Leveraging operational excellence to optimise payments processingJun Wang
Operational excellence is playing a major role in driving efficiency across various sectors, and digital transformation backed by modern technologies has helped to further reduce costs and transit from service-through-labour to service-through-software.
With the growth of the digital economy, which has been enabled by leading-edge technology and efficient processes, consumers and related businesses have a wide and ever-increasing array of choices to meet their payment needs. The emergence of internet-backed, cloud-hosted payment service providers has reduced merchant reliance on direct or point-to-point interfaces for payment processing, and presented new opportunities for easy, swift, and low-cost access to the market versus traditional merchant acquirers and processors.
For many mainstays of the payments industry, process re-invention may be just the ticket to increased efficiency, sustainable growth, and a way to embrace digitalisation and a pivot towards customer-centricity.
Changes and challenges
In the face of business uncertainty and increasing regulatory pressures, financial institutions and payment service providers need to re-consider how to drive innovation, using ideas from operational excellence and process re-invention. In addition, major initiatives such as New Payments Architecture, ISO20022, and RTGS Renewal will transform the landscape and require significant change adoption.
For many payments service providers, outdated and inefficient processes coupled with their limited agility is inhibiting their ability to react to new opportunities. These blockers have resulted from procedures developed before widescale digitalisation. At the same time, the tools and methodologies that are readily available to support the evolution of today's payments landscape remain largely un-tapped.
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Adopting an 'excellence' mindset
To succeed, organisations should embrace new ways of thinking, embed an operational excellence culture to accelerate the digitalisation of payment processes, and enable further improvement on organisational efficiency.
Operational excellence is the execution of strategies to continuously optimise run costs with lower risk and increased efficiency. Much of operational excellence is founded on Lean concepts, but it is also based on embedding long-term change into the organisation to drive significant improvements. We believe that embedding an excellence culture will help to baseline the current maturity level and identify operational issues on an ongoing basis. Consequently, organisations will be able to execute continuous improvements to processes and prioritise these efforts based on value.
Furthermore, as one of the most important elements of operational excellence, process is an important aspect for any business to focus on. A number of companies have taken advantage of the rise in automation and cognitive technologies to automate their business processes. However, many of them forget that before any activity can be effectively automated, it needs to be optimised. Without optimisation, automation will simply automate the incorrect activity and fail to achieve the intended objective.
To maximise success, organisations should consider process re-invention rather than automation alone, where business processes are diagnosed and optimised first before automation. The elimination of unnecessary process steps, a reduction of redundant or duplicate governance checks, and the development of better decision making will expedite the entire processing chain. In addition, companies should identify new opportunities through analysis of different markets, new cultural insights, and consumer research to inspire process re-invention.
As banks and payment institutions try to grapple with new ideas such as alternate distribution channels and ‘platformication’ of services to optimise operations, advanced AI tools are emerging as key facilitators of innovation. These disruptive technologies can uplift automation to the next level, simulating human cognition processes to upgrade a business’s capability and opening up new sources of value creation. This helps to unlock potential, increase efficiency, enhance customer experience, and acts as a key contributor to process re-invention and operational excellence.
To tackle challenges, our integrated and practical approach to operational excellence focuses on overarching business goals whilst improving business processes. Our operational excellence approach focuses on six key elements:
- Voice of your customer: This element focuses on developing a deep understanding of customer requirements of products or services that your organisation is offering, identifying critical features and specifications that match their unique needs.
- Process efficiency: This consists of a set of principles and tools to align the delivery of processes with customer demand and manage waste out of the end-to-end value stream. The focus of process efficiency looks to optimise the capacity of the whole organisation.
- Mindset and behaviour: This is about implementing a set of behaviours for leaders and employees to help the change to stick and to enable continuous improvement. This change in mindset aims to challenge the status quo, empower teams, ensures cross-functional working, and ultimately ensures that change is welcomed rather than resisted.
- Skills management : This looks at analysing current employee skillsets and requirements for future talent. Skills management is the starting point for ensuring that employees acquire knowledge, skills, and behaviours to support the new processes, systems, and ways of working.
- Organisation flexibility: This focuses on the relationship between the organisation and the individual regarding the ways of working and how teams are structured across the organisation. It ensures that roles and responsibilities are documented and that the spans of control are not too broad.
- Performance management: This ensures that an organisation is measuring what matters, when it matters in order to drive results. It will help identify Key Performance Indicators (KPIs) that are directly aligned to critical business objectives, allowing an organisation to highlight successes and identify challenges early on.
We typically diagnose an organisation by leveraging these six different elements to uncover potential improvement opportunities. Ultimately, we look to embed an operational excellence culture into organisations and help clients to spot cost reduction opportunities whilst improving the quality of services.
In a nutshell
Adopting new and more efficient ways of conducting business are key to success and this demands the right strategic direction, speed of execution, and ability to blend business and technological innovation. Our framework allows this to happen in a structured way, ensuring that progress is made across the entire organisation rather than in one area alone.
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