Management Lesson: Banking in the Time of Crisis and Beyond

Ashish Devalekar
Managing Director, Europe and Middle East
Article

The current crisis has hit the world at an unprecedented scale and speed. The impacts of this global health crisis are far reaching and have transformed almost every aspect of our lives. Traditional business models are getting disrupted to create a ‘new normal’ characterized by virtual and remote ways of working with little to no face-to-face meetings – be it for business development, strategic planning, or industry events and conferences. Customer and employee health continue to be the top priority for all organizations. While these changes have affected all industries, the magnitude of impact varies across industry sectors.

Transformations in banking

The Banking Industry, often referred to as the backbone of the economy, is currently undergoing an industry-redefining transformation. Banks have been called on to take on a special role amidst this crisis, aiding individuals, households, organizations, and the broader economy to cope with the current monetary and social challenges and its downstream impacts. Leading banks like Barclays, Lloyds Banking Group, and HSBC, are launching several initiatives to help businesses navigate through this period of uncertainty.

All the major traditional banks, start-ups, Neo Banks, and  FinTechs  are making quick upgrades to their systems to stay connected with their customers and launching new products and services to serve customers better in this hour of need. For instance, NatWest, Royal Bank of Scotland, and Ulster Bank recently launched a ‘companion card’ for carers to support vulnerable customers and those in isolation. They are also offering fee-free cash delivery services and the ability to entrust a third-party to make ATM withdrawals up to a limit on the customer’s behalf. There are many other examples. On the other hand, bank revenue is taking a hit because of the impact on fee income, credit loss, interest margins, and more capex or miscellaneous cost. Banks have to stay focused and move nimbly to retain customers and maintain profitability.

Given this scenario, Banks have realized the need and opportunity in ‘Digital’ and are accelerating the shift towards digitalization in their banking landscapes including applications, processes, operations and infrastructure. Many banks have started enhancing their digital offerings, bringing new products online and onboarding customers digitally. With employee health and safety as the utmost priority at this moment, banks are also looking to empower employees working on customer-facing or restricted-access systems that require physical presence in the office with digital tools and support. Examples of these include critical branch employees, call-center support for dependent processes, trading staff, treasury and clearing. Most of the new offerings that have been rolled out as a response to the current scenario, are here to stay for the future (with enhancements, upgrades and new versions).

The future of banking (beyond this crisis)

We are truly at the cusp of a new era in banking, with innovation and digitalization as the key drivers that will pave the way forward. There are three crucial opportunities that forward-thinking banks can fully leverage to take charge:

  1. Invest in driving customer adoption of digital products while also providing the required knowledge and AI tools to accelerate customer onboarding, thereby improving customer acquisition rate
  2. Quickly enhance ‘quick-win’ digital offerings such as increasing loans & overdraft limits, adding new payee and changing online transactions limits to enable higher customer retention
  3. Develop an adaptable roadmap for the post-COVID19 era by leading with an enterprise-wide digitalization program with phase-wise implementations, thereby improving the customer journey and engagement

“The value of digital channels, products and operations is immediately obvious to companies everywhere right now,” says Sandy Shen, Senior Director Analyst, Gartner, in a recent statement.“ This is a wake-up call for organizations that have placed too much focus on daily operational needs at the expense of investing in digital business and long-term resilience. Businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak and keep their companies running smoothly now, and over the long term.”

A research article from JP Morgan highlights the prospects of a quick V-shaped recovery from the current crisis, as opposed to a comparatively slower U-shaped rebound in economies and markets. Banks have already started strategizing on accelerating their digital journey with the current crisis acting as a real inflection point for banks to re-assess their position and plan for the future. Banks that can foresee customer expectations and future customer journeys, and proactively build digital capabilities to address them, will be the ones that will grow faster and emerge stronger on the other side of this global crisis.

 

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