Reinventing Business Processes to Win Wealth Management, Lending Customers

After the financial crisis and resultant Dodd-Frank Act regulatory landscape, banking business practices have evolved. Today banks are focused increasingly on wealth management and more prudent lending, which means they have had to reinvent some of their business processes as well.

As the popular saying goes -- the rich just keep getting richer, which means banks want more of their business. Between 1970 and 2008 (last data available), the richest 0.1 percent saw their median annual household income increase by 385 percent.

Therefore wealth management is hot: Barclays launched Project Gamma in January 2010 to expand its wealth management offerings and now has 85 advisers generating $200 million and managing $40 billion in client assets. In May, UBS hired 38 new financial advisors to replenish the ranks that dwindled in 2008-2009.

But wealthy clients are often picky clients and, because they bring in very high deposits, the banks are making sure they can guarantee tip-top customer satisfaction. A bank that can on-board wealthy clients faster and without any errors -- so that the client's wealth is delivered quickly to be managed -- is the bank that will win business. This process of onboarding is critical to building a lasting relationship between the bank and its wealthy clients.

When it comes to loan origination, banks have learned hard lessons from the sub-prime fiasco. There are customers that can pay a loan back and there are customers that probably cannot. With so many steps in loan origination -- from background to credit and income checks to coordinating approvals from multiple sources -- there is a great deal of room for error. If a client's salient details should change while the loan is in process, a bank that is unaware of the changes could be lending to the wrong customer.

What wealth management and loan origination have in common is that they both require efficient and high-quality business process management (BPM). BPM has long helped firms improve quality and increase efficiency by streamlining processes and ensuring consistent execution of the process. Due to the visibility and agility BPM provides, inefficiencies in processes can be recognized and eliminated to improve processes quickly.

For example, according to information presented by the CapitalOne Auto Loan unit at a Gartner BPM conference, BPM systems have helped some global banks to reduce the cost of loan origination by 30 percent and lessen errors in loan origination by 81 percent. These are not only dollar savings -- these banks using BPM have reported a 56 percent reduction in customer complaints. In an increasingly competitive global marketplace, end-to-end customer service management is becoming a critical business issue for banks.

What has been missing in BPM is complex event processing (CEP) functionality, where businesses can monitor critical events in real-time and identify important event patterns that could impact their decision making. If a wealthy client's money is tied up for months within a foreign fund or another bank's vault, the on-boarding bank needs to know quickly. Then it can remove bottlenecks and begin making commissions and using the collateral.

If a loan applicant suddenly loses his or her job in the middle of the loan process the bank will know immediately, and then can respond appropriately. Anything that happens outside of the business process that affects it, or if anything inside it goes wrong, an event will be instantly generated. That event alert will either wait for human response or will have a pre-ordained automated process to perform.

So if businesses were able to merge these two important enabling technologies -- BPM and CEP -- and create an even more holistic monitoring system, such a system would provide real-time visibility into disparate data sources and distributed business operations, enabling banks to monitor, detect and immediately act on process issues before the customer knows there is an issue. This is good news for banks, and better news for their customers.

Dr. M. Ketabchi is Chief Strategist at Progress Software, a $500 million software infrastructure provider that offers a solution called Responsive Process Management, which combines Business Process Management and Business Event Processing.