By Cisco LiquidoToday’s banks control the discussion around digital transformation—and not in a positive way. As banks scramble to meet consumers’ changing banking expectations, they struggle with legacy system integration. Vendors are added one at a time, one bank acquires another, new systems are tacked on to old ones to address evolving problems, and the result can be a mess of disconnected systems, redundant processes and excessive documentation.
The bigger an organization grows, the more severe document sprawl becomes. During M&A, the acquirer must determine how to consolidate information and services without sacrificing user experience. Far too often, managers plug holes with paper and manual workarounds. Before long, they sink their ships with the same redundancies they sought to keep out.
Document sprawl and unplanned systems integration are breeding grounds for customer service headaches. While many people prefer the local feel of a community bank, the failure to integrate systems comprehensively can erase the benefit of the personal touch. New websites, new requests for information, changes to learned customer experience and temporarily unavailable services can turn local charm into growing frustration. And with 20 percent of consumers willing to switch banks after a negative customer service experience, serious consequences can result.
Growing and acquisitive banks don’t have to sacrifice the things that make them special for a bigger slice of the market. When organizations begin the merger process, leaders should take the following steps to consolidate vendors and mitigate document sprawl.1 Do the homework. It can take anywhere from six months to a year for the Federal Reserve to approve a bank merger. In preparation, address integration concerns upfront.
Infrastructure issues have first priority. Will the company use on-premise software installations or cloud-based ones? Both options have benefits, but cloud-based systems help alleviate document sprawl because separate offices and business units can now leverage the same data.
Be mindful of regulatory issues as well, especially when two banks operate in different jurisdictions. Regulations may help make certain decisions for you. Finally, determine who owns the data and reach an agreement on its use. The more thought goes into these issues upfront, the better the resulting system will be.
2Practice technological agnosticism. Acquiring banks tend to prefer their own technology stacks, but flexibility is always better than a my-way-or-the-highway approach. Consider the advantages of the acquired organization’s stack before discarding it. Compare when the technology was acquired and implemented. Newer tech tends to be better because it’s typically more responsive to current customer demands and better at fully integrating data.
Economic factors are also at play. Ask yourself: Are there any recurring licensing or maintenance fees for either stack? How rigid is the system? Can it be amended as conditions change? What’s the total cost of ownership? It’s tempting to run with the cheapest option, but always perform a full cost analysis to determine which will generate the best ROI.3 Distinguish core and non-core processes. It’s not necessarily valuable to merge all technology to eliminate variance across the newly formed organization. Instead, stick to technologies that move the bottom line and unify core systems. Ignore the rest, if necessary. “Core” technology will always be revenue-related. For example, a bank with a residential focus that acquires one with a commercial bent shouldn’t fret about commercial technology shifts. Those new parts of the business can handle themselves as they did before.
Big banks and fintech companies will continue to apply heavy pressure on improved digital experiences. Growing banks need to move quickly to keep up, and with a bit of planning, they don’t have to look like they’re in a rush.
Cisco Liquido is VP for business strategy at Exela Technologies, a global business process automation firm.