6 Things the Public Sector Can Learn from Banking

Brian Gorham is a sales manager with Escher Group.

Think about when you last wrote a paper check, withdrew money from a bank clerk or only had access to your balance during office hours. All these processes have drastically changed in the last few decades. The sector has evolved into one of the most innovative and progressive developers of technology.

It feels like a seamless development of staggering technological and organizational achievements. Everyday things such as credit cards, ATMs and online banking are all taken for granted. Banking has achieved a level of pre-eminence that has not been surpassed in terms of spending, innovation and progress.

To date, however, the public sector has not realized the same success in embracing many of the same digital solutions in which banks have become immersed. So, why has the public sector been challenged in this progressive direction?

It can be argued that there are obvious constraints and impediments that prevent government organizations from taking the lead in technology innovation and investment. Restricted budgets and recruitment freezes are major factors, but why does it significantly lag behind other industries and sectors?

In many ways, the banking sector has paved the way for public sector technology to provide modern services to citizens (without the same level of investment) and there are steps the public sector can take to reduce that gap.

So, what are the areas in which the banking sector is excelling and how can the public sector learn from this progression? We at Escher Group have identified six key areas:

1.  Digitization

In the last decade, the banking sector has invested billions in digitization projects in an effort to reduce costs and increase efficiencies. This new technology has dramatically reduced the average cost per transaction.

Electronic and digital transactions are dramatically lower in cost than physical ones, sometimes by a ratio of 20:1. Additionally, the cost and processes involved in customer acquisition by electronic and digital means are also much lower and more streamlined than traditional methods.

By investing in digital processes, the public sector will not only save money; it will generate new revenues. This is a positive step, given governments are now being asked to do more with less.

How can they achieve this?

By reducing labor costs with new processes and modernizing money transfers, both of which would offer huge cost savings for the sector. The public sector should not allow itself to be left behind in this digital revolution and critically must ask the question: Can it afford not to be?

Banks have been at the forefront of digitization efforts and consequently, they enjoy the benefits of adopting this innovative attitude. Should the public sector services in central and local governments follow the banking sector, they can also enjoy the same benefits.

They can even go one step further and collaborate with their banking associates. In Mexico, the government saved $1.27 billion after learning from and collaborating with the banking sector in order to digitize wages, pensions and social transfers. There are valuable lessons here.

It is incumbent the public sector takes advantage of technology advances to help improve service delivery and citizen engagement. It is understandable the public sector might shy away from deploying leading or “bleeding” edge technologies, fearing they are costly and it will be a difficult process to manage, but these technological processes are now at a mature stage.

Therefore, adopting and deploying these advances should be approved and accepted more than they currently are. By examining case studies from various sectors, they can be phased into government plans via well-researched methods and with a sufficient risk management plan.  

2.  Risk Management and Reduction

The public sector should use technology to better understand risk. The banking sector has developed bespoke systems to address specific areas of risk such as:

• Market
• Credit
• Collateral
• Risk related to KYC (Know Your Customer)
• AML (Anti-money Laundering)

Together, these make a major contribution and impact on their overall Enterprise Risk Management. Similarly, the public sector faces challenges and risks that must be eliminated or at least reduced.

Using technology to identify, manage and resolve risks, the public sector can enhance its reputation and reach the same level as banking enterprises that view identification and reduction as a matter of priority. Risk management technologies will help a public sector agency (which can be equated to an enterprise) better understand, predict, avoid, reduce or even eliminate risk.

3. Citizen Engagement

Customer engagement remains a key priority for the banking industry and the public sector should adopt this mindset when dealing with citizen engagement. The banking industry recognizes the environment and marketplace it operates in. When it does not embrace change, this typically leads to a drop in customer satisfaction and business.

Consumers are no longer brand faithful and will switch between banks to access better products and services. Preventing customer churn is vital for banks to survive.

