In January, I wrote a predictions blog that said the priorities of the financial services industry would not change greatly over the next 12 months!
Of course, no one could have seen the full extent of the global COVID-19 crisis, but as we navigate through the pandemic it’s time to re-assess those trends and see how things have evolved.
Welcome to the world of home working
In my previous predictions blog, Jim Marous, Owner and CEO of Digital Banking Report, suggested that 2020 would be the year that banks and credit unions focus on changing their internal culture and building digital talent.
Beyond a change to a new ‘work from home’ reality, the pandemic has heightened the need for individuals and organizations to embrace the changes that have occurred while learning new business models and skills that will be even more important in the future.
Jim Marous, Owner and CEO of Digital Banking Report
Without a doubt, the biggest shift – perhaps a seismic shift – is in the move to remote working. Schroders was the first major London institution to announce that its entire worldwide workforce can work from home, but it’s a trend that has seen many banks and financial institutions start to make similar decisions.
It’s not just home working that’s driving change: “The pandemic is accelerating the movement of all kinds of activity into online and digital channels. Innovations that were underway before it struck are massively accelerating. As we come out of it, they will be far more advanced in technology and market size.
Jo Ann Barefoot, CEO of Barefoot Innovation Group
Jo Ann continued: “In lending, we will see rising adoption of new data for credit underwriting, starting with cash flow data and evolving into machine learning models. Regulatory challenges will limit the pace, but regulators will focus on working them out as a means of promoting sounder lending, more financial inclusion, and deepened markets, especially for community banks.”
We all love the digital customer experience
Underpinning this major trend is an incredible acceleration in digital transformation, especially in customer service. With branches shuttered, customers have been forced online.
Visa reported that more than 13 million people in Latin America made their first online transaction in March 2020 and even pensioners say they are twice as likely to make online purchases as they were in 2019. Digital banking is no longer optional. During COVID-19, banks and other financial services institutions worked quickly to help customers adopt new experiences around digital and remote channels.
However, according to Jim Marous: “Unfortunately, while many organizations have provided new digital engagement options, few have created the experiences that consumers demand. For instance, while our research for the Digital Banking Report found a significant increase in digital lending and account opening capabilities, the time to complete the processes remains sluggish at best. If mobile applications take over 5 minutes, banks and credit unions are only ‘faking digital’.”
AI is still the heart of hyper-personalization … as well as other priorities
In my last blog, I suggested that financial services companies would make greater use of their data to enable an era of hyper-personalization. AI lies at the heart of this strategy. The EIU research found that post-COVID-19, 77% of banking leaders believe AI is the game-changer. While improving customer experience through hyper-personalization tops the bankers’ priorities for AI, it’s also seen as important in areas such as new business initiatives, fraud detection, and cyber-resilience.
Jim Marous shared some additional context, “Research by the Digital Banking Report found that despite knowing the importance of hyper-personalization, and having access to potential solutions in the marketplace, over 75% of organizations considered themselves ‘not adept’ as providing contextual advice on a 1:1 basis.”
COVID-19 changes cybersecurity priorities
Reports suggest that banks have seen a 238% surge in cyberattacks during the COVID-19 crisis, with financial authorities worldwide demanding companies respond quickly to the increased threat. Every organization needs to create a cyber resilience framework, one that protects its network and data, but doesn’t affect the ability to deliver products and services to customers.
Goodbye branch, hello hub
COVID-19 shut a huge number of bank branches worldwide, with KPMG suggesting that the lockdown is a catalyst for change. Branches do hold a pivotal position within main streets across the globe, but banks, such as ING, were already beginning to turn the traditional branch into a service hub where people can access a whole range of financial and non-financial services.
In 2005 I predicted Bank Branches would decline globally by 50% by 2025. COVID has put us right on track for those numbers to hit.
Brett King, author of Bank 4.0 and The Rise of Technosocialism
Brett continued: “Instead of hoping branch business comes back after coronavirus, it’s time for banks to have a real plan for both digital acquisition and digital engagement. Branches won’t disappear, but the pandemic has shown banks who rely on branches will disappear”
A focus on cost will drive digital ecosystems
According to Accenture, banking requires a laser-sharp focus on costs. But this can’t come at the cost of customer experience or innovation. Coming out of COVID-19, we are very likely to witness a much greater degree of collaboration between players across the financial services spectrum. For example, traditional banks will look to invest, acquire, or partner with the capabilities of Fintechs to rapidly flesh out their digital offerings.
Everything relies on platformification
In my last blog, I commented that financial services organizations must develop new ways to securely share and collaborate on their information. Platformification establishes the connected infrastructure that will increasingly transform the industry. That’s as true now as it was then.
To improve efficiency and offer the array of services consumers expect in the future and to increase revenue generation opportunities, financial institutions will need to embrace the use of APIs either in the development of Banking as a Platform or Banking as a Service.
Jim Marous, Owner and CEO of Digital Banking Report
To find out more about the portfolio of OpenText™ solutions designed for the Financial Services industry, visit our website.