Platform Operating Model for AI Bank of Future

(9 minute read)

Disruptive AI technologies can improve banking performance in four key areas: profits, personalisation, omnichannel experiences, and innovation. Technology alone is not enough to transform banks into the AI bank of the future. It requires the right platform operating model as well which this blog will explore.

Changing Customer Interactions

Customer interactions with banks are changing rapidly owing to a combination of internal and external circumstances. As customers and banks both increasingly rely on AI to mediate their interactions, the focus has shifted from products to experiences. There is a rapid increase in number and frequency of customer interactions with the bank with a corresponding decline in revenue per interaction.

Banking operations are changing but face constraints owing to a combination of legacy technology, costs of maintaining and upgrading IT architecture, siloed structures, slow and cumbersome decision making, resource constraints, project delays and cost overruns, insufficient domain expertise, weak accountability, and lack of clarity around boundaries of functions. All of these hamper banks’ abilities to respond to customer expectations.

Platforms and Business Solutions

AI technologies enable better customer and business experiences across platform operating models. In an agile approach, platforms are a collection of hardware and software assets, resources, and talent that combine together to provide specific capabilities.

Platform Elements

Platforms typically contain three main elements, which when structured correctly will create value for both customers and enterprises.

Strategy which aligns business and technology outcomes to deliver end-to-end value and units all platform players around a shared vision along a clear roadmap.

Organisation and Governance based on a ’two in a box’ engagement model where technology and business leaders own joint performance metrics tracking outcomes achieved through shared agile working practices.

Technology which landscape is characterised by standard interaction mechanisms such as APIs.

Platform Categories

Platforms characterising banking operations can typically be of three categories.

Business Platforms are those aligned directly to a business unit to deliver business and tech outcomes such as revenue and profitability (consumer lending, credit card, wealth management)

Enterprise Platforms are those aligned to multiple business units to deliver outcome across units and tech assets which provide aggregated services to create operational centres of excellence. Across these two Enterprise Shared Services act as service providers enabling other platforms (core banking, payments, data and analytics) while Enterprise Support Units act as business owners delivering services across the enterprise (finance, HR).

Enabling Platforms are those not aligned to a business unit but provide scale through consolidation, safeguarding through defining guardrails, and facilitate delivery of business outcomes (enterprise architecture, DevOps, IT infrastructure, cybersecurity).

Building Blocks of a Platform Operating Model

A platform operating model provides a strong foundation for business-technology partnerships delivering cutting edge AI-enabled solutions. As an organisation transforms from hierarchical silos to a network of horizontally interconnected platforms, banks should focus on five main building blocks:

Agile Working: Agile mindsets involving rapid decision and learning cycles, sprints, iterative testing and scaling are essential in creating dynamic capabilities. Whether banks are setting up agile pilots or have already achieved a degree of flexibility, banks can experiment with creating multiple ‘pods’ or ‘tribes’ consisting of cross-functional teams made up of experts with a variety of skills working towards shared performance outcomes.

Remote Collaboration: The acceleration of online banking and full or part remote models has put pressure on co-located work practices, team working and collaboration. Agile work models need to be revisited to examine disruptions from remote working, determining those areas that are dependent on co-located human interaction and those that are dependent on system readiness such as data and software accessibility, to support secure, efficient remote work. Creating single sources of truth, shared workflows, strengthening security arrangements and governance procedures can all help facilitate stronger remote collaboration.

Talent Strategy: This involves recruitment and retention strategies for the best IT and engineering talent, harnessing skills expertise, reskilling, investing in digital talent, and building capability development programmes. Internal ecosystems which comprise of partners such as vendors, developers, remote and gig workers can all contribute to talent strategies.

Culture and Capabilities: Banking organisations need to work on a culture that fosters talent, innovation, and impact. A digital culture requires a transformation in mindset and working practices, shared purpose and mission, commitment to talent and collaboration, all underpinned by supportive leadership.

Architectural Guardrails: Standardised mechanisms for intra-platform interactions are required to ensure efficient management of the IT landscape. Architectural guidelines should focus on strategy rather than operational tasks.

Benefits

Platform models offer numerous benefits to all stakeholders in respect of delivering value-oriented business-technology partnerships, stronger performance, transparency, and a future ready business model.

Platforms foster collaboration between aligned interests of business and technology working together under shared performance metrics. Platforms strengthen organisational performance in respect of speed, efficiency, and productivity through agile working, use of automated and advanced analytical tools and enterprise standards. Models also increase transparency, accountability, and knowledge sharing. Finally shifting to a platform operating model can future-proof an organisation’s business model as platforms are incentivised to continuously improve their technology landscape and foster continual learning and improvement.

Platform models offer banks the opportunity to co-own business and technology solutions in ways that maximise beneficial impact on customers. Bringing together the right structures, teams, talent, and resources on a platform model would be a powerful mechanism for banking organisations to optimise their full capabilities and harness AI-powered decision making for the benefit of the customer and business.