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How Banks Are Capitalizing on Pandemic-Fueled Digital Transformation to Serve Customers – Futurum Tech Webcast Interview Series
by Shelly Kramer | May 21, 2020

In this episode of the Futurum Tech Webcast Interview Series, I got the chance to talk with Marc Andrews, VP of Financial Services and Insurance at Pega, to discuss how banks are capitalizing on pandemic-fueled digital transformation to serve their customers. This conversation is intended as a preview to Pega’s upcoming Pegaworld iNspire virtual event being held on June 2, 2020, from 9 to 11:30am EDT. This high impact, low time commitment, interactive virtual event is free, sure to be packed with great information, and also available on demand for all registrants.

In our conversation, Marc and I covered a myriad of topics relating to how banks are capitalizing on pandemic-fueled digital transformation and, in the process, discovering not only how better to serve their customers overall, but also the beauty of a digitally transformed organization. We explored:

  • The challenges banks face in servicing their customers as a result of the global pandemic, and how banks and financial institutions are capitalizing on digital transformation to improve almost every part of their operations;
  • The impact working remotely presents for banks and financial institutions when handling an increased volume of requests and a different kind of customer requests than what they are accustomed to and a myriad of other challenges;
  • The gaps or full on deficiencies in some organizations’ digital capabilities and how the Band-Aid approach is out, and auditability, compliance, scalability, combined with the ability to shift resources as needed, is more important now than ever before.
  • The fact that despite the rise of FinTechs — who often offer slicker, more seamless digital experiences — this crisis might actually give banks the chance to recover and thrive and the factors that influence that;
  • What customers are looking for from their technology partners and what they seem to need the most;
  • The role intelligent automation can play in helping banks and financial institutions manage processes and cases from front to back and to be able to deliver those quickly.

Marc shared some fascinating customer use case examples, including the small business lending applications the team at Pega developed, as well as the UK Coronavirus Business Interruption Loan Scheme they created, and also how the Commonwealth Bank of Australian and RBS out of the UK are using technology to be an empathetic partner to their customers.

We are definitely seeing there’s a new way forward in financial services, and banks can use technology to increase their level of service, create and deepen customer loyalty, streamline processes, increase efficiencies, meet compliance objectives, and more effectively compete in what is an increasingly crowded marketplace.

You can watch my interview with Marc here:

or grab the audio version of the interview here:

This is your reminder to make it a point to register for Pega’s upcoming Pegaworld iNspire virtual event being held on June 2, 2020, from 9 to 11:30am EDT. This high impact, low time commitment, interactive virtual event is free, sure to be packed with great information, and also available on demand for all registrants. Be sure and note that even if you can’t attend the virtual event in person on June 2nd, if you’ll register, you’ll be able to access the entire event on demand. Register for Pegaworld iNsprire here and I’ll “see” you there.

Check out the show recap of the interview I did with Pega’s Don Schuerman discussing how the pandemic might well be a catalyst a lot of businesses needed. You’ll find that here: The Pandemic is a Catalyst a Lot of Businesses Needed – It’s Time for a Massive Rethink.

Other insights from Futurum Research:

TSMC Plans To Bring Advanced Chip Manufacturing To The US 

Microsoft Teams Enhancements Spotlighted At Build 

Making Video An Effective Part Of Your COVID-19 Marketing Strategy

This podcast is part of a special series focused around what leaders and companies are doing to help employees and customers deal with COVID-19. Be sure to subscribe so that you don’t miss out on amazing insights.

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Image Credit: Pega

Transcript:

Shelly Kramer: Hello, and welcome to this week’s episode, the Futurum Tech Webcast Interview Series. Today, I am thrilled to have as my guest, Marc Andrews. Marc is the VP of Financial Services and Insurance for Pega. We are going to talk about the challenges that banks today face in servicing their customers in the pandemic and how they are using digital transformation to improve their response. Welcome, Marc. It’s great to have you.

Marc Andrews: Thanks. It’s great to be here, Shelly.

Shelly Kramer: Here we are working remotely, I know your customers all over the world are working remotely, and there’s a different set of challenges for banks and financial institutions as it relates to that. Talk to us a little bit about what some of the needs your clients are bringing to you.

Marc Andrews: Well, I think one of the biggest things that we’ve seen is around the challenges that banks are facing around how to address all the different types of customer requests that they’re now receiving. There’s been a huge change in both the volume of requests they’re getting, especially in certain channels as regular channels might be closed or overwhelmed, and in the types of requests that they’re getting from their customers. So that’s really been one of the biggest issues the banks have been facing with, is how to handle this sudden increase in requests from customers. Also, one of the other things that this crisis has really highlighted are the gaps in some of their digital capabilities.

