COVID-19 has upended economies, industries and communities across the world, causing an insurmountable obscurity in every aspect of life and business. As the economic precipitation continues, like every industry, banking has been sternly impacted. There seems to be no end to what every new day is likely to unleash in this pandemic.
Aptly quoted by an industry leader in the financial services domain, “The pandemic has accelerated digital adoption in banks at an unforeseen rate. Technology trends that would’ve otherwise taken a decade to implement got deployed in a matter of a few weeks.”
To survive and elevate growth, in that order during these challenging times, banks need to reset their business operations using innovative digitalization tools and approaches. Banks are expected to expand their digital footprint at an unforeseen pace, especially those concerning end customer service orchestration.
A bank’s agility to analyze, identify and act on risks relating to customer servicing through digital technologies will determine its recovery. The extent will also depend on the banks’ resilience, customer confidence, health and mitigating interventions.
Achille’s heel for Banking Industry’s Growth
Incomprehensible market trends and unpredictable customer demands are resulting in significant creaking of the business systems designed/ re-designed only about half a decade back. Overnight, banks had to move their operations to remote work, while keeping their service distribution channels open. Bank’s modalities for compliance and supervisory were never designed anticipating an inevitable remote working caused by a pandemic. They’re juggling among the fireballs of generating revenues, managing customer expectations and handling regulatory pressures.
Four Significant Challenges to Growth in Banking due to Pandemic:
- Pursuit of Survival: Mitigating liquidity threats while supporting customers and staff amidst the crisis is challenging for banks and financial organizations. They had to keep branch offices operational while following strict precautionary measures and social distancing guidelines.
Automating routine processes, back-office ops and restructuring available infrastructure helped in reducing operational friction to some extent.
- Managing customer expectations empathetically: Maintaining the brand image of the bank and preserving customer relationships has become imperative for the leaders. Dramatic changes in consumer behavior added to the complexity of the situation.
To grow during and beyond COVID-19, banks must address the evolving needs of customers through the adoption of self-service options and personalization of mandatory banking services.
- Reassessing balance sheets and enterprise performance: The precarious nature of the pandemic led to a steep decline in deposits, making it difficult for banking organizations to maintain liquidity buffers. Banks have to recalibrate their balance sheets to adjust the government stimulus. Reducing risk for customers is essential to retain them.
Increased lending would open up opportunities for refinancing and improving credit lines.
- Shortage of workforce: Employees are under stress due to increased workload in a constrained environment. The bank employees are switching among multiple roles while constantly reeling under the pressure of risk of infection to themselves and their family. Rebalancing workloads and automating repetitive operations would offer them relief.
Steps to Reset Growth Digitally in Banking Services:
Path to growth passes through a solid recovery from the current volatile situation, and it is patchy. As economies and industries struggle to reset themselves, adopting a well-structured and agile digitalization strategy is likely to lead the path to resilience.
Here are four steps that will be helpful for leaders planning to reset the banking services industry for growth beyond COVID-19:
- Create a roadmap: Leaders must create a comprehensive roadmap for growth and innovation in banking services keeping digital at the center. A future-oriented strategy would focus on remodeling risk management, reassessing existing financial instruments, rebuilding a robust digital infrastructure, and reinventing the operating model. All of this has to happen in the background of possibility of prolonged remote execution. Regulators need to advise banking organizations to identify risks, sustain significant cost structures, and build capabilities to position themselves for growth using a digital first strategy. Data analytics using advanced business intelligence tools will help gain insights and respond proactively to risks. A Deloitte, 2018 survey found that 73% of consumers who use digital banking access the bank’s website or apps through their smartphones atleast once a month. The onus to make the digital experience personalized and customer-focused depends on banks more than ever before.
- Rethink processes: The prerequisite for boosting productivity is to accelerate business operations to reset to digital. A fresh perspective will help re-engineer processes and adopt digital services such as remote customer support using branchless banking, interactive chatbots and video banking using branch automation.
Started in the first quarter of 2020, Citibank’s CitiDirect BE Digital Onboarding platform has helped open thousands of accounts digitally.
- Prioritize digital transformation: Digital payments increased by a staggering 50% during the coronavirus outbreak, according to Research and Markets. This shows the inclination of customers towards contactless payment options and an increase in demand for intuitive self-service tools. Adopting overall workflow automation that includes extending core services to end customers can help fulfill these requirements. Leaders need to adopt business intelligence tools to promote data-driven decision making. Automating repetitive processes will help alleviate their workload by reducing human dependency and errors.
- Emphasize on Lean Digitalization: Today’s market volatility and changes in consumer behavior are tall barriers to overcome. These external factors continue to add hurdles to modernization efforts. Banks are forced to expand their view on the importance of the digitalization, automation and remote working with speed. As the financial industry becomes digital-native, competitive pressure makes cloud and digital adoption a must.
Going ahead, traditional banks will have to evaluate how amidst budget constraints they would meet the modern consumer’s expectations post COVID-19. Investments in digitalization in financial and banking services needs to be done with an agility of a start-up.
Monitoring risks, embracing digital innovation, and fostering agile operational models will strengthen business structures and reduce vulnerability for banks.
Bank’s resilience plans must encapsulate the customers’ behavioral changes, regulatory responses, and preferred self-servicing channels. The need to modernize and digitalize bank’s infrastructure and workflows will support overall economic recovery, community confidence and business’s risk appetite.