Automation and self service is key to future of financial organisations
06/06

Offshoring is seen by many UK financial service providers as a strategic way of making cost savings and improving their bottom line. In the last few years, many UK retail banks have chosen to employ an English-speaking offshore workforce and move their call centre and basic back office operations abroad to save money. But in truth, offshoring can provide only a short-term solution – the long-term answer lies in automation and self-service.

Research from the National Outsourcing Association (NOA) shows that the trend for offshoring is continuing to grow. The NOA claims that 72 per cent of companies and 82 per cent of suppliers believe that IT departments will look to outsource activities to cut their operational costs in the next few years. According to Deloitte, more than 20 per cent of the financial services industry’s global cost base will have shifted offshore by 2010.

But a step change in wage costs is often the best that organisations can hope for when offshoring any of their activities, and this often comes at the expense of customer service.

Furthermore, many analysts are now predicting that even this benefit will soon be overshadowed. A recent report by Ventoro states that companies which offshored failed to save even ten per cent by moving some of their services abroad. A lowered public perception and reduced morale from staff who remain in the UK also contribute to the failure of one in three offshoring projects.

Some individuals and organisations claim that they will have no choice but to offshore some activities in the future because of a predicted shortfall in workers. While this argument is sound in part, because the UK is experiencing a decline in birth rates, offshoring is not the long-term answer to bridging this gap.

Customer service problems

While offshoring means that the organisations will be saving some money, customer service could be falling by the wayside, which would undoubtedly lead to dissatisfaction and the potential loss of customers. For example, Alliance and Leicester has, on a number of occasions, publicly stated that they intend to keep all customer servicing within the UK.

However, new methods of operating are now available to financial organisations that can help them address both financial and customer service issues.

Automation and self service key to efficiency

The best way of increasing efficiency still lies in automating key business processes so that operator intervention is not required or they shift the processing burden to the customer or intermediary through self service. This enables organisations to reduce their resource requirement and to redeploy people to provide value-added services such as customer retention or cross selling

For the past few years, banks and financial service providers have been automating key processes as they realise that by providing an automated telephone or Internet service, they are able to offer a self-service operation whilst also keeping their processing costs to a minimum. An automated telephone banking service, for example, offers customers the opportunity to obtain real-time balance and transaction information, pay their bills, set up, amend or cancel standing orders and order cheque books, paying-in books or a statement. Internet based services allow customers to apply for a loan on-line and get a decision without any operator intervention and similarly, to perform customer service functions on-line.

In the future, most customer touch-points will be self-service via the home computer, interactive TV, mobile technologies and automated voice services. While there are many notoriously bad implementations of these technologies (how often have we all cursed telephone queuing and push button responses?), there is no reason why interactive services on demand should not work well for people and fit increasingly within our ‘on-line’ lifestyle. As the demand for call centres thereby reduces, the argument for offshoring to reduce costs loses its appeal.

Much more to automation

While the automation of credit decisioning has been with us for some time, this has become increasing sophisticated in recent years. Systems will not just give an ‘accept’, ‘reject’ or ‘refer’ decision but they will offer alternative products based on the applicants risk profile. This may be a secured offer to an unsecured loan application or it may be priced according to risk. Alternatively, it could involve an ‘up-sell’ or ‘down-sell’, where the loan amount or term may be varied in the offer.

This kind of sophistication in decisioning can be extended to other areas of operation. For example, if a customer wishes to change their payment date, skip an instalment, or make a temporary arrangement to pay. Typically, these functions still require operator intervention, based on a set of guidelines and experience. There is no reason, however, why these types of functions could not also be largely automated using sophisticated decisioning and only queued for operator intervention in exceptional cases.

Although the ‘fully automated’ bank does not yet exist the potential clearly exists for this to become increasingly realised. But in order for this to be achieved, the underlying systems must be fully integrated.

Integration

It is estimated that large financial institutions spend up to 80% of their IT budgets on integrating their disparate in-house systems. It is clear therefore that the full benefits of automation and self service can only be achieved through building solutions around a common platform and centralised data. This is notoriously difficult to achieve, as the sheer number and complexity of legacy systems makes this a risky enterprise, and for all their expertise in risk management, aversion to risk is the predominant sentiment in the banking world.

However, if the challenge is not taken up, banks will continue to suffer from both the high costs of change associated with this complexity and a reduced time to market. It is not for the faint hearted, but those institutions that can overcome this resistance to change and implement integrated, highly automated systems that push servicing out as close to the customer as possible will win the day.

Peter Constance

Managing Director, pancredit