Getting better results from the back office

Many banks and credit unions present a technologically savvy face to the customer, but behind the walls, they are inefficient and still “pushing around paper,” which inhibits their ability to deliver on customer-service promises.

Banker-turned-consultant Kunal Chopra says an advanced front-end system paired with a rickety back-office operation amounts to little more than window dressing because it only creates a disjointed digital customer experience.

Chopra began his banking career as a teller for TD Bank in Toronto before going to hold managerial positions in operations, process management and engagement for three of Canada’s largest banks: Royal Bank of Canada (RBC), Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CIBC). He later became a senior consultant on strategy and operations for Deloitte and, in 2018, he founded his own consulting firm, Chopra & Co., which focuses on strategic, operational and technological innovation for financial services organizations.

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He spoke to BAI from his office in Toronto.

Q: Have the customer-facing elements of digital banking advanced more rapidly than the behind-the-scenes operational side amid the pandemic? If so, why?

A: The COVID-19 pandemic has not made the disconnect between the front line and back-office operations any worse, but it has underscored how underinvested certain units within operations are. It has revealed shortcomings in operational readiness and effectiveness. This has been a trend for over a decade now, if not longer. Front-end systems have long been the focus for banks as they are seen as a platform to enable clients to transact at their convenience. They are also seen as a potential driver of reduced branch traffic, therefore potentially reducing cost. The pandemic increased focus on operational flexibility, readiness and continuity. Organizations are now acutely aware that not being ready for the unexpected is no longer an option. They must be able to deliver sales and service via digital means.

Q: What is the inherent challenge in closing the gap between the operational side and the customer-facing side?

A: The biggest challenge is culture and strategy. Culturally, banks view operations as a cost center, not as a driver of positive client experiences and growth. Banks relentlessly invest in front-end drivers of growth while squeezing every ounce of productivity out of operations. Strategically, banks fail to think and execute from end-to-end. Investments are made in siloes without understanding impact upon the end-to end value chain. This hurts service delivery and limits ROI.

Q: How do you overcome the challenge?

A: It requires measuring key service drivers, understanding which internal capabilities most affect these drivers and then improving them. Banks must take a balanced approach to improving operations through technology, automation, process, human capital and business-rule improvements while thinking end-to-end. Unfortunately, there is a tremendous amount of back-and-forth between sales and operations because operations often gets incomplete information that does not meet business or risk rules. This back-and-forth chews up capacity. In organizations I have supported, we have proven that when sales provides better-quality applications, it results in improved operations service, which in turn increases sales. The need for collaboration is critical to deliver a great overall experience.

Q: Can artificial intelligence play a role in helping the operational side close the gap between it and the customer-facing side?

A: AI can play a role, but there are other foundational and incremental capabilities that should be addressed before jumping to AI, which requires massive data and systems transformation to enable true artificial intelligence.

Q: Again, thinking about digital transformation from the operational side, how can banks optimize business processes, such as mortgage origination or customer onboarding?

A: Banks should consider investments such as:

  • Better intake systems that can flag incomplete applications without requiring human review
  • Document imaging and parsing systems to eliminate human sorting of paper
  • Automated workflows
  • Bots to automate repetitive, low-value activities and processes, and
  • Investing in operations talent with modern data and technical skills will be critical.

Q: You’ve been a banker and now a consultant. Can you share a key insight gained from having both experiences?

A: Use your data to measure key operational drivers of effort and experience. Data should be your voice of truth. It should clearly point you to where your investments are required. Data can align stakeholders across the end-to-end value chain to enhance service, efficiency and even sales as operations gets faster and more efficient. That says, I have worked with operations leaders in banks who are challenged to effectively measure outcomes because of too much data and a limited understanding of what drives results.

Edmund Lawler is a contributing writer for BAI Banking Strategies.

Get additional insights about back-office upgrades that benefit banks and credit unions in “The transformation continues: Digitizing the back office,” a BAI Executive Report.