I mean, frankly, banks have been on a digital transformation journey for a while, but interestingly, I think they thought they had a little bit more time to get there and we’re moving in a more gradual pace. I saw a great cartoon that has a picture of some people in an office saying, “Oh, digital transformation is years away,” and you have a big wrecking ball coming down with the words COVID-19 on it, heading towards the building. I think that’s really the situation a lot of banks were in and now all those gaps in capabilities are just getting highlighted with the crisis.

Shelly Kramer: Yeah. I had the chance to interview Don Sherman from Pega last week. Our whole show talked about how this pandemic is really in many instances a catalyst that businesses needed, whether you wanted it or not, whether you saw it coming down the pike or not. This really is a situation where businesses have no choice but to embrace technology and to really make some significant path, significant inroads, as it relates to digital transformation. We don’t have time anymore. I saw another… Oh, I think I was listening to somebody from IBM or Microsoft in one of the events that they had and they were talking about basically what we’ve seen, is two years of digital transformation in about two months’ time.

So we’ve seen that very quickly, and moving forward, this is really, I think, a great opportunity for banks, for sure, and financial institutions to look at operations as usual and rethink everything. They really don’t have any choice.

Marc Andrews: It’s interesting that I don’t quite think that digital transformation is actually happened. I think it will happen, but I think the statements about two years’ worth of digital transformation has happened in the past two months… I actually think one of the challenges we’re seeing is that’s not the way most banks have approached it. The way most banks have approached these problems has been to throw up a bunch of band-aids. They’ve put in place dumb web forums to capture customer requests or deflect calls from the call center.

We saw what happened with the small business lending drive and the payment protection program and how people just put on these forms to capture a bunch of lending requests, but didn’t have the digital capabilities to process them and were having to throw people at the problem. So I think there’s still a lot of work to be done. That’s really what we’re finding, is people need to figure out more sustainable approaches to digitally enable. The other interesting thing that I’m seeing is it’s creating a different mindset, and that small business lending example highlights this.

I was just talking to the head of corporate banking of one of the top four banks in the US, and she was telling me is how before in a lending application, for example, they define the process and then they go and figure out how and when to digitally enable it. They said with this, as an example, there was no manual or interactive or human touchpoint. They did digital only. They started from digital. That’s the mindset that this is forcing people to have to go through. They almost have to start from digital as supposed to figure out down the line how to add digital capabilities.

Shelly Kramer: When I hear that, I think, “Finally.” I think that what is really important for financial institutions to understand right now is, A, there’s never been a time where customer loyalty is more important, and B, customer patience in terms of, “This is the way we’ve always done it and this is the way that we’re going to require you to do this,” is really evaporating. I think that was true, well, I know that was true even in my own life and experiences. My husband and I were buying a car last summer. I remember during the process trying to work with my bank and saying, “You have made every part of this. I mean, I’ve been your customer for 20 years. I run all of my personal finances.”
“I run all of our business finances through this financial institution. Okay. You are making this process so incredibly difficult. You know what I’m going to do? I’m going to go over here and get this loan applied, approved, done, signed, sealed, and delivered in 15 minutes using this bank who understands how to design things with a customer-first mindset.” So we’re dealing with a different set of variables now because we’re in a time of crisis, but I think that those two fundamental things remain true. We don’t have to do business as usual. It just because. I think banks have in some instances been slow to change, and we’re dealing with customers who are really savvy and who don’t care all that much.

I mean, I think I certainly grew up in a time and you probably did too, where it was really important to have a relationship with a banker, with a local banker. It’s like that banker just has your back and knows your business and can help you when you need it and everything else.

While I think in some instances that is still true, I think that what we see with consumers today is also entirely different. These are my business needs, who is the provider who can most effectively from a trust standpoint and I feel confident with, and who can help me get this done. I think that that’s really what becomes important to, pandemic or not, when it comes to embracing technology and a digital first mindset and everything that you do.

Are you seeing your most savvy clients embracing that way of thinking?

Marc Andrews: Yeah. Interestingly, I think the situation that you raised is exactly the threat that banks were under prior to the crisis. They were getting attacked by the fintechs that were offering slicker, more seamless digital experiences. However, interestingly, I actually think this crisis is going to give a lot of those banks the chance to recover and thrive. There’s a few reasons for that. One is, there is oftentimes in these crisis scenarios a flight to safety, people want to go with the people they trust. But the other interesting thing is, while you do want to be able to engage in that digital manner, it doesn’t mean you don’t want the human touch.

