Myra Thomas
Good day My name is Myra Thomas and editor with Bank Automation News. Recently I had a chance to speak with Hamel Nagarsheth, associate partner at Kearney, a global management consultancy firm. In this role Hamel is a senior leading leader in the financial institutions group advising executives on banking and payment topics at leading organizations spanning networks, banks, central banks, industry consortia and retailers. Hamel has been with party for over 10 years and is focused on supporting firms globally, to bring new products to market drive execution of large programs and improve operational efficiency. Hamel particularly focuses on the intersection of technology and innovation with banking and payments. Thanks for joining us, Hamell. Recently, Carney released a report that notes that banks have a hard time knowing which of their operations or functions are truly essential, or strategically differentiating. So they’re aware of what they can actually digitalize to slim down our organizations. I guess getting to this point can be difficult. So how does a bank take the first steps to critically take a step back and look at operations and get the buy in and change the culture of their financial institution to make it all happen?Hamel Nagarsheth
Thanks for having me here today. Yeah, no, that’s a great question. Um, I think we acknowledge that it can be difficult, right? I think it’s difficult to identify what those functions may be. And then perhaps equally as important out of messaging within the organizations are it because delivering a message to a function that they are not critical, or not necessarily differentiatingcan be often deemed motivational writers or worse, or work against the objectives of trying to actually improve the organization’s efficiency or customer experience to deliver? Right. But I think there are a couple of methods that we’ve seen banks globally sort of adopt that can be employed. I think some of it to start with some really basic things. Right. start listening, started questioning that is cool. Ask a lot of intelligent questions. So you know, why have things been done this way? I think oftentimes, we found within organizations that folks just go along with business processes that may be put in place a long time ago, always a thing working that have been just there for a long time, but not stop to ask that, like, does this still make sense today? Right, and it’s sort of that intelligent questioning challenge functions, that can really start to identify, you know, are there capabilities that really could be done elsewhere to free up capacity ready to take the conversation is not all about cutting capacity necessarily. It’s about repurposing, say, where do we create the most value within the within the walls of the bank? versus where can a partner help? And I think some of the inspiration can come from like digital first, or even FinTech organizations, right? Where often many of them have a culture of constantly rethinking status quo, right? They’re not necessarily wedded to previous approaches, or previous ways of doing things and having that mindset, allow an organization such as a bank to say, how do we actually go off the market and say, who are partners? Who are suppliers? Who can we work with? What are their best ideas? How can they help us say, you know, what, this area really makes sense for us to take on because we can we can do it, not only more efficiently, but then sort of show you ways how you can use that technology to repurpose those areas so that they can do them even better themselves.Myra Thomas
I think that, you know, when you’re thinking about those things, the banks need to really break it down between ideas of, you know, the things that are more people oriented and bringing those, you know, into making those digitalized. Versus figuring out the more complex things that I would imagine are much harder to get to the point of thinking of making digital, which would be, you know, actual business, business processes, business things that evolved business decisions. Do you find that to be the case?Hamel Nagarsheth
Yeah, no, I think that’s a great point. There’s a difference between doing work and then doing quality work, right? I think, oftentimes, organizations either because of capability, technology or processes, have folks doing work that is very manual, repetitive nature, where if you step back and say, You know this, if we change the way this works, we could probably automate this. And then that same person can go and do something more fulfilling or more something that creates tangible value for the customer. Right? So for example, if it’s reviewing a transaction or reviewing an application within the bank, there are aspects of it that are probably better off done. You know, automated fashion. And then that frees up the person to really focus on something that might be a little bit more customer facing, for example, right? And then that drives more fulfillment even from doing the task.

Myra Thomas
How do you how do you figure out return on investment? Because ultimately, I mean, I’ve spoken to so many bankers, I started to believe. And when they talk about automation and applying it to whatever, front or back end of the the operation there, they might be thinking of applying it to, there’s often a disconnect between, you know, what the actual return on investment is? And, you know, they’ll say, Oh, yeah, we assume that there’s a return on investment here, we think it’ll be x. But yeah, when they reach when they actually forecast it, versus when they actually look at it, the numbers are often different. How do you get a better sense of that return on investment?

