Navigating tech-enabled transformation of core banking processes| Part 3: The importance of non-IT change management - Financial Services

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Ensuring a successful transformation through non-IT change management

Businesses are constantly challenged by new technologies, evolving customer demands and a volatile competitive landscape. Financial service institutions are equally embracing tech-enabled transformations to sustain their competitiveness[1]. However, the activities are not limited to the IT elements described in our previous blog in this series[2]. While Phase 5.1: IT development and Phase 5.2: Testing are key for the integration and development of technical solutions, these new systems are only as effective as the people who use them, internal/external adoption, and regulatory compliance. This is where change management allows the transformation to come to life in a coherent way. This blog explores Phase 5.3: Non-IT change management (in dark blue in Figure 1) with a focus on lending process transformation as an illustrative example.

Figure1
Figure 1: Overview of E2E tech-enabled transformation approach

Banking transformations are often viewed and therefore handled as separate from an organisations day-to-day business. However, in most instances, a transformation impacts a majority of the business-as-usual (BAU) units. For example, in the case of a lending transformation, all relationship managers and their assistants, the full credit office unit, the operations unit, the credit risk team, as well as client-facing branch staff and call centres are affected, overall representing a large proportion of staff. For example, in a recent credit transformation where our team supported, 60% of units were impacted. Success relies on ensuring the organisation and its employees are ready for the transformation, both from a skills perspective and from a documentation and regulatory standpoint. Change management includes a large range of activities and topics (see Figure 2), which should be tailored depending on the needs of both the transformation and the organisation.

Figure2Figure 2: Overview of key elements of change management

In our Deloitte Banking Digital Transformation survey, 92% of respondents stated that they had experienced difficulties with a recent transformation by focusing on the IT development, and neglecting the parallel non-IT change activities[3]. Change management is the basis for enabling employees to adapt to the transformation and provides three key benefits:

Picture1Increased internal adoption & employee engagement Picture2Mitigated disruption to business-as-usual activities Picture3Sustained compliant with regulatory requirements

Non-IT change management: Top 3 pitfalls and associated success factors

Pitfall 1: Insufficient identification and integration of internal and external requirements and dependencies
While a transformation is usually designed to improve a specific core banking process, it is often the case that multiple BAU processes are affected indirectly. Failure to consider the implications for BAU may result in outdated and obsolete documentation, in turn leading to potential regulatory non-compliance. For example, in the case of a large lending transformation, the new processes need to be validated to ensure compliance with the credit regulations and the internal credit policies, and internal control frameworks updated accordingly. In addition, internal product and process documentation would need to be updated based on the changes to ensure consistency – this could even trigger New Business / Product Processes. Our Deloitte survey referred to previously highlights the predominance of this pitfall, revealing that it occurs for 79% of the respondents[3].

To avoid this pitfall, two key success factors to focus on are:

Picture4Firm wide transparent approach ensuring a consolidated cross-functional view   Picture5Overarching and consistent change management approach

Financial services institutions must take proactive measures to promote a transparent firm-wide approach to ensure that all affected business units are aware of the transformation and its impact. Transparency is not only about keeping everyone informed: it allows for proactive identification of potential requirements and hurdles, ensuring that the target state adheres to all relevant requirements. Ultimately it creates a collaborative environment where internal needs and external requirements can be managed effectively, benefiting both the organisation and its employees to avoid any last-minute bottlenecks. For example, in a recent lending transformation supported by our team, a planned go-live was required to be postponed at the last minute due to a parallel credit decision engine update which was not raised to the transformation team and therefore not factored into the release planning. Organisations can ensure a complete scoping of the non-IT activities, through the definition of overarching change management work packages along the target operating model. With our extensive global experiences, Deloitte has set out 20 best practice work packages in lending transformation ranging from strategic forecasting to specific credit decision work packages (see Figure 3). For example, the shift from physical to digital applications also creates a shift in the staffing requirements for customer support from branches to centralized teams: this shift must be quantified, and tailored tactical and strategic measures must be defined. The combination of all these work packages ensures all key transformation aspects are covered to establish bank-wide readiness.