I mean, that’s part of the reason why the call centers are overloaded. Some of the things they could do online, but they don’t want to do online. They want to talk to someone. I recently went through a process of going through a mortgage also, but I never… and I talked to a banker, to a person, and I found the experience really helpful, but I never met the person. It was all online and digital and talking to them and exchanging documents via online forums. But I still had that person and that confidant to engage with. What we’re seeing is, the advisory aspect is going to be critical in these times of crisis and as people look to what is likely to be an extended recovery period.

The consumers are going to be looking for that advisory aspect. The banks that can come in and deliver that but in a digitized fashion and with more automated processes behind that are going to be the winners. That’s where we’ve seen some of our customers, some of our banking clients, doing extraordinary things in these times. As an example, one of the large Canadian banks we’re working with, within three days, was able to get not a dumb web forum set up, but a digital interface for capturing crisis-related customer requests.

But not having them just go into the ether or into some large queue for people to pick and choose from, but they went into a solid backend case management system where they could be triaged, sent to the appropriate people for review, where they could track the process from start to finish, where they could digitally automate parts of the process, streamline some of that processing, and even automate payments from, for example, the Canadian Revenue Authority and IRS and things of that nature. In fact, they got the forums and the digital process set up within three days and process over 60,000 direct deposit payments within the next three days.

So we’re seeing the ability to get digital capabilities up and running much more quickly than they did before. But it’s critical that people think about not throwing on a band-aid, but building up something that is going to be able to scale as they move forward, something that isn’t going to be just a stopgap measure that a month from now, two or three months from now, they’re going to be wondering, “Okay, what were all those requests that we got? How did we handle them?” They’re not going to have compliance and audit teams coming in and saying, “Okay, why did you give this person an extra three months for their mortgage payment? What justification was there? Where’s the process? Who made the decision?”

So being able to have that auditability, that traceability, into all these activities, all these special exceptions that are being made, all the requests you’re getting, and being able to track the response times and the service level agreements; how do you track and know, okay, we just got thousands of requests and you know, how many are still waiting to be responded to? How many have we resolved? What are the different types of requests we’re getting? Then the next aspect is how to really support a distributed and flexible operations teams behind that. Because that’s the other big challenge that we’re seeing, is those workloads are going up and down in different areas of the business and banks don’t necessarily have all the people and personnel with the right expertise to handle those types of requests just sitting around.

So what happens when you have in a loan servicing area of your business your staff to handle a certain volume, and all of a sudden the volume doubles or triples, or when the small business lending applications come in. I had a friend that worked for a mid-sized regional bank, and she was asked to go spend the weekend helping with a lot of the payment protection program loans that had come in and she wasn’t in the small business lending department. So she had no idea how to actually process these loans the right way.

What you need to be able to have that flexibility to shift resources back and forth is more guided processing and more automated capabilities, because of its manual work and the policies are documented in some Word documents somewhere on some SharePoint site and people don’t really understand the process, they’re not guided through the process by the system, you haven’t codified those policies. Then you’re not going to be able to handle those volumes. But if you can automate more steps in the process, if you can provide guidance and take out some of the manual decision-making, then you can handle those constant changes in volumes and changes in workloads.

Shelly Kramer: Yeah, definitely is a game changer. That’s for sure. One of the things that your mention of your Canadian client reminded me, and shame on me for not bringing this up earlier, we’ve got the PegaWorld iNspire event coming up. That is a digital event. It is being held on June 2nd from 9:00 to 11:30 Eastern Time. I’ve been covering these events for the past four or five years in person. One of the things I always enjoy the most from this event, and really from any event I attend as an analyst, is I’m always looking for use cases. While it’s great to hear new product launches and brand success stories and all this sort of thing, I’m a very nuts and bolts person.

So when I can hear, “Here was our customer’s challenge, here was the solution that we came up with, and here’s how we put it into play,” I think that that is really interesting. So for those of you listening or watching, know that the registration for the PegaWorld iNspire event is free and it will be awesome. So I’ll include links here in the show notes for you to sneak over and grab a registration and save a spot there. So talking about challenges and solutions, I know that you guys have developed some amazing things to help small businesses with their lending processes that have arisen out of this COVID-19 pandemic. You want to give us an example of one of those?

Marc Andrews: Yeah. It’s another great example of the need to build intelligent applications that have the ability to manage the process and manage cases from front to back and to be able to deliver those quickly. That was one of the things we highlighted in our small business lending solution that we literally delivered in a period of a week. What we did was we actually addressed multiple sides of the problem. The first part of the problem was just being able to accept applications from a bunch of… Again, like I talked about before, all of a sudden, a huge volume increase of the number of customers making these requests for small business loans.

