ARTICLE
The Efficiency Wars: how operational excellence is becoming banking’s key superpower
As the banking sector grapples with margin compression, relentless regulatory pressure, and rapidly shifting customer expectations, one theme has moved sharply up the board agenda: operational excellence. Once seen primarily as a cost-cutting lever, it has now become a strategic superpower, defining which banks can adapt, grow, and compete in an AI-accelerated world.
Operational excellence was once seen only for what it takes away – costs, branches, jobs. Today, however, it is increasingly seen as additive, bringing in new technologies, skills and propositions to turbocharge the modern bank. Rather than a process of shaving and eliminating, operational efficiency is becoming a process of creation, reimagining banking for a new age.
As Daniel Meere, Partner at Capco, puts it, “If once the narrative was ‘do more with less’, then today it is about building a capability for delivering high quality outcomes, for the bank and its customers.”
This work has never been more urgent. High street banks face unprecedented operational challenges. In addition to economic, regulatory and market pressures, they must also modernise decades-old infrastructure, compete with digitally native challengers, and meet customer expectations shaped not by other banks, but by digital-first retailers, platforms, and apps.
Against this backdrop, operational excellence is no longer optional – it is existential.
Redefining operational excellence
The industry’s definition of operational excellence has widened significantly – no longer synonymous with cost-cutting alone but as a means to drive enterprise-wide transformation: balancing cost, compliance, customer experience, and colleague engagement.
‘These things do not always sit easily together,’ notes Derek Burt, Director of Home Operations at Lloyds Banking Group.
Heather Andrews, Talent Journey Director from leading pensions provider The Phoenix Group, agrees that financial services institutions are striving to deliver strategies that are ‘multifaceted’. ‘We’re trying to grow, optimise, and enhance all at the same time,’ she says.
As Daniel Meere notes, cost remains a critical driver but the emphasis is shifting. ‘Increasingly, it’s about better customer experience through a continuous improvement mindset.’
This reframing is critical. Efficiency today is not about isolated initiatives or functional optimisation, but about aligning the organisation around outcomes – simplifying journeys, improving quality, and enabling growth while operating at lower structural cost.
Legacy challenges
For most incumbent banks, this transformation is complicated by deep structural complexity. Many institutions have evolved over centuries, acquiring multiple brands, platforms and operating models along the way. The result is often a highly federated organisation where incentives, ownership, and benefits sit within functions rather than across the enterprise.
‘Operating models in financial services are very federated,’ says Heather Andrews, whose own organisation pulls together some of the biggest and oldest financial services brands. ‘With silos, benefits often align to functions rather than the enterprise. Now it’s about driving shareholder value through enterprise-level efficiency and investing wisely.’
To unlock real efficiency, banks must move beyond siloed optimisation and align around products, platforms, or end-to-end customer journeys. This requires difficult trade-offs: fewer initiatives, clearer ownership, and a sharper focus on what delivers real impact.
Operational excellence, therefore, becomes as much an organisational challenge as a technical one – demanding executive alignment and a willingness to rethink how work gets done across the enterprise.
Technology, AI, and the human factor
These huge shifts are taking place at breakneck speed as digital technologies, and particularly AI, are redefining operational excellence.
‘We’ve had 30 years of change in the last three years,’ notes Derek Burt of Lloyds Banking Group.
This is a challenge for an industry that is rooted in values of prudence and resilience, where risk must always be carefully calculated and trust is akin to a licence to operate.
The challenge is not whether AI can be deployed, but how it is deployed responsibly, ethically, and in a way that enhances customer outcomes. As Derek Burt points out, a good customer experience looks different to different people.
‘The role of technology is a real accelerator,’ says Burt, ‘but as an incumbent bank, we also have to serve five generations across our business, each with their own expectations.’
‘Organisations need to be able to articulate a really clear and well defined skills matrix’
Daniel Meere of Capco stresses that this must be an enterprise-wide strategy: ‘Colleagues really need to understand the AI, data and technology strategy and how that links to business benefits.’
Crucially, they also need clarity on how roles will evolve. As AI automates tasks and augments decision-making, organisations must articulate what skills will be needed in the future – and how people can transition into them.
‘Organisations need to be able to articulate a really clear and well defined skills matrix,’ Meere says.
Heather Andrews of The Phoenix Group stresses that workforce planning is becoming just as critical as system design.
‘The most underleveraged asset in any organisation is the workforce,’ she says. ‘We need to think about the skills and competences that will be needed strategically.’
This shift is prompting banks to identify which tasks belong to humans, which to AI, and which must be entirely redesigned. At Phoenix Group, a clearer view of skills is enabling more pinpoint investment decisions, both in people and in technology.