Hamel Nagarsheth
No, that is a common struggle, right. And I think there’s a couple of things that can be done. One is pursue like an integral approach to get there. So that you can sort of test and learn, right, I think, often if a business case or some determination of the ROI is done at the onset, and then it’s not necessarily updated later, or the approach is not adjusted to say, okay, how’s this working, not working, because oftentimes, you know, initiative may not work for me not deliver the outcome you need. So if you go and update that along the way that helps if you change if you’re flexible, to change the approach that helps. And then also, even when thinking about the ROI, there’s there is an efficiency component to that ROI. But increasingly, we’re finding it banks are looking at two other measures that can improve ROI, right. One is, what does this do for the CX or the customer experience? And what does that do in terms of like, top line? Right? Are we getting better? Sort of outreach from a marketing efforts coming out of that? Or are we able to convert customers better because we made this process? And then the third one is really? Does this help mitigate any sort of loss or other risk? Sort of oriented? KPIs are metrics, right? So then that way, the, the ROI can be much more holistic? Because if it’s, if it’s only on cost, and that may not be enough?

Myra Thomas
Yeah, I think what you made you said is important point, because I think referencing back to your report, you’re talking about, you know, other industries sectors that had been much more successful in speeding up customer transactions and using automation to do it, whether it’s pharmacies, retail, fast food and other service companies. But, you know, I think, obviously, banks are playing catch up. But I’m wondering, you know, what’s the holdup for banks? I mean, has it just been being wedded to legacy systems and the costs that, you know, that banks face? Is it, you know, regulation of the industry? Or do you think that, you know, the customer experience is a much different one, and the transaction and the, even the way that banks say they want to relate to their customers much different than what might happen between, you know, fast food establishment retailer, and their customer?

Hamel Nagarsheth
Yeah, I think it’s a confluence of factors, right. And there’s multiple drivers for that, in many ways, banking may be catching up. But I think also banking is the head at the same time. And what I mean is that if I take retail or, you know, quick service restaurants or fast food, anything related to that, I think some of the learnings happened last year during the pandemic. And for that it was much more of a drastic nature of the shift, right? I think, for some of those industries, there was an almost overnight shuttering of stores and cutting off all in person interaction. And so it was very hard to just even move forward with today’s lecture. Like if your dining rooms closed or the store had to be closed, how do you serve great food or, or fulfill a shopping trip versus in that sense? You know, banking has been ahead, right that online banking has existed for a long time, mobile banking, is getting scale and pretty much handled a lot of the basic everyday banking. So in that sense, there wasn’t that immediate business continuity risk. But I think the challenge you have with banks versus some other sectors is that there needs to be more active managing of like the consumers receptivity for self service and digital, right. They customers do use digital, they like mobile banking, and all that. I mean, I think that there’s really well, but when we when Carney has done the consumer survey, it shows that even though bank, consumers look for those high tech capabilities, they still also consider what’s the proximity of a branch location, right when they decide which bank they want to shoot? in many ways. It’s almost like a safety blanket. Consumers say look, you you it’s not negotiable. You have to have a good website. You have to go to mobile app, but I may want to branch nearby And so that I think that weighs a little bit right on trying to just make that big shift to say everything sugar or self service, I think to your point about regulation, regulations do have, you know, their place. But I think what’s also important is that banks need to really sort of manage and think about privacy and security, right when they do Digital’s digital solution. And it’s not just because you know, financial transactions are play, it also has to do with the position that consumers hold of their bank, right? I think when Carney is in consumer survey, when we asked for it to Who do you trust, who do you use? Who do you trust to, like safeguard your information? And who do you trust to provide your personal information to, to no surprise me bank, banks rise to the top and, you know, banks and some of their payment companies, they beat out a lot of other companies that consumers regularly interact? Right. And so I think banks banks are aware, and they know they can’t sort of do ill will write on that trust, they’ve earned that trust the wrong time, they need to maintain it. And so that’s why banks can’t just necessarily pivot. You know, push things online or digital without thinking about the safeguarding of the data and the privacy implications. And then I think also, the The challenge here is, if I’m going in and men are getting a drive thru cup of coffee, right, that’s not necessarily a high touch interaction. In banking, there are a fair amount of interactions that need to be high touch right there. There’s a component of like advice. It’s not very transactional. And I think the technology needs to catch up consumers need to catch up in terms of how do you make that smart choice versus, you know, what, what can be digital and self service? And what needs a human to intervene? Right, like, where does it make sense to introduce a little bit more human to human connection? I think

