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Shared Service Centers Presentation from Rob ... - Kern Evolved

Shared Service Centers

the role in payment operations

Rob Hayden

McKinsey & Company


In North America, as operations has become more automated, mindsets

around Shared Services now include production heavy functions

Historical

Current

Drivers

Check &

ACH


Check: manual & paper based

▪ ACH: digital and autonomous

▪ Check: relied on physical

transportation

▪ Historically siloed due to inherent

differences in processing and

ops model

▪ Significant increase in the electronification

and automation of check

▪ Removed dependence on physical paper

making ops process more electronic – more

akin to how ACH is processed

▪ Ability to break silos and see like skill sets

▪ Check 21 enabled image based

processing

▪ Cost pressures to be more in line with

electronic

▪ Continued cost pressures around

operations

Fraud

▪ Organizationally siloed/ fragmented

▪ Fraud related systems are noncommunicative

▪ Little to no C-level awareness of the

magnitude of fraud

▪ Fraud mitigation transactional in

nature

▪ Enterprise relationship view

▪ Growing C-level awareness of the risk

associated with fraud

▪ Push to get to systems that talk to one

another

▪ Increase in risk exposure and fraud

related losses

▪ C-level involvement

▪ Need to avoid catastrophic loss

(financial and/or reputational)

Acct

opening &

customer

maint.

▪ Paper intensive

▪ Manual and product specific based

on staffing and technology

▪ View that it is core to product

▪ Shift away from the thinking that it was core

to their product to something that gets done

and not core to product

▪ Technological revolution: automated

process with less reliance on paper

▪ Cost pressures in back office

IT arch.

▪ 1:1 architecture

▪ Siloed, fragmented, and nonintegrated

architecture

▪ 1: Multiple

▪ Attempt to simplify bank architecture

▪ Movement towards enterprise integration

▪ Advent of hub services architecture

▪ Need for customer enterprise level data

▪ Desire to move towards real-time

Document

management

▪ Siloed, fragmented, and nonintegrated

architecture and

organization

▪ Paper intensive with a level of manual

intervention

▪ Significant increase in the adoption of

eDelivery and eInvoicing

▪ Reduced demand for paper creating

capacity in Print & Rendering

▪ Consolidate around like skill sets and

infrastructure

▪ Continued cost pressures around

operations

▪ Growth in electronic adoption of

eDelivery and eInvoicing

SOURCE: McKinsey team analysis

McKinsey & Company | 1


4 step approach for thinking about SSC levers

Eliminate Standardize Consolidate Automate

Outsource/ offshore

▪ Evaluate and

eliminate

redundant,

excessive, errorprone

activities to

avoid bringing over

the “waste” into a

new process.

▪ Eliminate redundancy/

multiple touches

▪ Improve efficiency

and reduce risk

caused by

inconsistent

procedures

▪ Reduce the

opportunity for errors

and enhance

customer experience

▪ Harvest best practices ▪ Automation is not

into one organization for beneficial to broken

the best possible result processes or

▪ Improving visibility procedures

▪ Create accountability to ▪ Automation provides

ensure that simplified access to multiple

and standardized tools previously

policies and procedures inaccessible due to

are implemented siloed organizational

▪ Leverage skill sets structure

resulting in multitasking,

cross-training,

career pathing,

reduction in fixed costs

▪ Offshoring or outsourcing is a viable option to be heavily

considered especially prior to steps 2-4

▪ To offshore or outsource an inefficient process could still

negatively affect pricing (cost) and quality/ customer experience

SOURCE: McKinsey team analysis

McKinsey & Company | 2


Viable areas of production operations for SSCs

4.0

3.0

▪ Sales

▪ Innovative services

2.0

▪ Facilities

▪ Supply chain

▪ Marketing

▪ Customer

1.0

▪ IT

▪ Finance

▪ HR

▪ Procurement

Areas for new SSCs

The Shared Services world can be broad depending on what

is in scope and what is out. Here is the list for payments

related activities that are prime targets for SSCs:

