In a recent article written by McKinsey & Company, it is rightly stated that the adoption of advanced technology such as automation, the cloud, machine learning, artificial intelligence and advanced analytics can lead to valuable and necessary improvements in productivity.
Below are relevant highlights and excerpts. Finvar focuses on helping banks realize the benefits of technology highlighted by McKinsey.
- A McKinsey analysis suggested that African banks may need to achieve productivity gains of between 25 – 30% if they are to restore pre-pandemic profitability.
- There is also an opportunity to pass on these gains to consumers and assist governments in the drive to advance financial inclusion, which is a priority in many African countries. This would ultimately strengthen their role in rebuilding African economies in the post-pandemic era.
- The next technology horizon in banking has become a reality much faster than anticipated. Banks that are leading in this space are developing frequent customer engagement outside of traditional channels, providing customers with ease and convenience and taking advantage of AI for ultra-personalization—which is necessary to compete in cluttered markets—while reducing cost to serve.
- For example, a European bank that went through a tech-enabled transformation of its customer care achieved 25% improved productivity, among other key performance indicators, through digitization and adopting AI including cognitive agent, digital assistant, advanced-analytics-driven coaching, robotic process automation (RPA), and identification and verification (ID&V) robot.
- One of the key trends shaping the future of central and back office is the hyper-digitization of work. Research suggests that there is more than 50% automation potential across selling, general, and administrative (SG&A) functions and 40 to 60% cost-savings potential from using automation in these functions.
- Leading banks are increasingly moving toward zero-based operations with the implementation of automation and digitization across the banking value chain. Despite several years of investment in lean, digital, and automation, McKinsey analysis estimates that a significant part of the banking value chain remains dependent on manual tasks, driving 60 – 70% of costs.
- Adopting technology and digitizing operations has additional benefits beyond cost efficiencies, including faster service through a significant reduction in processing time per order and payment, improved quality through prevention of payment-processing errors, and increased employee and customer satisfaction as employees shift their focus to higher customer-facing value-added tasks.
- Banks have seen what’s possible and understand better where their weaknesses are. Furthermore, the projects, tools, and technologies to move the needle on productivity are available, especially in light of what market leaders have achieved. The remaining question is: Are banking industry leaders ready to seize the opportunity to continue this transformation and give the productivity challenge the management attention it commands?