Myra Thomas
the one thing where I think your report mentions that digital mortgage lenders now sit on the lion’s share of mortgages, you know, so at least for that customers are really embracing, you know, digital mortgage lenders, I think you mentioned giving more than rocket rocket, you know, a number of other ones, and they’ve taken a lead on traditional banks. How can banks compete on this front?

Hamel Nagarsheth
You know, what are they doing wrong? And how can I make it right? Yeah, no mortgage is a great example. And I think it’s also a tale of two different customers where a building up the point that we were just talking about self service versus high touch. I think if you look at the math, mortgage market rates of more traditional conventional loans, then yes, there are a lot of these digital first lenders or FinTech lenders, what have you, they’ve, they’ve done well for themselves. But I think if you look at jumbo loans, and sort of the higher end of the market, their presence is still muted, right. And I think that speaks to in that market, there’s more complex set of needs, there’s more need for high touch. So they haven’t been successful. But in the mass market, what are they doing? Right? And I think there’s a couple of things right, what they’ve done is they’ve focused on saying, how do we just not be beholden to the current process? Right, so for those who have gone into mortgage, it’s not instant, right? I mean, if I go to a bank website and apply for a credit card, for most customers, you can get an instant decision right then and there, they’ll tell you about the credit card or not, the mortgage experience is not quite there yet. It can take 30 days, 45 days, 60 days, sometimes to close. And in this whole real time world, that can be confusing for customers, where it’s like, I’m in a world where things can be delivered to me Next day, same day, everything’s real time. Why does this work this way? I think, you know, some of the newer vendors and sort of fintechs, etc. They’re trying to say, how do we take out all the manual steps of the process right there. There are steps where, you know, customers are asked to fill out paper forms or even digital forms. There’s data that needs to be collected, that takes time, there’s manual appraisals that have to be done on the property. There’s more and more offices, how do we automate that right? Can I pull income data automatically? Can I can I use other data sources to triangulate? Can I do an appraisal? virtually, if I if I need one, right? So can I use e signatures? So I’m not fedexing? a document to somebody? Right? So these are some of the maybe sound basic, but some of the steps that are being taken to crashing the cycle. And I think that’s what people like, right? And some of the lenders have taken the process and almost completely vanished paper out of it, right? Everything’s online, they can do e signatures, all of that. And I think that’s what consumers are sort of gravitating to, right? They’re saying, look, I like this new way of doing it. Yeah.

Myra Thomas
So but let’s jump back to you mentioned the pandemic and I’ve heard this quite often. The pandemic highlighted all the things that banking organizations were getting wrong, and what they needed to digitize. Do you think that you’re first off? Why? And second of all, do you think the lessons learned from the pandemic are necessary or have really been learned by banks, and that they’re really rethinking? You know what they need to make digital first?

