By Jeremy Donaldson, Managing Director of Banking and Capital Markets, and Andy Haigh, Head of Banking and Capital Markets, DXC Technology
In recent years, the banking and capital markets (BCM) sector has undergone an unprecedented transformation driven by technological advancements, changing customer expectations and regulatory requirements.
We strongly believe this transformation will continue at pace over the next five years. This will include the evolution of digital operating models to align with the modern customer experience alongside a continued focus on protecting data from cyberattacks, fostering sophisticated secure-identity management and keeping data at the heart of sustainability investments. It will also help reinvigorate hiring practises to ensure BCM companies are reaching the talent that can take them into the future. BCM companies, especially retail and commercial banks that embrace this period of transformation, will be well positioned to succeed in the future.
The customer-experience bar is constantly being raised, with customers increasingly looking for higher levels of personalisation and deeper, more efficient transaction processing. Financial organisations are increasingly exploring new technologies, such as generative artificial intelligence (GenAI) and machine learning (ML), to meet this demand, improve customer care and drive internal processing efficiencies.
However, this convenience is only valuable if done seamlessly, with customers feeling that their experiences and transactional outcomes from their interactions with these technologies are aligned with their interests and values. In this industry, companies cannot afford to have their customers’ trust damaged by poor planning and inadequate implementation of these technologies.
At DXC Technology, we have observed two major phases of any successful digital-transformation journey: the Essential Transformation phase (i.e., preparing for the ability to introduce new technologies securely and effectively) and the Evolutionary Transformation phase (i.e., introducing the new technologies to improve customer experiences dramatically). While elements of these transformative phases can run in parallel, the foundation—the Essential Transformation—must be in place to succeed with the Evolutionary Transformation initiatives.
Stage 1: The Essential Transformation
Maximising the value of technologies such as GenAI, ML and process automation requires introducing these technologies within an environment that is ready to use them. This means having robust, reliable and well-integrated systems in place, as well as well-trained staff who can efficiently handle customer queries and transactions. The efforts required to reach this point will drive greater benefits to the bank through increased efficiencies and tighter security. We call this the Essential Transformation phase; it will prepare BCM companies to exploit the value of the new technologies successfully.
The Essential Transformation stage requires companies to have foundations in place to transact seamlessly and securely to meet their customers’ needs. Retail- and commercial-banking customers alike require their companies to execute smooth and efficient transaction processing across an ever-growing set of channels, payment types and currencies. With this in mind, financial organisations must maintain and improve their abilities to transact efficiently to remain competitive. The age-old term straight-through processing continues to be the goal.
To support this, BCM companies must ensure they cater to bigger data volumes, modernising core banking platforms and standardising enterprise platforms. This sounds like basic housekeeping; however, if the environment for new technologies is not equipped to leverage them, then costs will spiral out of control, and desired business outcomes may not be achieved.
Mitigating risks is another crucial element of the Essential Transformation stage, requiring companies to manage real-time risks effectively to protect their customers’ and their own financial stability—including optimising risk engines, such as credit, market, counterparty and consumer risks. This process provides risk-related services, strengthens operational and compliance-risk controls, and deters and counters cyberthreats.
Through this stage of the journey, BCM companies must monitor and report on the progress of their transformation journeys to stakeholders, whether they are customers, internal management and board or external parties (regulators, market analysts, etc.).
Stage 2: Evolutionary Transformation
For the next stage of the transformation journey, BCM companies need to maniacally focus on better understanding customers by bringing together all relevant customer data and interactions into a single view. This will give the bank the critical information and insights required to better serve its needs. Solving system-integration and data-relevance challenges (which should be addressed in the Essential Transformation initiatives) will create opportunities to unlock personalisation, customer service and simplified client communications.
As part of this evolution, BCM companies must focus on providing great experiences to attract and retain customers. This means leveraging available data to become more relevant to client needs, performing seamless interactions and offering customers the products and services they need when they need them.
As customer interactions grow, get captured and are analysed, the information can add additional value to these interactions by providing guidance or recommendations, such as personalised financial advice based on a much more robust view of customers’ individual circumstances.
While the Essential Transformation stage includes the capability to better facilitate cross-selling and up-selling products and services to existing customers, Evolutionary Transformation introduces a process to identify customers likely to be interested in new products and services because of their personal circumstances—often referred to as “hyper-personalisation”. These concepts are not new. What is new is the technology that exists today allowing for the consumption and analysis of huge data sets on customers to provide a much better understanding of their individual circumstances and interactions with the bank.
Greater leverage from cross-industry partnerships is also part of the Evolutionary Transformation for BCM companies. This enables them to leverage their strengths and resources to partner with other market players and industries to create new products, services and sources of value that their customers will appreciate. Examples of this in today’s market can be seen when companies partner with retailers to offer financial services at points of sale through embedded finance or when banks work with their supply-chain partners to achieve net-zero carbon emissions. Successfully leveraging cross-industry partnerships relies heavily on the ability of participants to share data and integrate their systems to generate additional value for end customers.
Looking ahead and completing the transformation journey
Advances in AI and large language models (LLMs) have created opportunities for companies to increase the value delivered to their customers substantially at the click of a button, creating tailored, hyper-personalised customer experiences.
GenAI has the power to transform the experiences of customers and employees alike, enabling organisations to cater to different tones of voice, offer individual recommendations and create more human-like interactions at much faster speeds. Such technologies will also be used maliciously by outside threat actors. Therefore, security will need to advance in parallel and at pace. Data and how it is used will establish new analytical biases, which will inevitably cause a moral dilemma for banks as they decide how to act based on what they can now see.
For example, aircraft cannot deliver people and cargo without first having airports designed to enable them to fly safely. Similarly, BCM companies that can easily translate new technologies into value for end customers and wider stakeholders will be those that have the technical, operational and organisational foundations in place to exploit the inherent value of rapidly developing technologies properly.