Enhancing efficiency and adaptability: knowledge management in the banking industry

Introduction

Knowledge management (KM) could be of great significance¹ for enhancing the organisations’ performance and lead them to better competitiveness. As a knowledge-intensive organization, banks are exploring KM. There are some unique things in the process, including multi-level and complex organizational structure, personnel liquidity, and the changes in the external market environment, extensive regional span, etc. These problems have become an important factor affecting banks to effectively implement KM.

Before studying a master’s degree in KM in NTU, I have worked in a large business bank in China for seven years. Through the project management in the background of the head office and providing financial services to customers at the front desk, I can combine the actual experience of the KM of the banking industry in-depth analysis and hopes to provide effective suggestions for the future KM of the bank.

Organization structure adjustment

The scientific and reasonable organizational structure is very important for promoting collaboration, knowledge sharing, and improving the quality of decision-making and task. It is like a car that requires a strong engine driver to maintain its efficient operation. From the perspective of the basic corporate framework, banks are usually divided into three major levels of head banks, branches, and sub-branches. The head office is responsible for important basic operating strategies. The branches implement the principles and policies of the head office, and the operation strategy is transmitted to the grassroots branch. However, the structure of traditional commercial banks often fails to fully reflect its strategic investment in management business. The vertical well-organized organizational structure has led to the front desk, middle stage, and background on the wealth management chain, both in terms of business functions and management levels, and have a certain degree of splitting. To a certain extent, it restricts the progress of the wealth management transformation of commercial banks. If a commercial project requires multiple departments to cooperate, it will pay high communication costs, resulting in low efficiency of cooperation.

To continuously stimulate the internal vitality and adapt to the changing market environment², banks will make multiple organizational structure adjustments with the situation in accordance with the situation during the development process. For example, my bank has adjusted its organizational structure in 2021, and the organizational structure has developed flat. It is conducive to improving the efficiency of information dissemination in the organization and speeding up the decision-making process. From the 2.0 era to the 3.0 era, the bank adjusted the organizational structure in the challenge of continuous transformation of the external environment, so that it can continuously draw energy from the organization in the market environment and give full play to the power of intellectual assets in the change of organizational structure.

Internal knowledge sharing

Knowledge sharing, as one of the effective ways to flow internal and external information. The investigation of the Libyan bank³ shows that all interviewees clearly realize that there is no appropriate KM strategy to conduct daily business. The risks of banks at all levels have stored a large amount of user information, and the cost and risk of information management are huge. When handling various businesses for customers, bank staff must operate strictly in accordance with the rules and regulations within the bank. However, with the changes in external regulatory policies and market environments, some operating processes and system basis have changed, but these changes have not been reflected in the official institutional rules and regulations, and it is difficult to provide decision-making basis for front desk personnel.

To promote the knowledge and experience exchanges of internal employees in the organization, a communication platform has been established within my bank. Employees can contact colleagues from any department of the company through this platform to conduct daily information exchanges and information transmission; business departments will release the finished project on the platform so that other colleagues can check and learn from valuable information. In addition, employees can also subscribe to online training courses on the platform to enhance business knowledge. These simple and efficient knowledge sharing methods are gradually accepted and integrated into daily work by employees, becoming an indispensable office tool.

However, a huge problem is to motivate employees to share to ensure the continuity and effectiveness of information flow. In order to build a positive sharing culture, the common method is to establish a reward and recognition mechanism to reward and recognize the active sharing of knowledge and put forward employees who have valuable opinions, including money rewards, employee commendation, etc. In addition, internal platforms sharing successful cases of employee knowledge sharing, emphasizing the importance of knowledge sharing, and can also create a relaxed and active cultural atmosphere. One thing that must be emphasized is that employees will be very busy and tired in their daily work. They are usually unwilling to spend time summarizing and sharing personal experience, unless they realize⁴ the experience of others sharing is also beneficial to them.

