The digital future for mid-size banks
Through partnerships smaller banks can play in banking as a service (BaaS)
The 2022 KPMG State of Banking Survey features insights from 100 senior executives. This article shares the findings related to digitization of front and back-office processes.
Digitization: Progress has been made, but the work is not done.
Banks’ two-pronged plans to broaden digitization of external and internal capabilities are moving along. Significant foundational work took place in the immediate aftermath of the onset of the COVID-19 pandemic when the institutions rapidly accelerated such plans to deal with millions of home-bound clients and employees.
Generally, survey respondents said their banks are doing a better job on the customer-facing processing front than they are on the back-office processing job. There is still much work to be done to get better and faster, on both fronts.
Specifically, a large majority (three-quarters) of respondents said they need to do more to digitize both the customer-facing processes and back-office processes, while slightly more than half said they are well on their way to developing an integrated, scalable digital operating model.
Banks’ customer-facing processes are mostly or fully digitized.
Banks’ back-office processes are mostly or fully digitized.
Banks’ said front and back-office processes are not at all or barely digitized.
Even as respondents recognize the migration of a sizeable portion of customers to non-traditional service providers, traditional banks reported moving with purpose to meet the challenge and provide customers with products and services they increasingly are using – or want to use more frequently and easily.
Asked about how they are bolstering their ability to compete in the digital age, they responded:
Investing heavily to develop digital and fintech capabilities
Acquiring digital capabilities
Developing cross-platform services
Partnering to acquire capabilities and distribution
Action steps
Digitizing an entire bank can be an enormous task, “although banks that start with their focus on foundational elements may realize a significant return on investment,’’ according to Celeste Diana, a principal in KPMG’s financial services strategy practice, who focuses on digital innovation and business transformation.
“Core modernization,’’ Diana said, can “unlock product innovation, speed-to-delivery processes, real-time processing, and other important aspects of customer needs.’’ However, bank executives setting out to improve an institution’s digital capabilities will need to place emphasis on “the impact to the entire enterprise—from strategy, to people, to culture,’’ all while recognizing that their efforts also will require attention to improvements to “the business model down to the operating model—efficiently uniting front, middle, and back office to deliver consistent experiences.’’
