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BPM and Banking

Business Process Management (BPM) refers to the methods, tools and techniques used to make business processes more flexible and effective. As the name implies, BPM is centered on process improvement. It uses information technology and management tools to ensure that an organization’s operating processes are helping the organization keep pace with the demands of a changing marketplace. Business process management techniques help organizations align their operational processes with their business objectives and strategy.

Why Banks Need BPM?

Since the financial crisis of 2008-2009, banks have been under greater pressure to decrease costs and increase profitability. Increasingly demanding customers also hold financial institutions to higher standards with the expectation that banks respond quickly to their needs by providing innovative products and services. In this highly competitive industry, banks and other financial service providers have little room for error and can quickly lose the customers who feel their needs are not met.

Banks are rising to the challenge of the competitive marketplace by focusing on creating business processes that deliver products and services that attract and retain customers by meeting their needs fully and quickly.

Three elements of BPM can help banks face an increasingly competitive marketplace:

Agility–BPM focuses on process automation and helps organizations quickly adapt to constantly changing business conditions and customer demands.

Transparency –The process automation feature of BPM allows banks to monitor their performance in real time. It also enables them to understand how processes impact their business objectives and strategies.

Effectiveness –BPM helps banks determine the optimal level of performance for their processes and helps organizations achieve optimal performance levels. Once optimal performance is achieved, BPM establishes permanent controls to maintain effectiveness.

How One Bank Benefited from BPM

BPM promises real benefits for the banks who apply it. A newly-founded bank with over 200 branches in the Middle East recently realized a problem with its loan processing system. The system required two days to process a loan. To respond to customer requirements and remain competitive with other financial institutions in the region, the bank set a goal to drastically reduce the loan processing time.

The goal to reduce loan processing time was complicated by the fact that the bank was required to comply with Sharia, a set of Islamic laws based on the Koran. Therefore, all contracts, transactions, and products required the approval by a team of Sharia scholars before the new product could be certified and deployed. If the bank’s software solution for reducing loan processing time was found to be non-complaint with Sharia law, the new process would be delayed and expensive software coding modifications would be required. 

The Bank’s CIO employed business process management modeling software to evaluate the product in its development stage. Because the Sharia team evaluated the software product early in its development phase, it was able to bring it into compliance with Islamic law before the bank expended large amounts of time and money for software development. As a result of applying BPM the bank reduced loan processing time from two days to 30 minutes - all while receiving full Sharia approval.

Banks and other organizations seeking similar agility and effectiveness in meeting their customer needs would do well to follow one of the core concepts of BPM: focus on process improvement.  Using BPM methodology to monitor, analyze and control business processes gives organizations the ability to respond quickly to customer needs, to understand the impact to changes in the process and to bring daily operations into harmony with the organizations goals and strategy.