While a citizen clearly cannot switch providers (a banking customer can, unless they move to another municipal area), positive citizen engagement has many clear benefits. These include:

• Enhanced citizen satisfaction ratings
• Greater compliance with municipal laws and regulations
• More guaranteed (or even higher) revenues
• “Softer” benefits such as better public sector employee morale

Digital channels are central to driving consumer and citizen engagement. Research has shown banks have significantly increased the number of interactions processed online. The average customer has 17 interactions with their main bank per month, 10 of these being online or mobile. These have obvious time- and money-saving implications for the customer.

Additionally, many of the key attributes of effective customer engagement, such as transparency and trust, are in alignment with many government policies and best practices. Therefore, incorporating and making citizen engagement a key factor in public sector technology should be a priority.  

4.  Mobility

Banks are pioneers within the area of mobility and continue using cutting-edge technology to move their business models forward. They are now the benchmark that other industries should follow.

From basic WAP mobile phone banking to mobile banking apps for the current generation of smartphones and tablets, banks have played a key role in the development of mobile computing and mobile service delivery.

The banking sector has also played a large role in creating and continuously setting the precedent for competing financial companies and other industries. Therefore, the government sectors can take greater advantage of the path pioneered by banks.

What is apparent is that the past successes within the banking industry and of course its future are because of its reliance on mobility. Banks are investing in this technology as they can predict and identify clear returns on increased customer engagement and satisfaction. This aligns them to the preferences and lifestyles of existing customers and new customers they want to win.

The timing is ripe for the public sector to follow suit and investigate where services and citizen engagement can be deployed over mobile devices, yielding valuable and immediate customer satisfaction and loyalty.  

5. Relevance

Both the banking and public sector remain at the heart of any society. They are essential to a community’s function and survival. So, why does the banking sector enjoy perceived relevance the public sector does not?

Banks have worked extremely hard to stay relevant to existing and potential customers and generations. So, how can local governments begin to engage more effectively with society and earn greater relevance?

By improving how services are delivered, local governments can further engage and improve satisfaction ratings. By improving online payments for citizens, as well as updating user experience and improving websites, they will contribute to making it easier for government departments to engage with local governments. These improvements will also appeal to the tech savvy and experienced millennial generation.

By modernizing manual, costly and time-consuming processes with faster technology, the public sector will enhance its reputation and become more relevant in a society where banks, telecommunication companies and social media sites are already competing fiercely to ingrain themselves into the minds of the population.

Should local governments fail to focus and engage with these efforts, it will result in higher costs, longer lines and processing times (and therefore, lower customer satisfaction). Another impact would be on job creation (and the failure to attract suitable candidates) and not being in sync with citizens’ everyday lives.

6. Leadership Buy-In

A key factor in the success of this process is the buy-in of leaders across these industries. A key report in retail banking by PWC revealed that “97 percent of CEOs see innovation as a key priority for growth,” and that in the banking sector, innovation is regarded as highly important by people at the C level. Therefore, a “top down” approach must be seen as a clear success factor.

Additionally, a 2014 Report looking at the future of retail banking confirms this thinking that companies must adopt a “senior sponsorship” buy-in. “People look to the actions of senior leadership to set their priorities, so the tone needs to come from the top.”

The government and public sector must follow the banking sector’s lead and ensure this endorsement for change is embraced by senior management, so the challenge of providing a modern standard of service is supported by all.

As citizens become increasingly familiar with doing business online and via multiple channels, the demand for a modern, user-friendly government service is now more crucial than ever. A recent “Digital at Depth” study highlights “86 percent of citizens expect government to offer equal or better services than the private sector.”

Therefore, local governments must now rise up to this challenge and meet these expectations. Estonia is a key example of how government leadership has made advances in digital government. Estonia has emerged as one of the most advanced e-societies in the world.

While there are, and always will be, major differences between banking and any government systems and departments, it must be a goal of the public sector to move toward a more modern service provision and delivery to close the existing gap. Essentially, governments must view their citizens as customers, while learning valuable lessons from the banking sector.

The key to their success is not just recognizing the work that has to be done but determining how these changes can be administered. Their first step is to listen and then act.