COVID-19 has literally had the world stop dead in its tracks. If the word ‘unforeseen’ were to assume a new elucidation, it would be the pandemic, nuancing it in ways much else cannot.
Business and geographies around the world are reeling under the pandemic impact with varying degrees of severity. In courting these extraordinary times, Digital adoption has been the most significant coping muscle businesses have built and / or strengthened. There is no gainsaying that we have pole-vaulted many years forward in consumer and digital adoption in a matter of 3 months. From tele and video consultation by doctors to online learning and digital classrooms, from seamless online ordering and home delivery of consumables to critical business decisions now taken in Zoom boardrooms, the change has been nothing short of dramatic. As one CEO of a large tech company recently quoted, “We are witnessing what will surely be remembered as a historic deployment of remote work and digital access to services across every domain.”
While digitization wasn’t really a new kid on the block, its immense importance, rather indispensability could not have been understood better than now. With Banking and Financial institutions at the center of the global economic mayhem, digital shoring up has enabled them to continue operating as essential services and extend the critical support for individual consumers as well businesses to meet the crises at hand.
The crises coping gear
Banks with strong and agile digital underpinnings have been able to digitize many of their existing processes. Though some of these short term measures are mitigants, many hold immense long-term value, and nearly all of them have lessons to give in crisis management. While on one hand, it is helping facilitate business continuity, on the other hand, it will help existing users get more comfortable with digital banking and also induct laggards into the digital groove, thus paving way for digital scaling up in future.
- Customer Service – With substantial reliance on in-person exchanges, ensuring some semblance of continuity in customer service has been one of the top priorities of BFIs.
Idaho Credit Union in the US is going branchless by implementing technologies like video banking. Video banking services that allow virtual interaction with remote tellers, though less established, are likely to see higher adoption as social distancing continues.
For those with no access to technology for video conferencing, Interactive Teller Machines (ITMs) allow customers to visit the branches and carry out simple transactions without speaking face to face with human tellers. Withdrawal and deposit of funds and checking balances can be done with the machine, and with the help of a screen, assistance through human tellers can be provided. Michigan based Consumers Credit Union has reported increased adoption of these machines in recent weeks.
Upgraded ATMs equipped with video banking services, drive-thru ATMs are also being installed and/or remodeled by banks.
Some of the FIs have turned to more conventional methods like emailed queries and educational tools on their websites to address customer queries. Several UK banks have set up additional email addresses, call centers and mobile chat support as the consumers reach out even more for banking support.
- Enabling self-servicing – Some banks have augmented their existing digital infrastructure to extend basic self-servicing options to customers, thus reducing the load on relationship managers. These include viewing balances and transactions, categorizing transactions, making payment notifications and cashflow analysis.
- Digitization of processes – Many banks have been able to quickly transition to electronic customer onboarding, online document submission and e-signature tools.
Singapore’s DBS Bank promptly digitized 11 financing processes to minimize in-person interaction and is offering instant bank transfers to business accounts.
A leading bank in the US deployed a new process on its internet banking solution allowing its retail and business customers to defer repayments for 30, 60 or 90 days with two simple clicks. In the first two days, more than 25,000 customers used the process to defer repayments. A bank in Australia avoided many hours of manual effort and significant operational risk by using process automation to apply repayment holidays on a large portfolio of loans.
Some FIs have taken the initiative to partner with ecosystem players to ensure completion of processes with speed and efficiency. A large commercial bank in Hong Kong has outsourced specific loan application types that are tedious and time-consuming to a digital fintech in the region, thus streamlining it for faster decision making and disbursal.
- Special banking products – A large bank in China offered products and services tailormade for current times such as COVID-19 insurance policies, credit cards with interest-free periods, short term personal credits with easy documentation and facility extensions for existing loans.
- Allied services – Going beyond the call of duty and offering additional non-banking services to customers has augured well for a large Chinese bank that added a ‘Coronavirus zone’ to its mobile app with updated info on the spread of the virus, medical facilities, online counseling, etc. In one month, the zone had over 100 million visits, many of these with no prior affiliation with the bank and more than a million people receiving online counseling
- Remote working – Quite a few banks have been able to deploy a remote work-force and provide necessary training in digital technologies, infrastructure help, remote working tools, etc. This model could well become the new normal, particularly for the middle and back office after having built enough operational resilience into the system.
- Knowledge base – User-friendly mobile and internet banking guides are being deployed by banks to educate customers about the usage. Some FIs have also taken the initiative to educate their customers about Fraud Prevention, Wealth Planning and Financial Prudence.
The Road Ahead
While many of the measures discussed above templatize branchless banking and reimagine traditional relationship management, in-branch banking will continue to remain critical, albeit in a new form. It may get more specialized, with many of the basic transactional needs getting addressed via digital solutions. As per a 2019 study, 54% of the population is classified as ‘dependent’ on in-branch banking in some way and the trend is likely to shift marginally.
A comprehensive approach to digitization including middle and back-office along with front-office will gain momentum as agile delivery on the front is impossible without modernizing the back end.
The global unbanked population stands at a whopping 30% with even developed economies like the US with 25% unbanked/underbanked. Digital technologies spanning branchless banking and agency banking will contribute hugely to bridging this gap.
Exceptional customer-centricity will be the new normal, as per PWC’s report. This will entail offering seamless omnichannel experiences and meeting customers where they are – on social media, Instant Apps or Progressive Web Apps and OTT messaging apps – beyond the traditional financial channels. Syncing customer data platforms (CDPs) with CRM systems to offer tailor-made products to customers will become indispensable.
Digital agility will accelerate in importance requiring banks to restructure tech (e.g. cloud) to reduce costs and respond with speed and efficiency.
Innovation will be driven by challenger banks and fintech startups along with a possible entry into the consumer banking space by non-FIs like retail & big tech.
Cybersecurity and fraud prevention will gain huge momentum as rapid digitization will make consumers and BFIs more vulnerable.
While digitization has emerged as the knight in shining armor in pandemic times, digital capabilities aren’t globally prevalent in the BFI industry. While some organizations are digitally ready, many are still at the outset or in the middle of their digital transformation programs, thus limiting their ability for an agile digital response to tough times. After the pandemic moves to yester times, banks are likely to see digital scaling up as one of the top strategic priorities and build agile businesses equipped to operate in the hardest of times.