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
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
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
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
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
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
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
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
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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