Figure3

Figure 3: Non-IT change management best practice work packages for tech-enabled lending transformations

Pitfall 2: Lack of accountability and time inefficiencies due to the need to align with multiple stakeholders (and obtain their approval)
Navigating the complex network of stakeholder interests and requirements across different functions is a common challenge in tech-enabled transformations, leading to accountability issues and time inefficiencies. In our survey referred to previously, 93% of respondents said they had experienced this pitfall[3]. Overlapping responsibilities and a complex approval process with multiple levels can create serious hold-ups, significantly slowing the transformation progress, impacting its quality and release timing. Without a clear understanding of the role of each stakeholder on project outcomes, the risk of miscommunication and conflicting priorities increases, potentially derailing key transformation objectives. For example, for the reporting framework it is essential to understand the various roles across the lifecycle (i.e. data aggregator, report owner, producer, reviewer, user) to ensure completeness, accuracy and consistency of the reporting. Additionally, the lack of a clearly defined escalation and decision paths for addressing issues identified during the transformation often leads to confusion about accountability, with critical decisions delayed as they end up going back and forth between various stakeholders. For example, when detailing the credit engine specification, the right people with sufficient decision-making power should be involved early-on to minimise time lost from inefficiencies.

To avoid this pitfall, two key success factors to focus on are:

Picture6Clear definition of roles and responsibilities for internal and external stakeholders   Picture7Flexible and agile approach to development
and change management

These success factors are key to enhancing stakeholder collaboration and alignment with the overarching transformation objectives, ensuring that all parties are effectively engaged and that the project adapts to meet evolving needs. Establishing clear roles, responsibilities and single points of contact for key activities and work packages (e.g. IT, non-IT, testing), can significantly enhance accountability. Furthermore, flexible and agile change management practices become crucial as they allow organisations to adapt quickly to changes and integrate stakeholder feedback, keeping the transformation approach dynamic and responsive, directly addressing the challenges of stakeholder alignment and accountability.

Pitfall 3: Insufficient emphasis on staff training, with lack of supporting material, and clear timely planning
Overlooking the importance of enabling employees can hinder the success of a transformation. In our survey referred to previously, 71% of respondents have encountered this pitfall and 50% even encountered it more than once[3]. Training sessions encourage a firm-wide understanding of the “why” behind the transformation and its associated benefits, which in turn encourages staff motivation and reduces potential resistance. To adopt change, employees need to be provided with the right supporting material, knowledge and understanding. For example, in the case of introducing a new loan origination system, credit staff should be involved in testing activities to familiarise with the tool and be provided with tailored training in the new system to avoid negative impact on BAU and the end client. As a complement to training, organisations should not underestimate the importance of materials and documentation, such as user manuals and internal guidelines and of replacing outdated documentation to avoid any confusion and inconsistencies.

To avoid this pitfall, two key success factors to focus on are:

Picture8Open to change and adaptable
firm culture
  Picture9Comprehensive change approach, giving
employees sufficient time to adapt

When an organisation is accustomed to and comfortable with change, new transformations are seen as an opportunity rather than a threat. A strong organisational culture that embraces change is crucial to ensuring that internal staff needs are identified and addressed in a timely manner and do not hinder the transformation. Additionally, a comprehensive change approach that prioritises staff training is essential and needs to be an integral part of the transformation planning to ensure the employees have sufficient time to adapt and adopt the changes, accounting for common delay factors such as staff holiday, calendar unavailability or the language barrier. Through Deloitte’s extensive experience with transformations, best practice approaches include video recordings, initial pilot group trainings or a train-the-trainer approach to be leveraged based on the desired objective. Performing training before the go-live provides valuable feedback through free testing insights which can be addressed. Additionally, the development of robust supporting materials and follow-up clarification opportunities, where staff can ask questions and clarify open points in the months following the go-live, is essential. Innovative players are for example considering applying GenAI enabled Intranet Chatbots to collect questions and provide answers sourced from established change documentation[4]. By taking these steps, organisations can ensure their workforce is equipped to navigate a transformation and the associated benefits can be emphasised.