▪ Research and Adjustments

▪ Exceptions and Returns

▪ Keying

▪ Reconcilement and Balancing

▪ Non-Check Document Management - Statements, Print,

Scanning, Signature Card, Tax, IRA Forms (Receiving,

Scanning, Storage and Retrieval)

▪ Fraud Management

▪ New Account Opening

▪ Customer Account Maintenance

▪ File Transmission (incoming and outgoing)

▪ Cross-channel Investigations

There are also Shared Services opportunities that are

tangential to Payments:

▪ Project Management

▪ Reporting and Analytics

▪ Training

▪ Customer Improvement

For examples of financial institutions implementing these

SSCs, please contact Rob Hayden or Marcy Ellis-Williams

Areas SSCs have already

been implemented

Areas FI’s have recently

implemented SSCs

SOURCE: McKinsey GBS Leader Survey, team analysis

McKinsey & Company | 3


Benefits sizing ranges from 10 to 40%

Lever

Examples of

impact to customer

Examples of

Impact to bank

Benefits

Expected

range of

benefits

Implementation

complexity

Common

policies and

practices

▪ Common authentication

processes regardless of

channel

▪ Change one change all

account maintenance

▪ Cross channel and

product information and

policy share

▪ Consolidated functional

unit administering

account maintenance

▪ Improve quality/ reduction in

exceptions and workarounds

▪ Filling gaps and handoffs

▪ Reduction in risk exposure

10-20%

Enhanced

career

pathing

options

More crosstraining

across

payments or

channels

▪ Higher percentage of first

touch resolutions

▪ Greater efficiency of calls

▪ Create career path

where one does not

exist today

▪ Bank gaining trusted advisor

reputation

▪ Retention – reduced new

hire training costs

▪ Employee satisfaction

▪ Enhanced expertise

10-20%

Process

standardization

and

consolidation

IT automation/

selfservice

tools

▪ Greater efficiency

▪ More comprehensive

▪ Any time, any place –

self-sufficient, not at the

bank’s will

▪ Real-time information

▪ Relationship information

▪ Economies of scale

and specialization

▪ Faster M&A integration

▪ Faster new product

speed to market

▪ Reduced headcount

▪ Reduced fixed, labor, and

system costs

▪ Improved quality

25-40%

SOURCE: Sizing hypothesis and then confirmation from interviews

McKinsey & Company | 4


Although SSCs may provide significant benefits, they are not without risks

and barriers

Governance

▪ Who’s going to champion and socialize the

transformation program

▪ Who’s going to run the program (internal

politics)

▪ Self-preservation

Implementation costs

▪ Training

▪ Moving/ building

▪ Retention of knowledge base

▪ Upfront cost if you don’t already have

location to house this service

▪ Loss of/inability to attract highly

skilled staff at surviving/

new locations

▪ Loss of “best-practice knowledge”

in transition

▪ Business disruption during transition

Regulatory

▪ Protection of PII

▪ Local laws

▪ Tariffs

Integration

success

Integration risks

Technology

▪ Dependency on consolidated

platforms

▪ Cost of implementing consolidated

platform

▪ Security, physical and cyber

Business continuity

▪ If consolidated to one side, there

is a single point of failure

▪ Longevity of transformation

program

▪ Initial implementation success

▪ Lack of LOB buy in or

cooperation

Economic/ political threats

▪ Physical location may be of concern

based on current political conditions

▪ Reputational risk of moving both from

customer and local population perspective

▪ LOB dissatisfaction with shared service

performance and remoteness

▪ Negative scale and decreased effectiveness

Access to a talent pool

▪ Potential limited pool of talent

based on physical location

▪ Nearby competition creates poaching

Mindsets and behaviors

▪ False fears

▪ Need for whole degree of

standardization

▪ Unclear vision and aspiration for

shared services across the firm with

low buy-in/compliance from LOBs

▪ LOBs fear loss of control and flexibility

SOURCE: McKinsey team analysis

McKinsey & Company | 5


Thank You!

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