We had to support the ability to not only just accept applications, but build intelligence into the application to go through the qualification and eligibility criteria. One of the things that we saw happen to the banks is, they accepted all these applications but a lot of them may have been for amounts that were more than they were actually allowed to have, because there were certain guidelines about how much money you could borrow based on the size of company, how many employees were in different compensation levels. Then there were certain eligibility criteria just in general that you had to adhere to.

So a lot of banks just took in these applications and then had to manually run through all those checks. We built all of that into the front end of the process. So as someone went in, a small business, went in and started applying for a loan, immediately there, by asking them a few questions, we could then pop up on the screen and say, “Okay, this is how much you’re actually qualified to get a loan for,” without having to have all that iterative back and forth process. So it created a filter and filter it out any applications that in the past would have come in for higher amounts or that were ineligible. So building that into the process.

It also streamlines the experience for the customer. So now, as we’re capturing the end-to-end process in a digital fashion, we can keep the customer up to date on the status; let them know when we’ve received information, if we need additional documentation or information, send the request back. We’re actually doing the same thing for the loan forgiveness process. So a lot of people focused on the initial loan application, but as part of the Paycheck Protection Program at least, these businesses and part of the appeal of these loans is that they will be able to be forgiven for a large part of the loan. It almost becomes a grant if you will.

But again, there are certain qualification criteria. They need to go and provide documentation proving that they spent a certain percentage of it on payroll, how much money was spent on utility or mortgage interest or rent, things of that nature. So we also built that second half of the process where as the loan reaches that seven to eight week period, we automate the generation of a notice out to the customer with an intelligent form for them to provide the information and the details.

Then it automatically calculates how much of that loan is eligible for forgiveness, and then allows the information and documents to be routed to people at the bank that can go and verify the information and the documents, can indicate if certain information is missing, have it sent back to the customer to resubmit the information, pass it on to the SBA, capture the SBA response, and then transition the loan, either pay off as much of the loan as was forgiven and transition the remaining amount into a regular loan. So it’s completing that end-to-end process. One of the things that we focus on is building from… we talk about this as building from the center-out.

Maybe Don talked to you a little bit about this, where we don’t embed the rules or logic directly into the front end channels or applications, or even directly tie into creating an abstraction layer between the definition of the process and the ultimate backend systems. What that does is it gives you the flexibility to drive change and to enable you to support additional channels and front-ends to participate in the application.

But also it enables you to adapt the application very rapidly. What we’re finding is, while the Paycheck Protection Program has pretty much gone through both cycles and it’s pretty much done, there’s the Main Street Lending Program.

In the UK, there’s the UK Coronavirus Business Interruption Loan Scheme, which is a different program that has its own guidelines and its own criteria for government backing versus forgiveness. We build in rulesets that are able to be tailored in a much easier approach. We use this situational layer cake approach where you can layer on different rules and policies based on the product line, the business line, the geography, things like that so you can manage the different complexities in a much easier approach so that it reduces the overall complexity of your applications and it enables you to deliver things much more quickly.

Shelly Kramer: Yeah, that’s really cool. I mean, the forward thinking of the end solution of the PPP program is really exciting, because I think that a lot of people, banks included, banks and consumers went into this only thinking about the beginning part. This is a really short program, so solutions that serve the end of the program as well is, I think, again, something I hadn’t thought of at all. So I know that something that you’ve developed you’ve made available, I think, free of cost. Is there something that exists that you’ve made available free of charge?

Marc Andrews: Yeah. So what we did as the crisis started emerging, we started developing out a few reference applications. What we mean by that, they’re sample applications that basically demonstrate how the power of the Pega platform and how Pega can be used to address a few different problem areas. One is the small business lending area. So the small business lending application we created as a reference application and posted it and made it available in the Pega community for any Pega customer to download at no charge. They can download, they have access to the code, the rulesets, things of that nature. We created one version for the US Paycheck Protection Program.

We created another version for the UK Coronavirus Business Interruption Loan Scheme. We’re making this available that customers can go and take that code set, deploy within their environment, modify the policies and the rules. Again, it’s built in the Pega approach of defining different stages as part of the process where you can… and the different steps at each stage so that you can plug and play or swap in and out different steps. So for example, we have a step for sending information to your core loan system. You can replace that in with whatever your core lending system or backend loan system is. You can replace any of the components for driving the communications to the clients.

