Why banking agility requires Lego-like thinking

By Zameer Momin on Sunday 26 September 2021

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True agility will require converting common processes into interchangeable building blocks says Zameer Momin, nCino’s Director of Strategic Partnerships and Alliances in the APAC region.

Why banking agility requires Lego-like thinking
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2020 was the year of the “pivot”. Liquor distilleries and perfume manufacturers repurposed their facilities to make hand sanitiser. General Motors recast its Indiana plant to produce ventilators.

For the global banking industry, the changes were no less profound. The pandemic has reshaped the competitive landscape, accelerating digitisation, questioning the role of branches and creating massive spikes in online customer service demand. For traditional banks, the pressure is on to change rapidly and frequently. But for those hamstrung by a legacy banking stack and data locked in silos, this is easier said than done.

Unlike manufacturers, banks don’t have an assembly line that can be changed with a simple retrofit. Even the simplest banking services involve a complex orchestration of multiple departments, manual processes, core systems, decisioning, reporting, analytics, authentication and security. Unpicking all of this in order to “pivot” can be a long, complex and disruptive process.

Composable businesses are truly agile

But now a new approach is emerging that will eventually support true agility by allowing banks to re-use, swap in or swap out business components. Welcome to the “composable business”, which Gartner defines as:

“… creating an organization made from interchangeable building blocks. The modular setup enables a business to rearrange, and re-orient as needed depending on external (or internal) factors like a shift in customer values or sudden change in supply chain or materials.”

In other words, we’re talking about a business model where a bank can easily repurpose its resources as business requirements change.

Empowering flexibility, cost and adaptability

When banks use a composable approach, it’s far easier to transition people to different areas in the value chain as the capabilities required and experience is similar when you move from various departments across the front to back office. So, new efforts can be stood up in days. And, as people become used to moving into different roles around the bank, agility gets baked into the culture.

It’s also much more efficient and cost-effective to repurpose internal resources – who already know how the business and how its processes work – than to hire and onboard new ones.

Banks starting down the composability path don’t just get faster at adapting – their cost structure begins to optimise. As you start to break down the capabilities and further the processes, you inevitably uncover and remove duplications. As an example, if you uncover that an underwriter and a relationship manager are both gathering a customer’s tax information, you could create a composable process that removes this task from the underwriter, freeing up a couple of minutes.

That time saving may not seem like a big deal. But multiply those minutes by the number of tax entries an underwriter makes per day and the number of underwriters the bank employs. Now multiply that by the hundreds of other composable processes the bank uses and you can see the cumulative power of this idea.

Take inspiration from the Coca Cola engineer who, in the ‘80s, cut the bottle capsize by just 1mm. The marginal reductions in material costs and lighter shipment weights propagated annual savings across the value chain that ran into billions of dollars.

Where do we start?

This is not a new idea for your CIO, who’s been aware of ‘composable architecture’ for almost a decade. But it is a new way of thinking for COOs and Executive General Managers who need to lead their organisations in breaking down processes to identify which areas are ripe for composability and where else they sit across the bank.

Don’t fall into the trap of thinking about composability in silos. You need to canvass every part of the bank, because the processes you’re looking for are used by different people, in different business divisions, reporting to different P&L lines.

For example, HR requires capabilities that allow staff to read, sign and return documents issued to them. Similarly, sales require the same capability for new customers to read, sign and return contracts. Both processes share common data points and operating policies, common outcomes and common staff skillsets.

This commonality is the signal that signing and returning documents can be turned into a composable process – one that can be picked up and repurposed across the bank as times and needs change, creating a truly interconnected network of composable processes.

As you can imagine, one of the biggest challenges in achieving a composable business is establishing great connectivity and communication across people and teams – to both identify a common component and collaborate towards sharing that component.

This is about getting everyone on board with a mandate to discover “where else we’re doing this”.  So, you’ll likely need to invest in and encourage cross-department connection and collaboration.

Should I be thinking about Tech?

As you begin your journey into outlining your business process and target operating model for a composable business, it’s also a good idea to start thinking about the platform you’d want to build with early. This is the underlying platform that will help guide you based on its dependencies and capabilities that are available. As you venture into building out your future state, choose solutions for their:

  • Business alignment – The trick with taking a composable approach is to avoid customisation, which is expensive and time-consuming. It’s unusual to find an absolutely perfect fit but look for platforms that are designed for the way your bank works.
  • Innovation roadmap – Find vendors who are innovating ahead of the curve – so you don’t have to. You should receive continual delivery of incremental innovations, rather than large disruptive updates.  
  • Cultural fit – You’re looking at a long term relationship. Are your and the vendor’s values aligned? Do they speak your language? Are they truly building a partnership with you?

Finally, keep an open mind as you start to look for composable blocks, and don’t force composability for the sake of it. Remember, the change you’re embarking on requires an open mind, culture changes and reimagining the possible. Your purpose should be to remove duplication, enable automation, improve risk controls and empower people to move around the business to where resources are needed most.

As time goes on, each iteration becomes faster, smoother and easier. Eventually, major pivots become business as usual as you adapt to changing business circumstances while continuing to deliver an exceptional service for your customers.

This article was provided by nCino and does not necessarily reflect the views of AltFi.

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