Why back office processes should be a priority

Mon 21 May 2018

By Jay Dodd, Business Development Director, Equiniti Toplevel

It’s often said that transformation starts with the customer. The consensus is that digitalisation should fundamentally seek to serve the customer better by reducing friction. Yet by focusing on customer-centric delivery, the danger is that back office processes are neglected, with the bulk of the spend invested on the front end.

Digitalisation has seen organisations pursue a policy of channel shift, concentrating on putting in place more cost effective digital access channels such as self-service websites, email, social media and chatbot channels, in order to reduce engagement via face-to-face, paper or telephone.

The problem with this approach is that a transformation project could well be deemed a success with new front of house systems proving accessible and well utilised, belying issues with back office processing. Digitalisation can often hide a failure to integrate back and front office systems, with the new services little more than a façade.

In any transformation project there should actually be two beneficiaries – the customer AND the employee – and this is achieved by delivering end-to-end transformation.

Back office issues

In the retail banking sector, for example, the rollout of online and mobile banking customer channels has been a phenomenal success leading to the closure of expensive high street branches but back office legacy systems continue to cause problems.  The database migration by a high street bank of 1.3 billion records of five million customers is a case in point but the sector routinely suffers from issues affecting online and mobile account access.

The retail banking sector is also struggling to keep pace with an increasingly digitally savvy customer base due to these back office issues. Frustrated users want the same flexibility from their bank as they receive in other service industries and can’t understand why it takes so long to open an account or for financing agreements to be approved.

Take the mortgage application process. While preliminary approval online is now standard it can take weeks to sanction these loans with back-end systems (i.e. the credit bureaus used to verify credit status and identity) causing delays.

The sector is currently being disrupted by the Open Banking initiative which aims to make customer transaction data more fluid and the market more competitive. ‘Born digital’ providers are now entering the fray, unencumbered by legacy infrastructure, forcing the incumbents to address back office integration faster than they may have liked. Some major banks initially struggled to meet the deadline of 13 January for opening up their customer base and another was granted leeway of a year to get its act together, suggesting many are still realigning their systems.

In the public sector, the UK Government hasn’t fought shy of the issue, acknowledging in the Government Transformation Strategy (February 2017) that “in many cases they [i.e. departments and agencies] have not yet been able to transform the ‘back end’ of their organisations” and that this has compromised efficiency as in some cases “the online service passes the contents of a web form to back-office staff, who must then re-key data into an existing system”. It surmises that “if there are fundamental flaws in the business process behind a service, then simply putting it on a digital channel cannot fix those”.

Fixing integration problems between front end and back end systems has also been identified as a major stumbling block in the digitalisation of the Health and Social Services sector. In its 2017 Annual Report to Parliament, the National Audit Office (NAO), which reviews government spending, stated that “integration of ICT systems can result in savings in the long term, but at the same time, the implementation of the reform will increase the need for ICT and other investments and administrative costs during the early years”: in other words, there must be a commitment to investment in back end processes before cost savings can be realised longer term.

End-to-end processing

Developing an end-to-end digitalisation solution IS possible provided back-end system integration is included in the transformation of the service. In the case of the Legal Aid Agency, for example, the design of a digital customer interface was complemented by a staff facing approvals process. The time taken to process applications on behalf of Legal Aid Services Providers was slashed in half, from 20 days to 10 or less, revealing the contribution made by changes to back-end processing.

Front end digitalisation is simply not sustainable, so organisations need to look at how they can improve back office processing and make workflow more streamlined for staff without resorting to a complete redesign or Business Process Re-engineering (BPR). The answer lies in assessment and automation.

The organisation needs to assess where pinch points are occurring that delay processing, such as manual data entry or where data is being duplicated to provide information to more than one system. Having identified these, it then becomes possible to automate these processes and integrate them with the front end i.e. website services.

Automation reduces the number of steps in the process, the requirement for human intervention (and therefore the likelihood of errors), and provides an end-to-end delivery mechanism, while integration with other third party systems via APIs and connectors ensures the system will be able to deliver end-to-end processing now and into the future.

In those organisations that have rolled out customer-facing initiatives, uptake may indicate the project has been a success but the lack of investment in back office processes will become evident. New legislation, entrants, and requirements for data sharing will then see these organisations either fall to competitors or be brought to task by their customers or the regulators. It’s only by digitalising the back office to create an end-to-end service that empowers both internal and external users that the organisation can truly transform.