Hamel Nagarsheth
Yeah, I think the some of it came down to just basic. So how do you get the work done? Right. So for example, if I look at the domain of b2b payments, a lot of those of them with checks, the way it worked was, they had staff go in, and they pick up the checks and process them. Well, when folks were working from home, that became a problem, right? And even though it’s very basically, well, how do I actually process this paper? Or even on the other side, where corporate have to work with the bank, they would shuffle paper around, they say, Well, I can’t do that anymore. Because I don’t have staff going in there. Or, you know, I’m having trouble with delivery services or what have you. And I think it was almost that very basic realization that said, yeah, this process has worked for us, these payment methods have worked for us, but they don’t work anymore. And in an increasingly remote, care driven world, it’s hard to push around paper versus electrons. And so I think it’s these basic things that highlighted that and said, okay, like, this is a real risk to our business. And I think that’s why now, banks and other organizations have started looking at say, how do we, how do we actually not only digitize right, which is step one, which is maybe taking the paper and just turning it into a PDF, or something like that, right. But then actually truly digitalize, which is take that and really just say, Can we have a digital process? Right, and that’s why we’re seeing some momentum behind not only automation tools, which is sort of saying, can we can we actually get documents to originate electronically, right, whether it’s an invoice or, or something else?

Myra Thomas
now working with all those vendors, and obviously, banks, you know, I’ve talked to banks, and oftentimes, they might be working with 4050 different vendors, you know, for a variety of functions on the front end back end, or whatever. You mentioned the need to co design in your report, and not just sort of handover the work to the vendor, whatever they might be working on, you know, whether it I don’t know, its credit decision name, you know, KYC, it could be anything, you know, automating, you know, like you said, If signature or what have you, you know, how can banks work on a more collaborative basis when, you know, essentially, I would imagine they’re just looking to the vendor to offload work?

Hamel Nagarsheth
No, that’s true. And I think it requires a little bit of a mindset shift that we talked about earlier. Right? It’s, it’s, it’s not throw it over the fence. Right? You can’t just say, here are a couple of requirements or, or leave it to the vendor to just solve it purely requires having the openness to say this is how things are done. What are the best practices that the market can bring where a vendor supplier can bring, and then, as we say, co design, which means creating something that you’re making to buy, right, which is a different concept. I mean, typically, when outsourcing is done, folks may have some requirements, and they’re essentially buying what the vendor can offer. I think this is a little bit of No, let’s, let’s build something that recognizes my uniqueness and differentiating aspects where they exist and actually make something that’s for me, with the bank. And when we when we do that, that’s where we see the creativity really taking off. And the bottom line impact, right, because now, both sides are not sort of beholden to their existing technology or processes or platforms, they’re both sort of taking the best of both, so to speak, and bringing it together, right, and that, but that that requires a different way of thinking new requires a thought process of you know, what, maybe the other side actually as a better way of doing this on the way I’ve been doing

Myra Thomas
with but we have these multiple partners, you have to think about cross partner integration and management. How is that accomplished? effectively?

Hamel Nagarsheth
Yeah, and I think that requires almost like a new organization structure, right? What we’ve, what we’ve seen banks do, we term it sort of like a notion of like almost an operating factory or something like that, which is you, you essentially ring fenced and create an operations organization that can look at things. And right, the notion of can’t look at things by product, or just by line of business or Lunar vertical, you got to go horizontal. And what that does is that allows them the dedicated organization to manage multiple vendors, because to your point, it takes some effort. I mean, managing vendors And sort of having this cross learning matters, the what we do in our organizational culture to work with banks to create a top layer that can actually really serve to do that orchestration. And figure out, you know, where do vendors need to work together? Where do different parts of the board need to work together. So you can get that cross partner coordination, and then delegate the actual day to day tasks down to the vendor or to that particular, you know, in house part of the organization so that they can excel on doing the day to day work, but there’s actually a dedicated layer routine that’s thinking expressly about cross partner, right? Otherwise, what happens is it sort of becomes an afterthought, and then may not be done well, right? If there’s so no dedicated team focused on it.

Myra Thomas
Well, I think that’s a good place to start. I want to thank you once again, Mo for joining me today. That wraps up this episode of the buzz. Thanks for listening and please let us know how we’re doing and thank automation news.com and of course on Twitter and LinkedIn. Thanks again.