We also delivered another reference application for crisis-related customer requests. So again, we see a lot of banks out there that are being inundated with all of these different customer requests. What we did is we created a intelligent application that can sit at the front-end and capture all these different types of customer requests and generate appropriate cases based on the type of requests. Then we prebuilt four or five of the most common types of requests, like the request for a loan concession, like if they’re asking for deferral of payment or a reduction in interest rate on their mortgage or their credit card payment. So a case type for managing those requests.

We also built out another one for requesting fee waivers. That’s another thing we’re seeing banks deal with if they fall below minimum balances, or haven’t been able to make payments, run into overdrafts to be able to address that. We’ve also seen a huge increase in the number of payment disputes that are coming in, especially credit card and debit card related disputes, because this happened to me personally. I had tickets for a Broadway show on, I think it was March 16th and the show was canceled obviously. They sent out a note saying, “Call this number for refunds or to figure out what to do with your tickets.” I must have called like 15 or 20 times and got a fast busy signal, couldn’t get through.

So what I do, I called my credit card company and told them, “Hey, I’m disputing this charge because it hasn’t been refunded. I can’t get ahold of the merchant.” That’s what happened to a lot of people in this crisis. They couldn’t get hold of the merchant or they found it was much easier to deal with their bank. So they ended up going and disputing the charge through there. So that’s another example. So what we did is we prebuilt out cases for handling these different types of customer requests and enable you to define different prioritization, routing based on the type of requests and the priority of the requests, and track the requests from initiation to completion.

Even with the built-in reporting to provide transparency into how many of the requests are outstanding, how long they’ve been taking, if there are certain bottlenecks or areas where cases aren’t getting resolved or responded to, or certain types of cases. So that’s, again, one of the big challenges that people had, is that just lack of visibility and transparency into the different types of issues customers were facing and how long it was taking the bank to actually respond to those issues.

Shelly Kramer: A lot of good things are coming out of this. So that’s a big bonus. I mean, good things for banks and for customers as well. So as we get to the end of our show, I want to ask you, so I’ve already mentioned to our audience the PegaWorld iNspire event that’s coming up on June 2nd. What are you looking forward to most? Leave us with that. What tempt to us with why you want to be absolutely positively sure to register for this event because of what?

Marc Andrews: So I think what we’re seeing is there’s a new way forward in financial services. It’s going to be an environment where banks can actually have an opportunity to be more empathetic with their customers to increase the level of service. What we’re seeing, and as you mentioned, is we’re going to highlight case studies. You’re totally going to be hearing from Pega customers about how they’re leveraging the platform and taking advantage of our capabilities. We’re seeing some banks do amazing things where they’re really stepping up the level of service they’re providing to customers even as we think about how you figure out the next best action and how you engage with your customers in a more personalized manner.

It used to be very much focused on cross-selling. how do we cross-sell our customers and maybe try and keep customers from leaving the bank. But now we’re seeing Pega customers use their platform to really provide a more balanced approach to what is the next best conversation to have with your customers, and how do I proactively actually service customers? Maybe instead of reaching out with an offer for a credit card, I should be proactively reaching out to this customer that I identify as a troubled situation and maybe needs to have some relief on their credit card payment or on their mortgage payment.

Two of the customers that… or two of the largest and probably most profiled customers of our customer decision hub technology, Commonwealth Bank of Australia and RBS out of the UK, both were great examples of banks that came across being very empathetic and supportive to their customers, that provided significant relief to their customers and used their platforms for engaging and providing better service to their customers. Not using it as an excuse to go sell them more, but as an excuse to be an empathetic partner to their customers.

Those are the types of stories that you’ll be able to hear more about and that we’re really enabling in the financial services community.

Shelly Kramer: Cool. Well, I’m looking forward to that. I think that you made a really important point here. I think that banks have been certainly threatened by financial services startups and the reality of waning customer loyalty or the threat of waning customer loyalty. This is really a chance, I think, for banks to pull customers back in and to be trusted and really develop those relationships anyways. I’ve seen empathy calculators before in terms of some of the dashboards that you use and I’ve seen real world results in terms of what some people have been able to experience as a result of turning up the empathy factor a little bit. So I’m really looking forward to the event.
Marc, I really appreciate the time you’ve taken with us today and we’ll see you on June 2nd.

Marc Andrews: Thanks. It was my pleasure.

Thank you for joining us on this week’s Futurum Tech Podcast, The Interview Series. Please be sure to subscribe to us on iTunes and stay with us each and every week as we bring more interviews and more shows from our weekly Futurum Tech Podcast.

 

 

 

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