Conclusion
Tech-enabled transformation is an ongoing process, not a one-time event. By clearly identifying dependencies, assessing the E2E impact and the key required activities of a transformation (e.g. people component, regulatory aspect or marketing needs), transformation and change managers ensure the workforce is equipped to navigate the transformation and enhance future success. The full potential of technology is unlocked only through an enhanced change management approach, which is also a required foundation to achieve the desired impact in the market (e.g. Time-to-Yes, Net Promoter Score)[5].

At Deloitte, we have observed these pitfalls through extensive experiences in Switzerland and globally. We have consolidated ready-to-use enablers to support financial services institutions through the phases of non-IT change management, such as standardised templates and accelerators for each work package in Figure 3.

Reach out to us if you want to participate in the Deloitte Banking Digital Transformation survey (2024 edition) and gain deeper insights into your bank’s positioning relative to industry peers, or if you want to discuss how we can help support you your better prepare for your next process transformation initiative. As you navigate through your next transformation, it is essential to also build in a dedicated Phase 6: Post-implementation monitoring and commercialisation, if you are curious to know more look out for our upcoming blog: Navigating tech-enabled transformation of core banking processes| Part 4: Safeguarding success through post-implementation monitoring.

References

[1] Deloitte. (2024, May). Navigating tech-enabled transformation of core banking processes |Part 1: Business execution readiness as a foundation for success
Navigating tech-enabled transformation of core banking processes | Part 1: Business execution readiness as a foundation for success - Banking blog (deloitte.ch)
[2] Deloitte. (2024, May). Navigating tech-enabled transformation of core banking processes |Part 2: IT development and testing
Navigating tech-enabled transformation of core banking processes | Part 2: IT development and testing - Banking blog (deloitte.ch)
[3] Deloitte. (2023, September). Deloitte Banking Digital Transformation Survey.
[4] Deloitte. (2024, January). Bridging measurement divides in AI, cloud and cyber. Retrieved from https://www2.deloitte.com/us/en/insights/industry/technology/measuring-cyber-ai-and-cloud-kpis.html?id=us:2em:3na:4diGLOB176936:5awa:6di:MMDDYY:author&pkid=1012003
[5] Deloitte. (2023, February). Measuring value from digital transformation. Retrieved from https://www.deloitte.com/global/en/issues/digital/maximizing-value-using-digital-transformation-kpis.html

Key contact

EG

Eric Gutzwiller - Director, Financial Services Transformation

Eric is a Director in the Financial Services Transformation team of Deloitte's practice in Zurich. He focuses on leading process optimization and digitalization as well as TOM design projects. He brings over 11 years of strategy consulting experience in financial services for both leading global institutions and emerging players, as well as central banks and regulators in several established markets (Switzerland, UK, US, HK, Singapore, Germany, Canada) and emerging ones (CEE, Middle East).

Email | LinkedIn 

NM

Nadia Moutiq - Manager, Financial Services Transformation

Nadia is a Manager in the Financial Services Transformation team of Deloitte's practice in Zurich. She brings more than 6 years of experience at several financial services providers in Switzerland, Europe and the Middle East in medium to large, complex and tech-enabled front-to-bank core banking process transformation programs covering topics from change management, smart PMO, process optimization and re-engineering to testing capabilities, risks, controls and reporting frameworks.

Email | LinkedIn 

MP

Matilde Pearce - Assistant Manager, Financial Services Transformation

Matilde is an Assistant Manager in the Financial Services Transformation team of Deloitte’s practice in Zurich. She focuses on transformations, from digitalization to risk frameworks with experience at several financial service providers in Switzerland and internationally. She focuses primarily on lending process optimization and digitalization with specific expertise on change management, smart PMO, regulatory compliance, reporting frameworks (incl. KPI) and monitoring

Email | LinkedIn 

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