VIRTUAL BANKINABOX®: How to Create Upstream Flexibility While Keeping Your Operating Model in Check

In an era of digitisation, greatly accelerated by a global pandemic, there has been a deluge in demand for virtual banking from tech-savvy customers. These customers want products and services that are competitive, convenient, and intuitive. Unsurprisingly, this demand glut has resulted in a profusion of both challenger and incumbent banks striving to quickly establish a digital banking offering that is both compelling and distinctive in an over-crowded marketplace.

Setting up a virtual bank at speed and scale requires navigating and addressing a beguiling array of complexities, ranging from customer stickiness, intense regulatory scrutiny, and elasticity of demand to a hypercompetitive market.

The challenges of standing out in a crowded digital marketplace

Given the immense competition amongst virtual banks to acquire customers and provide a superior client experience, the timely design and rollout of a robust and sustainable business model are vital for capturing market share and achieving ROI in a short timeframe (Figure 1).

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Figure 1: A sustainable business model and a path towards profitability

An often overlooked pitfall when designing a digital bank is the temptation to focus only on the client journeys and the user experience design. While these are critical components of any digital banking –or indeed, banking in general – set-up, it risks underestimating the importance of the steps required in operationalising the virtual bank. The operating model, the organisation structure, and the operational control framework ensuring regulatory compliance are also equally crucial elements in the success of a digital bank.

The creation of an effective operating model impacts not only most business areas, but also multiple IT touchpoints and all levels of the organisation to ensure compliance to cross-functional requirements. In addition to these internal bank complexities, financial authorities also require strict adherence to regulatory requirements. This results in increased compliance and regulatory risks that must be balanced with fast speed to market and a broad product offering (Figure 2).

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Figure 2: What is required for a digital bank

Building the Virtual Banking blueprint

A fundamental conundrum digital banks must resolve is how to build their bank’s infrastructure at breakneck speed and efficiency while not compromising the use of best-of-breed technologies and vendors available for each component or service since there are a beguiling number of options available.

In a nutshell, stronger regulation, the need for fast time-to-market, the want for high business-IT alignment and augmenting client demands raise the need for a methodological and proven process project approach. This approach must consider the main challenge of designing and implementing a digital bank. This means introducing a high-quality business model on a budget that’s market responsive and scalable. A well-defined target operating model (TOM), therefore, is vital in delineating the optimal business and IT architecture required for the successful execution of the bank’s business strategy.

However, defining the operating model and target enterprise architecture for a digital bank requires a proven methodology and procedure model with a well-elaborated role concept.

What’s needed is a comprehensive process database with an end-to-end view from a functional and technological perspective to make working with the process documentation easy.

Documentation tools and numerous templates can automate and accelerate repetitive work while an easy-to-learn standard can ensure the reusability and consistency of the documentation.

The challenges of ensuring all requirements and capabilities are met can be solved with VirtualBANKINABOX®.

VirtualBANKINABOX® is a combination of best-practice content, a proven project method and a toolset which facilitates process projects during the introduction of a new digital banking operating model, working in conjunction with Synpulse’s project method SPEEDmethod®.

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Figure 3: From business proposition to operationalisation, based on the VirtualBANKINABOX® methodology

Accelerating the blueprint with VirtualBANKINABOX®

VirtualBANKINABOX® contains the know-how and expertise gained over 15 years in designing and implementing target operating models. Hundreds of best-practice processes and process maps have been used as a starting point for VirtualBANKINABOX®, covering a spectrum of private, commercial and retail banks. They are highly aligned to specific core banking solutions and digital banking front-end providers.

Past projects have shown that with the use of best-practice processes as a starting point and elimination of duplicate work, implementation costs can be reduced by up to 35%. Through the implementation of VirtualBANKINABOX®, the following targets are met:

  • Save time and money in the design phase – Instead of starting from zero, the base of best-practice processes that comes with the VirtualBANKINABOX® will significantly shorten the design phase.
  • Reduce implementation time – VirtualBANKINABOX® ensures that from an early stage, the focus is on the critical capabilities that are required for a digital bank. As a result, the implementation effort can be reduced to the areas earmarked as core digital competencies.
  • Reduce compliance risk – Standardised and well documented processes facilitate compliance and reduce risk.
  • Increase commitment– VirtualBANKINABOX® will involve a significant section of the Bank. All domain experts can contribute to well-elaborated target processes. This increases stakeholder commitment and engagement.

Check out our presentation on how VirtualBANKINABOX® helps to build and run a target operating model for a digital bank here.

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