Re-imagining the Business and IT synergy of Banking and Financial services firms – Part II
The changes in customer, regulatory and Fintech landscape are pushing
Banking and Financial services firms to re-think their business and IT strategy. A multi-modal IT organization can help achieve this transformation by doing the right things at right pace.
Multimodal IT – Doing the right things at right pace
Part 1 of this article covered the System Classifications within the Multi-modal IT framework. This part (Part II) will focus on the enablers required to synchronize projects running at multiple speeds.
Multi-modal IT Framework
Enablers to synchronize Multimodal IT
There are six broad aspects (or enablers) that BFS firms need to focus at the enterprise level to ensure the other two modes are able to run synchronously – Business Process, Program Management, Technology architecture, Enterprise Data, People and Digital Toolset.
Enterprise Business Process
Business processes are the blueprint of an organization. Managing changes to business processes has become a major challenge due unclear implementation requirements of regulations, strict deadlines and potential penalties for non-compliance . Another challenge is compliance-related processes such as KYC, AML and tax compliance procedures (including FATCA and TRACE) which require detailed due diligence procedures across multiple global jurisdictions. These regulation and compliance procedures have forced firms to re-visit multiple business processes across their front, middle and back offices.
Process efficiency initiatives (such as Lean and Value-stream mapping) and process repositories can help in maintaining process discipline as a culture.
In order to ensure the various multi-speed initiatives are all running in sync, immense amount of upfront and continuous planning is inevitable. Program managers need to have a clear view of the in-flight & upcoming projects, the associated risks and benefits to manage time and cost effectively. With Fintechs and digital technologies in the mix, program managers need to account for experimental failures and carefully tread the optimal path in a program’s journey. Program management practices such as Agile and DevOps have become a commonplace in many BFS firms. These practices help ensure that there is a firm handshake between IT development and IT operations teams. This in turn increases the agility of enterprise enabling continuous delivery, automation and innovation.
Enterprise Data Management
BFS firms deal with large volume of data which grows with time. In order to tap into the intelligence hidden within the data, a robust data management plan is required at the enterprise level using Data marts or Data Lakes. This will ensure seamless integration and transfer of data for both internal and external system communication. It also helps creation of business content that is accurate, consistent and transparent. Big data technologies such as Hadoop, analytics and reporting software packages play a major role in managing and mining data to drive actionable insights.
Changes to Technology Landscape
- Legacy modernization: New challenges have emerged for investment managers which legacy systems are seldom equipped to meet – increase in the number and complexity of products, multiple distribution channels, diversified client needs, etc. Having said this not all firms can take a total transformation approach to modernize legacy systems. Firms have to find an optimal path to ensure gradual replacement of legacy systems.
- Enterprise App Catalog: Enterprise app catalog helps firms in consolidating common business services using micro-services architecture. The applications in the catalog are modular and lightweight, independently deployable and re-usable across the enterprise. The app catalog also provides the app developers, access to an enterprise standard toolset that can be used across platforms. The benefits of an app catalog can be realized when BFS firms aim to be build an integrated omni-channel for their clients. Adoption of enterprise app catalog amongst large-sized BFS players is on the rise.
- Open APIs: Open Application Programming Interfaces (APIs) have been a game-changer in the BFS firm’s IT division. APIs have grown in importance from a design methodology to a business driver featuring in boardroom considerations. In the context of APIs, another key BFS industry trend is around Openbanking architecture. Openbanking is a collaborative model of securely sharing customer-authorized financial data through API’s with other parties. This helps banks to deliver enhanced customer experience through easy transfer of payments, comparing product offerings across banks, etc.
- Digital Security: Digital or cybersecurity is more of a risk management discipline that BFS firms need to consider while going through the various stages of digital adoption and transformation. It refers to aspect of securing digital applications, infrastructure and data from unforeseen vulnerabilities or attacks by cyber criminals.
- Platforms for IT and Operations: Software Platforms is another area which is witnessing adoption across the BFS industry. These platforms (such as SimCorp Dimension, Blackrock Aladdin, FIS PaymentsOne to name a few) help BFS firms in providing solutions for specific business functions thereby helping them scale their business in a short span of time. Business process-as-a-Service (BPaaS) is also being offered as a package along with these platform solutions.