‘We’ve right sized our operational plan and are now thinking long-term about how to sustain and grow the assets needed to deliver our strategy,’ says Heather Andrews. ‘The interplay between AI, technology, and people is central.’
From experimentation to execution
There’s an urgency to this work now. AI is not a distant prospect. It is already reshaping workflows across front and back offices, from customer support and personalisation to finance, legal, and administrative processes. The gap between AI leaders and laggards is widening fast.
‘By the end of the decade, we could have superintelligence that can build companies’
Derek Burt highlights the potential of emerging agentic AI – systems capable of autonomously orchestrating tasks and processes – as a key differentiator.
‘By the end of the decade, we could have superintelligence that can build companies,’ he says. ‘The differentiator will be those who take it seriously, test use cases, and build from them.’
‘The time for proof of concept and pilots is over. We know this works’
For Meere, the industry has reached an inflection point. ‘The time for proof of concept and pilots is over. We know this works; we know what the benefits are. Now it’s time to make it an enterprise-wide campaign and deliver continuous improvement.’
This marks a shift from experimentation to execution – embedding proven technologies at scale, aligned to clear business outcomes.
Resilience and process reimagination
Operational excellence today must also be resilient by design. Regulatory expectations, rising cyber threats, and high-profile outages have made system resilience non-negotiable. An AI arms race between banks and criminals means this threat is ever more pressing.
‘Staying ahead of cybercriminals requires vigilance, significant investment, and ongoing upskilling of employees across all levels of the organisation,’ says Heather Andrews.
But resilience cannot be bolted on after the fact.
True efficiency gains come not from automating existing processes, but from reimagining them end to end – removing duplication, simplifying journeys, and designing controls into the process rather than layering them on top.
As organisations modernise platforms and move to the cloud, the focus must remain on outcomes. Technology only delivers value when it is applied to solving real customer and business problems.
‘Every investment should focus on improving outcomes for customers and the organisation,’ says Heather Andrews. ‘Always ask why are you doing this? What’s the impact on the customer?’
The most successful organisations will answer these questions, and balance modern infrastructure with relentless end-to-end simplification.
Winning hearts and minds
Perhaps the most overlooked dimension of operational excellence is cultural change. Enterprise-wide transformation requires more than technology investment – it demands buy-in from ExCo through the organisation, clear prioritisation, and a shared understanding of why change matters.
Efficiency initiatives must be aligned through a product, platform, or customer lens, with teams empowered to focus on what delivers the greatest impact. Taking people on the journey – building trust, capability, and confidence – is essential to sustaining change.
‘Future-proofing starts with the workforce’
‘Future-proofing starts with the workforce, and upskilling your people,’ says Daniel Meere of Capco. ‘It’s the responsibility of employers to do this, and that means partnering with the right organisations to deliver it.’
Giving employees access to AI tools ensures they upgrade their skills while also enhancing performance and improving job satisfaction. This capacity-building is essential because in the future some employees may find themselves managing teams of intelligent agents rather than manual processes.
‘It’s going to be about finding the optimal mix of humans and bots,’ Meere adds.
This investment in employee education and upskilling also helps dispel fears that the technology is coming for their jobs. ‘There’s a constant drumbeat of fear across society in general,’ notes Derek Burt of Lloyds Banking Group. ‘We need to help people get excited, inspired, and go on this learning expedition together. This is how you take the edge off that fear.’
This educational exchange works both ways, with Derek Burt pointing out that employees themselves often hold the most valuable insights. ‘This is an audience we can learn so much from,’ he says.
Daniel Meere emphasises that future-proofing starts with people – and that upskilling should be a priority now. ‘It’s the responsibility of employers to do this, and that means partnering with the right organisations to deliver it,’ he says.
‘Workforce planning can’t be an afterthought. If you don’t plan for skills and capabilities, you won’t have them when you need them.’
Heather Andrews is equally direct. ‘Do the planning,’ she says. ‘Workforce planning can’t be an afterthought. If you don’t plan for skills and capabilities, you won’t have them when you need them.’
Building the bank of the future
Operational excellence is no longer a back-office concern. It is a strategic capability that determines whether banks can compete, comply, and grow in an AI-driven world. Those that succeed will be the ones that align technology, process, and culture – investing in skills, simplifying relentlessly, and focusing on outcomes that matter to customers. The future will be shaped not just by innovation, but by leadership, clarity, and a willingness to rethink what a bank can be.
Derek Burt
Director of Home Operations
Lloyds Banking Group
Heather Andrews
Talent Journey Director
The Phoenix Group
Daniel Meere
Partner
Capco
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Capco, is a global management consultancy with a focus in financial services including banking and payments, capital markets, and wealth and asset management, plus a dedicated Capco Digital arm which partners with financial institutions and FinTech firms to deliver digital transformation from customer experience to back-end processes.
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