Traditional financial institutions, be they banks, insurance companies or brokers, coming under pressure from new entrants emanating from the world of technology is not news. Less well known is that because of how financial technology works, improvements can be made that not only transform traditional business processes, but meet both increased customer expectations and a fast-changing regulatory environment.
User experience (UX) consultant Each&Other has found that banks are open to change, and while they do not want to upset proven systems there are other potential points of entry. For example, changes to payments can be made at the level of intermediaries.
“Traditional banks are a bit like supertankers, but the providers can be more nimble and they can integrate with the banks,” said Each&Other’s co-founder and director Ciarán Harris.
At the centre of the improvement process is the adoption of technology designed to keep things smooth despite ever-increasing complexity.
For example, Each&Other worked with fintech stars Stripe to develop a challenge-response system to reduce fraud, but with a specific goal in mind: to encourage legitimate transactions
“In the past, a lot of fraud reduction was so intrusive that it actually stopped people transacting. Now, it’s the opposite,” said Harris.
Behind this is the use of advanced artificial intelligence (AI) and machine learning (ML) techniques to analyse purchases, automatically flagging suspect ones. Similar technologies are also used to ensure that customers can easily sign up, something that is becoming increasingly difficult.
“There has been a revolution in KYC [know your customer] and AML [anti-money laundering] regulation,” said Harris.
Beyond using AI and ML, working through one client’s KYC and AML processes, Each&Other found that processes were stuck in the past, slowing and frustrating customers.
We are able to change many linear processes into concurrent processes after finding that there were only two points in the process that had to be completed in a linear fashion.
It’s not just customer-facing processes that have changed, though, and Each&Other has worked on behind the scenes technology, too, including in ensuring consistency in the face of changing regulatory environment.
“Regulations change all the time, and that means new forms,” he said.
Whether working on the front- or back-end, Each&Other’s goal is to think about customers, with the end result of making sure the transaction goes through.
Some financial institutions have taken a piecemeal approach to digital transformation, Harris said, meaning that they have not fully responded to raised customer expectations. “Motor insurance was very quick to do online quotes,” he said.
Claims-handling, however, has not kept up.
“It’s inefficient, paper and phone call-based, and, frankly, it’s ripe for transformation,” Harris said.
Partly this is because old, legacy systems, including mainframe batch processing systems programmed in COBOL, still rule the roost at the back-end. While mainframes have proved their stability, they are not suited to the kind of live transaction reconciliation that customers today demand. However, they are unlikely to be replaced until there is a clear need.
“That need could be regulatory, or could be a very persuasive change agent at c-suite level,” said Harris.
Working with Zurich on a life insurance product in the Middle East, Each&Other made the case for digital transformation by reducing customer on-boarding from weeks to mere minutes.
“We got it to the point where 80 per cent of customers were able to be processed in a few minutes and around 15 per cent in two business days. Fewer than 5 per cent were required to adhere to the old two-week norms,” he said.