Customer service

The daily business scope of banks mainly includes two aspects: financial service providers, financial product producers. On the one hand, banks pass on financial information to users and provide financial consulting. In the context of the stability of the financial environment in the past, banks only need to rely on traditional deposit and loan business to earn the profit difference of borrowing loan to obtain the profit required for operations. However, with the changes⁵ in the financial market environment and the implementation of interest rate marketization, similar competitive companies have emerged, such as Internet financial companies, private lending companies. Banks have to improve their competitiveness by improving the level of service and expanding the types of original services to provide users with value-added services. Therefore, in this sense, the banking industry itself is the service industry. Luo Zhenyu, a senior media person in China, quoted Deng Fanhua, the president of Yuehui, in his New Year’s Eve speech in 2023⁶, saying, “All industries are knowledge services.”

In several specific areas, knowledge is particularly important for the banking industry. Bank staff must make full use of their own professional wealth management knowledge to provide scientific and reasonable financial suggestions for their customers. Basically, the most common position in all banks at the front office is “customer relationships”. In order to provide customers with continuous high-quality services, the bank has developed customer relationship management (CRM) system. This system is used to record users from opening an account at the beginning, in all the wealth footprints of the bank, if customer encounter the situation of the client manager’s transfer and resignation, the newly-taken-off customer manager can easily see the record of the customer in the CRM system. In addition, because the user’s demand for financial services is diversified, including access to money, accounts, loans, wealth management, etc., through collecting and analyzing user information, establishing complete user portraits, adding internal systems exclusive labels are convenient for sales staff to grasp user preference faster.

Internal knowledge transfer of fintech development and organization

In recent years, the banking industry has continued to increase investment in the financial technology field. Cloud computing, RPA technology, RFID technology, API, smart calls, etc. These technologies provide convenience for users. For example, users can submit most business needs through mobile banking, save time to return to and from banking. In the field of loan business, banks are also use robot calls to reach more users, collects users’ funding needs, and then contacts professional loan business managers to further assist customers to collect qualification certification documents; in the middle and backstage of banks in simple work, RPA technology can help reduce the burden of manpower, and the liberated manpower is used in complicated and high risk factor modules.

However, at the same time, it also puts forward new challenges to the internal knowledge transmission and transfer of the bank. With the development of fintech, the IT department plays an important role in the development of fintech. There are situations where the knowledge transmission and transfer of knowledge departments are not timely⁷. To cope with this problem, banks need to manage the collaboration between IT departments and business departments more effectively to ensure that the faults of knowledge transmission will not occur during the maintenance and upgrade process of business systems.

The banking sector stands to gain significantly from the integration of Artificial Intelligence (AI) and Machine Learning (ML) technologies to streamline knowledge-sharing and decision-making processes. As noted by our lecturer Rajesh Dhillon, leveraging AI and ML can automate tasks and uncover valuable insights that humans may overlook, thereby improving operational efficiency and risk management.

Recruitment system

According to data from the Crowe 2021 Bank Compensation and Benefits Survey, banks are experiencing the lowest employee turnover in years⁸. Especially in the negative state changes, employees may not be willing to pass hidden knowledge to other colleagues. In order to encourage employees to provide long-term dedication in the same knowledge field, banks have established employees’ expert directory and reserve talent pool. Through these measures, banks can better manage talents and give priority to selecting people with relevant experience to run for campaign to ensure the flow and inheritance of knowledge internally. However, this measure also has obvious defects, which may cause the knowledge communication with external personnel to be blocked. At the same time, due to the confidentiality and closure of banks, it is difficult to achieve internal and external knowledge exchanges.

Conclusion

From the aspects of organizational structure adjustment, internal knowledge sharing, customer service, financial technology development and internal knowledge transfer, recruitment system, etc., the banking industry has achieved some achievements in the application of KM, but still faces challenges. In the future, banks need to continuously optimize KM strategies, improve the efficiency of knowledge sharing, ensure the professionalism of customer services, strengthen the combination with fintech, and seek a more open recruitment system to cope with a variety of market environment. KM will continue to play an important role in the banking industry to help banks better adapt to changing financial fields.

Article source: Adapted from Enhancing Efficiency and Adaptability: Knowledge Management in Banking Industry, prepared as part of the requirements for completion of course KM6304 Knowledge Management Strategies and Policies in the Nanyang Technological University Singapore Master of Science in Knowledge Management (KM).

Header image source: Pete Linforth on Pixabay.

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