As depicted in the multi-modal framework, Digital technologies act as a fulcrum for BFS firms in achieving differentiation in the Front Office and cost optimization in the Back Office. Digital technologies such as mobile, social, cloud, big data and analytics have already witnessed widespread acceptance and usage across BFS firms. Advanced technologies such as Artificial Intelligence (AI), IoT and Blockchain are highly promising in terms of disrupting the existing landscape. Though, these technologies are in an experimental phase, it may not take too long for them to be adopted mainstream. In their multi-modal journey to re-imagine their firm, BFS firms need to continuously assess their maturity against their peers and competitors.
People – Sourcing and Talent Management
Sourcing of talent by BFS firms has been altered by the changing industry landscape. Regulations and demand for mobile and digital services have had an impact on the new skills that firms have to look out for. With the emergence of Gen X and Gen Y clients, their demand for younger BFS counterparts has also increased. BFS firms need to on-board talent with the right mix of business skills and tech-savviness.
The outsourcing of some business processes by BFS firms has increased the dependency on third-party providers which in-turn has gained attention from regulators. BFS firms also need to have strong vendor management and transition management teams to ensure proper due diligence in selection of vendors and transition to new vendors when required.
Target State of the Transformation journey
The illustration below depicts a re-imagined state of a BFS firm where business strategy drives the business architecture and business processes. The multi-modal IT framework seamlessly synchronizes the business, IT and operational priorities of the firm. These decisions in turn will drive the resourcing and operating models. From the front office standpoint, client experience and relationships will continue to be the focus. This will be achieved through omni-channel integration, self-service capabilities, collaborative platforms, simple and fast client on-boarding, data transparency and real-time data availability. In the case where a firm decides to insource the middle and/or back office functions, efficiency in terms of cost and time will garner attention. This will be achieved through the adoption of the following – Artificial Intelligence, predictive analytics, natural language processing, robotic automation, Shared service operating models, cloud-based infrastructure and operating models (e.g. SaaS, BPaaS, etc.) will gain wide acceptance.
Re-imagined Target state
Driving Multi-modal Transformation in your enterprise
The implementation of the multi-modal framework fueled by digital capabilities starts with the assessment and definition of target operating model and development of foundational capabilities as the first and foremost step by focusing on current state of business processes, enterprise data, talent (people) and platforms followed by a charter of cost optimization and enterprise enablement initiatives ably propelled by digital innovation and technology.
BFS firms which are currently using a traditional/bi-modal business and IT transformation approaches are burdened with challenges such as – lack of collaboration, existence of legacy systems and processes which create a bottleneck to scale their business, slow response to change. We have recommended a five-step high-level implementation approach that will help BFS firms navigate their transformation journey to multi-modal.
a) Define your Transformation Vision
- Map client touch-points in your value chain
- Plan the transformation of people, processes and technology to be Client-centric thereby ensuring consistent client experience across products and service portfolio
b) Align with key stakeholders
- Enable your sponsors with the right data points to commit to multi-modal transformation
c) Institutionalize multi-modal framework
- Enterprise architecture should govern and anchor multi-modal adoption
- Identify key capabilities across the enterprise and benchmark against industry peers
- Define cross-functional capabilities to arrive at common business interests and bucket a better mix of capabilities for business outcomes
- Evangelize Data Stewardship as an enterprise capability
d) Be Digital and Do Digital
- Rationalize processes & systems
- Adopt a micro-services and open APIs based architecture
- Embrace responsive and open-source technologies
- Invest in advanced cloud, CRM, mobile and analytics capabilities
- Prioritize digital security
- Explore Blockchain, AI and Reg-tech
e) Take constant efforts to Future-proof
- Proactive readiness to regulatory changes
- Re-skill and nurture a culture of design thinking, Agile, DevOps and Product orientation
- Modify metrics to align with multi-modal
- Break organizational silos
- Setup a Program Transformation Office (not a traditional PMO)
- Sustain and control the multi-modal setup
High-level Implementation Approach for Multi-modal transformation
Beyond just delivering good returns, BFS firms need a step change; essentially technology led innovation to differentiate themselves in terms of client facing solutions, enterprise applications and making the most out of data. To define paths for success, BFS firms must place conscientious focus, pace and time to tap in to the right synergies and achieve best return on their investments.
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Disclaimer: The views and opinions expressed in this article are those of the authors and does not represent those of Cognizant or their previous employers.