To digitally transform, or not to digitally transform… is no longer the question. The more noble questions are not the why and when, but the; how, where and with whom.
There are multitudes of digitization systems on the market and all are designed to automate workflow processes and generate / issue documents. The plethora of choice poses a challenge for banks and other financial institutions to objectively assess and select a solution. This article offers some elements upon which decision makers can augment their assessment criteria in order to make the best decision.
Please do not expect a simple checklist, this goes deeper. Its purpose is to provoke thought in order to build upon your thinking when evaluating potential vendors.
Each of the ten points has been formed following numerous detailed client conversations over the past 24 months. As such, they represent a guide built upon client-experience. Each client has asked to remain anonymous. My hope is that you find this valuable in arriving at a robust decision considering both immediate and long-term needs of your organisation.
1. Stakeholder identification is important, but equally key is conducting an independently minded evaluation of all needs for the project definition.
This does not mean treating all equally, it may be necessary to apply a different weighting to certain needs. For example, focusing on the primary drivers for the project such as regulatory compliance or business critical drivers of client experience and process efficiency over, what may be seen as lesser factors (for example secondary benefits across other departments or workflows). However, this does not mean neglecting other factors. Indeed the most successful implementations have taken a holistic view of the organisation and its processes. Additionally, some of the greatest improvements can be gained in back office functions that have for so long been the Cinderella of financial organisations. The challenge comes when dealing with conflict and making the tough call one way or the other.
This task becomes more complicated when you consider both the need to involve management but also account for the reactions of those who will use the system every day. It may be that there is a management desire to start with a small test before expanding to other areas whereas users are likely to be focused on how easy the system is to operate (the UI / UX aspects such as the number of clicks required, the ability of the system to avoid double data entry etc.).
These seemingly different demands need not be seen as conflicting and banks can be well served to ask potential vendors about how they would approach stakeholder consultation if they were to be awarded this as a task.
I recently had the good fortune to be part of a project review with my LPA colleagues and the respective client team. One of the senior managers at the client stated that they all appreciated how LPA were able to bring together the stakeholders from across the bank and make sure the people who needed to input and deliver understood what they should to do. The front-end PMO (Project Management Office) understood the value of a people driven business and all the people felt part of a common effort towards a positive goal.
2. Insource or Outsource? - What technical / software knowledge can realistically be maintained in-house over the long-term?
It is reasonable to assume that some IT departments may wish to build and implement a solution themselves while other bank IT teams may see the benefits of managing a project with the support of a third-party, such as for best-practice or due to internal resource constraints.
When conducting a post-project review with major global bank, the project leader recounted the initial resistance that came from two different areas. Firstly from the IT function who believed they could build the optimal system as they knew the bank the best and secondly from the internal departments who were convinced that there was nothing wrong or inefficient with their current processes. The project success proved in hindsight that the decision of the leader to focus on the use of latest technology to digitize documents and ensure compliance was more significant than other conflicting internal demands. The project was universally accepted by all teams as the best decision in the banks own interests.
User experience / user interface demands are a given. Any new solution must be easy to learn and use. It is against the interests of a bank to build a new workflow or system and then need significant time and money to implement and maintain that new solution. What is more; technology, automation, artificial intelligence etc. is continually advancing. Many banks see learning from the market as more cost-effective than maintaining internal technical knowledge.
Furthermore, and this is a major plus-point for operating teams and IT departments. Many software systems are built with a low code platform, enabling the bank to make its own re-configurations giving the users a genuine control over the evolution of the system.
3. How will the system integrate with other systems (core, legacy etc.)?
I am sure you have often heard phrases like ‘we have a number of sticking plaster – system fixes’ etc. etc. All would agree that it is important to avoid another add-on solution and to consider the compatibility with the core system and processes, and ideally think of what legacy systems could possibly be decommissioned.
Connectivity is key to compatibility. Modern Application Program Interfaces (API’s) are the building blocks that provide the functionality and simplicity required to integrate to core operating systems. Underpinning this are often used terms such as ‘golden-source’, being the one source for data throughout any process. This is key to avoid data-mismatches and maintain compliance.
Learning from feedback to LPA prior to the acquisition of Modelity by LPA, a major European bank confirmed that after initially obtaining proposals from six potential vendors the final shortlist of two vendors were Modelity who were most convincing about a technically compatible solution and LPA who were clearly the most client focused. The subsequent acquisition of Modelity by LPA was viewed by the bank as an obvious step and they had no hesitation in accepting a combined team to work on the project. The resulting system performs its role and also conducts the required interfaces to the core system, everything runs perfectly.
4. How will this improve the banks business (cost saving, efficiency, customer service, regulatory compliance, more competitive etc.)?
It is beyond argument that banks and other financial institutions face increasing pressures from eroding margins, more demanding customers, high fixed-cost bases, increasing regulatory compliance, cyber-security threats etc.
Therefore, although this may seem obvious, it is worth asking how any new software, system or process will help combat these pressures. After all, the fundamental purpose of any investment or organizational action is to improve performance.
One client bank happily reported to LPA that external audits from the regulator led to positive comments. The bank is seen as a best practice and the compliance department were clearly very reassured receiving praise from both external regulator and senior management.
