Understanding digitization in theory is one thing. Figuring out how to get it done is something else.

You know the story — banks recognize they must deliver the same speed and flawless experiences that their customers have grown to expect from digital leaders like Google, Apple and Amazon. Banks attempt to invest in digital experiences to spark revenue growth, efficiency, customer satisfaction and loyalty.

And here's where things go awry — banks struggle with execution and don't see expected results from rising investments in technology.

Unlike the 'digital native' companies they aspire to emulate, most of which started out organizing operations around customer needs, banks still tend to be oriented around process and functional silos instead of customer journeys, limiting their ability to provide differentiating customer experiences.

To realize their ambitions for customer experience, today's banks should rethink the role of operations, which are in charge to deliver the customer experience. They must evolve from a back-office support function to an enabler of customer experiences. (And it's not just me saying this — this view was confirmed by insights from 80 COOs and bank operations executives who participated in Accenture's 2018 North America Banking Operations Survey.)

Making bolder, digital bets

Traditional approaches to operations do not suit the needs of banks in the digital era. To shift operations from a back-office 'service' to an actual engine of growth through data and intelligence, banks must pursue a bolder vision of digital transformation. This means developing coordinated and comprehensive digitization strategies that infuse data-driven processes and agile delivery methods across the organization and maximize benefits by using digital technologies.

And bank executives themselves will be the first to acknowledge the need to change the focus of operations to the customer. After years of investing in technology to raise efficiency, three-quarters of banking leaders in our survey now say that customer experience has become their top strategic priority.

This new mandate raises the bar for operations. Instead of satisfying internal clients — who have little choice — operations will be increasingly responsible for engaging consumers. It means that processes and systems need to be intuitive, transparent and fool-proof — all within the constraints of the legacy systems environment. Almost 40 percent of respondents in the survey said that the limitations of legacy systems are among the top three impediments to digital transformation. To get around this without undertaking massive updates to core systems, digital leader banks are turning to open APIs and cloud services to integrate new customer-facing apps and processes with legacy systems.

Why the payoff remains elusive

Banks have already made massive investments in digitization and are prepared to spend even more, but the payoff remains elusive. In 2017, North American banks spent an estimated $20 billion on digital transformation, and are expected to double that spending by 2020. Yet, despite their digital investments, banks have yet to move the needle on revenue or cost. Compound annual revenue growth among the top-40 North American banks surveyed averaged only 2.4 percent in the past three years; the average cost-to-income ratio is 60 percent — far from the 50-55 percent that the most efficient banks enjoy.

The limited payback can be traced to how organizations approach digitization. For the most part, banks continue to deploy digital technologies in a piecemeal fashion, with benefits flowing to only one part of the organization. One reason: only 46 percent of banks have a bank-wide digital transformation plan.

A comprehensive approach is key to generating top-line and bottom-line benefits that have eluded banks. It is also a competitive requirement — banks that offer smooth, end-to-end customer journeys will win the contest for customer loyalty and growth.

'The new front office'

Many COOs — 45 percent in our sample — agreed that the primary objective for operations in the next three years will be to make the back office 'the new front office.' The back-to-front shift will require freeing trapped data in back-end systems to enable better experiences in customer-facing services.

In India, HDFC Bank has introduced 'Eva,' a chatbot that is accessible from all digital touchpoints, bringing the call center — traditionally a back-office function — directly to the consumer. Eva responds to spoken queries and text messages and can help customers with questions about their accounts and bank products. All the while, Eva is collecting data about customer interactions, which the bank can mine to create targeted offers that drive growth.

Creating these intelligent, customer-facing apps is not easy. It requires pushing data and associated intelligence down in the organization and closer to where banks interact with customers — a non-trivial challenge for operations that have spent decades collecting and analyzing data centrally and transmitting results to internal customers.

Preparing for digital transformation

• Transform the core. Banks will not succeed if they only work on what happens at the boundaries of the organization, where customer interaction occurs. The reality is that organizations have to continue to invest in and improve core operations by using cloud and open APIs to enable new customer-facing apps that work with core systems.
  
  
• Focus on experiences and outcomes. To foster better customer experiences that will make the bank more competitive in the digital age, operations needs to help set clear objectives. This starts with understanding customer pain points across customer journeys. Banks should anticipate customer needs, providing solutions before customers realize there’s a problem. This is key to moving from a process-push mentality to making compelling customer experience the goal. To enforce the new goals, performance needs to be measured in terms of customer satisfaction, complaints and retention.
  
  
• Build a digital-ready workforce. To move quickly and implement their digital agendas, banks need access to new capabilities and new kinds of talent. This will involve a combination of recruiting, greater use of flexible work arrangements and investments in 'reskilling.' More than 91 percent agree that reskilling will be required for affected workers.
  
  
• Adopt agile methods. Agile methods are being adopted across industries and functions and are essential for bank operations. These methods also stress experimentation and rapid iterations — introducing minimum viable products, then testing and refining them in the same way digital leaders do.

By clearly articulating a comprehensive digitization strategy, operations can evolve from a centralized back-office model to a ubiquitous, agile capability that can be deployed wherever and whenever needed.

Indeed, the very idea of the 'back office' may disappear.