Banking sector must adapt to thrive in post-COVID-19 world
Banks had to adapt quickly to operate during COVID-19. For many, digitization was the preserve of a few business processes, and the industry is still relying on paper to function effectively in a virtual environment. The pandemic has sent the message that digitization and automation are not optional; they are essential for resilience in a crisis.
Old school banks must change to survive.
It is not just the operational difficulties caused by the pandemic. British and European banks must prepare for the end of the
Brexit transition period, too much.
Traditional banks have started to become more nimble to compete with new challengers in the market who by their nature don’t have clunky legacy systems to manage. But the current crisis has raised fundamental operational integrity issues that must be addressed now, if they are to remain competitive and relevant to customers.
Banks can protect their operational integrity by focusing on four main areas.
How agile are traditional banks really? The pandemic has proven the need for rapid change: customer behavior changed overnight as their priorities shifted; interest rates have fallen; the housing market has stagnated; banks had to support people who suddenly couldn’t or wouldn’t be able to repay their loans. Spending patterns have changed beyond recognition. No one could get to a branch, and many banks still rely on face-to-face contact for things like identity verification. On top of all this, the banks had to make arrangements for everyone – including call center staff – to work from home.
Banks that were on the path to digitalization will have had a clear advantage – while the same banks have been able to build up CBIL’s capacity quickly, most of us fear the impending tsunami defaults that will affect lending to businesses. individuals and businesses and for which most will respond manually and inefficiently.
2. Artificial intelligence, automation and machine learning
In 2019, the bank of england found that two-thirds of respondents to its survey were already using machine learning – primarily in the fight against money laundering and fraud detection. It attributed restrictions to internal factors such as deployment on legacy computer systems and data limitations. Automation, AI and Machine Learning will revolutionize the industry – allowing traditional banks to compete with their
digital native competitors.
AI will transform the industry in some obvious areas. The ability to spot spending patterns that might indicate fraud, for example, or the ability to make instant decisions on things like loan applications and credit limits. This would not only speed up the decision-making process for customers (for a much better customer experience), but also allow banks to compete with challengers who already offer faster financial decisions based on a risk-based assessment. IA.
3. Client experience
We’re starting to see Gen Z come into the workplace and it’s going to really change what customers expect from their banking experience. Most banks are talking about completely redesigning the customer experience, but reality is harsher than words. There are still banks that expect people to bring a physical copy of their passport to a branch to verify their identity, or download, print, and display a credit card application form. People generally accepted this because there was no real alternative. All of that is changing with Gen Z, who have multiple jobs, pay-as-you-go for their workspaces and cars, and expect flexibility in everything they do.
4. Data-driven insights
As always, it all comes down to data. Banks have a huge amount of it, largely unused. Think about the potential of using it, to predict areas of risk and opportunity. What might data modeling and predictive analytics tell you about customer behavior – past, present and future?
We hear a lot right now about COVID-19 which gives us all the opportunity to reset ourselves, to rethink our future. It would be a missed opportunity for the banks to return to the current situation. My message to banks is to embrace change and use technology and data to build a better and resilient future.