Another project with a well-known global bank and financial services company to digitise their client interactions led to an overall 85% reduction in processing time and a 47% reduction in the process steps required during sales advisory interactions. The impact was that not only were the people able to process more transactions, but market share grew as the bank were seen by clients as far more efficient than their peers.
5. What systems could the new solution enable you to decommission?
Furthermore it is worth taking some time to consider what legacy systems and processes could be; decommissioned, side-lined or reduced due to this new project.
A recent project with a world-renown commercial bank to implement a system for trade processing resulted in a project payback not only from the increased efficiencies but also from the IT cost savings by decommissioning three legacy systems which were not only incurring software license fees but were also consuming additional resource for maintenance and support.
6. Can we ‘scale’ the solution to other applications across our business?
One thing that has pleasantly surprised the LPA team when implementing projects is the incredible foresight exhibited by clients.
Following successful selection after an RFP process with a Scandinavian bank, the client team revealed to LPA that there were cheaper proposals. BUT LPA Capmatix
was chosen because the proposal not only solved the immediate need but gave potential to expand the automation of tasks to other areas. This client vision had been the driving the choice that differentiated LPA from other options throughout the selection process. Indeed the project leader at the bank actively gives internal presentations to other teams explaining how the system works and how it has improved performance.
7. Is this vendor likely to become a trusted partner?
This may sound corny, or even over-simplistic, but the value of a third-party vendor who maintains their expertise, and gains your trust is worth everything and can be part of a competitive edge.
Part of an evaluation process should include an assessment of how the potential vendor will work with you (not just for you).
Firstly, do not assume everything will go perfectly first time. Expect things to get complicated and judge whether the vendor will act as a partner and work through the complexities. Or could they be the type to seek refuge in contract agreements, SLAs, documented meeting records, or even give you the ‘silent treatment’.
During a client review, the team-lead at the bank explained that the early implementation phases were stressful but under the circumstances (meeting a regulatory deadline) it went well. Both sides made a lot of effort (resources and hours) but what came out was quite impressive. Everyone was happy that a solution was in place when the regulation came into force.
Conversely, it is also good to be the supplier-partner that quietly and effectively functions in the background. A shared services team providing outsourced support for a number of regional banks describe how they value the LPA partnership as.. ‘We tend to hear when things go wrong, we get a pattern with problem vendors. We don’t hear about things connected with LPA, which is a good thing.’
The manifestation of a trusted partner status is the incidence of repeat and increased long-term business, or indeed the ability of a vendor to be granted access to the inner-workings of the banks operation. LPA can share many examples of this. One such case is with a Northern European bank specialising in real-estate investments. The lead consultant is one of very few external people who has a permanent desk at the banks main office.
8. Domain expertise
One point not to overlook, if only as a simple tool to whittle down the plethora of options, is to seek evidence of true, related, domain expertise. This is more than a simple tool as has been referenced by many clients over and over again as a valuable need for a thorough implementation.
What clinched a successful selection of LPA by a German regional bank was that they felt LPA really knew what they were proposing and were able to demonstrate (in that case) expertise on treasury related topics.
9. Soft Factors
Flexibility and sensitivity to your situation is a vital ‘soft’ factor. It is not unlikely that a project will be held up or experience delays or diversions. Positive feedback to LPA from a US Headquartered challenger bank was that they appreciated the sensitivities LPA maintained with their organisation and how we accommodated this within the project.
Perseverance is another ‘soft’ factor worth gauging with the potential partners that are under review. Again, a positive learning experience for the LPA team came through a vast and complicated project with one of the world’s leading banks. Initial project phases were tough. The amount of teams and people involved in decisions and a complicated the internal structure, made even harder by inter-country differences meant that 3-4 slightly different implementations were be required on any one issue. Furthermore, the senior managers who were signing-off project stages required detailed explanations of every stage before approving. The LPA team, to their credit, persevered and the project was a success that LPA were awarded strategic partner status with the bank.
10. Do we chose a Big 4 consultant, a start-up FinTech or…?
Expect this question to arise, it nearly always does.
Our position here is to be absolutely partisan towards LPA, you would expect that. So please allow me to use some words told to me by a director at a highly regarded commercial bank…
When updating the management board on a digitization project, the director faced the question… ‘Surely our accountant can do this?’. The assumption is that the bank would be better covered for potential regulatory issues with a big name vendor. Indeed, the brand name and reputation of the major consultants is exemplary. LPA often collaborates with these organisations to solve mutual-client problems. But going it alone with whoever audits your accounts can pose a variety of issues. In the words of the bank director… ‘Our accountants were more likely to do a tick-box exercise. Our bank needs sound expertise to set something up properly in the first place. We don’t have to explain what a bank is to a junior consultant. LPA understand how we fundamentally work as a bank.’
At the other end of the scale are the many FinTech start-ups. They are ‘cool’, no doubt about that. But start-ups bring risk of disappearing, being acquired or simply not being able to develop and support software while their organisation experiences its own rapid evolution.
Many clients value that LPA straddles both worlds and is an established FinTech (since 1999) and has grown to a 400 people business operating across nearly 15 locations. With a software platform build upon the Microsoft Azure Cloud
and specialists dedicated to front-end consulting, project delivery and also ongoing support the company is positioned to be the optimal choice for digital transformation projects within banks.
I do hope that you found the points raised in this article helpful for your next vendor selection. My thanks for the content goes to the clients who gave the feedback that led me to write this.
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