Not only have these disruptors brought a new experience to the market but they’ve also gained significant market share, taking the lead against banks, many of which have been slow to adapt to the new environment. Recently we’ve seen some banks achieve significant results—in terms of both efficiency and customer experience—by reevaluating their end-to-end mortgage process. Key improvements we’ve helped clients achieve include:

20 to 30 percent reduction in loan processing costs
40 percent reduction in overall time-to-yes
40 percent increase in productive hours across the underwriting team
25 percent reduction in customer effort

Clearly there’s still considerable leeway for making changes, even for a product dictated by regulatory complexities—further evidence that banks benefit significantly by applying a new strategic vision to transformation across the organization. This applies not only to products but also to internal functions that are generally less heavily regulated and strategically differentiating (for example, finance or human resources).

Keys to executing successfully

To deliver a meaningful transformation, you’ll need to challenge any incremental mindset hiding within your organization. At the same time, you need to establish a mechanism to both sustain any efficiencies achieved and make ongoing improvements. You should concentrate on three areas in particular:

Customer-oriented, end-to-end excellence. You need a dual focus on customer experience and operational efficiency. You can achieve this by working backward from customer needs and using process engineering, partners, data, and technology to augment capabilities and capture efficiencies. Taking the customer perspective can help the organization move from “how it’s done today” to “how it can be done tomorrow.”

Collaborative transformation. Digitize as much as possible and work with partners who can help you achieve process efficiency and effectiveness using either or both of the following approaches:

“Make to buy.” Instead of turning to traditional outsourcing, work alongside partners in a more collaborative manner. For example, codesign rather than simply focus on the “best of breed” mindset that has traditionally been used to select the best existing solution for each individual need. This requires not only identifying opportunities to work with partners but also effectively choosing the right partners, integrating with them, and working alongside them to expand their capabilities (that is, having them “make” a solution for you to “buy”) in mutually beneficial areas.
“Stitch to fix.” Improve processes by taking full advantage of the capabilities of multiple partners. Different partners can independently target specific parts of a process, but when their efforts are woven together they’ll collectively improve the end-to-end customer experience. Finding the right partners (generally fintechs), however, is only part of the solution. Cross-partner integration and management are also vital.

Operating factories. Consider setting up an operating factory (that is, a centralized function) to empower, maintain, and continuously improve efficiency. Factories and their respective teams should help you achieve your overarching strategy by managing the services, processes, and tools while pushing for continuous improvement and execution of the day-to-day activities (whether internally or through partners).

Finally, you’ll need to be mindful of the speed and depth of your transformation effort. Some banks may be ready to embark on a wholehearted journey toward operation improvement across the organization; others may be better off focusing on a smaller set of targeted areas while rallying the organization for a more comprehensive transformation down the road.

The window of opportunity

Operational efficiency is not a new topic. However, during the current pandemic banks are facing unprecedented challenges and opportunities. They need to simultaneously address their short-term financial outlook, the accelerated customer shift to digital channels, and the threat of technology providers who’re delivering strong bundled and unbundled value propositions to customers.

The short-term pressures and long-term possibilities are clear, and there’s a window of opportunity to address them. Banks that can deploy a new, bold strategic operations transformation will see the near-term financial results they need. But perhaps even more important, as organizations that are refocused on strategic impact and ongoing innovation, they’ll be in a position to deliver better customer experiences for years to come.

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