the customer conversation,” McIntyre said.
The bankers also said these technology improvements will require fewer staff: Slightly more than 60% of banks expect to cut 10% to 30% of middle- and back-office positions in the next three years.
Some of those jobs will be lost to robotics process automation. While only 16% of the bank executives are using this technology, 63% say they plan to use it over the next year or are experimenting with it.
At the same time, slightly more than 20% of bank operations leaders are tapping into freelancers or on-demand workers, while 40% plan to incorporate them within the next year.