Financial Institutions during the COVID-19 Outbreak: Did they go through Development or Transformation?
For the past 15 years, technology was a major part of digital transformation in the way we do business. However, within only a few weeks, when the outbreak of COVID-19 was the new reality, technology is what saved the lives of many people around the globe. Remote work, virtual meetings and contactless commerce was suddenly reaching unprecedented levels of growth. US e-commerce saw a surprising growth of 93% year over year in May 2020. The new reality finally has technology at its core and each organization should include digital transformation as part of its corporate strategy in order to survive.
The outbreak of COVID-19 was the perfect opportunity for financial institutions to reinvent the way they do business and concentrate on the digital delivery of services. Digital transformation now is all about making convenient and contactless financial products and services, in a way to keep this industry running profitably in the future. Change management along with agile development should be at the core for any financial institution.
Is the industry just developing or is it going through a complete transformation? Digital transformation might be the best possible answer right now, based on the following retail trends:
- Visa reports that the US market saw a growth of 150% in contactless payments (source: IFF)
- 7 in 10 consumers support that cashless transactions will be permanent even after this crisis (source: MasterCard)
- In the US, 35% of customers are increasingly using online banking, especially seniors and boomers, who were traditionally slower to adopt it (source: IFF)
- TD Bank built new features “overnight” in its IT systems so that 80% of its employees are now working remotely (source: IFF)
- Banks along with FinTech companies are focusing their efforts to provide the right advice to the customer along with digitizing all operations (source: American Banker)
- Banks in US and Canada saw more than a 200% increase in new mobile banking registrations (source: FIS)
- Online banking traffic increased more than 85% within the first two months of the outbreak (source: FIS)
But first… they focus on innovation
Online banking is booming, pushing the industry to develop state-of-the-art IT systems and digital platforms in order to handle the increasing number of logins and transactions. Especially when bank branches started closing down, one after the other, the institutions started questioning how they could bring innovation forward. From the other side, this trend has put the spotlight on several institutions that lagged behind in advanced and innovative software solutions. Financial institutions have invested huge amounts in digital transformation, analytics, innovation, and AI within the first few weeks of the outbreak. In the past, financial institutions, that would aspire to implement digital transformation and move forward with ground-breaking technology, were held back by risk aversion. In contrast, COVID-19 has now removed those barriers. A Canadian bank reported a 20% increase in productivity with its innovation development team, building new digital products and services transforming the customer experience and interaction forever.
Innovation is no longer “nice” to have, but it is a “must-have”, as Mr. Balkin, Director of Innovation at HSBC, supports. HSBC had to triple down on innovation. Innovative and efficient API’s, client self-service solutions, new risk management systems and updated cyber security are only a few examples, proving that trend. Building new digital solutions is not only about making cost-cutting technology. As Mr. Balkin supports, the mission of any successful financial institution is to build new, resilient, and innovative digital solutions, all directed towards helping the employee, using this technology, to assist the customer. Agile development should be linked and directed towards optimizing the customer experience.
Customization is all about personalization and differentiation
During times of uncertainty, and especially when there is an unprecedented crisis, customers need a special piece of advice from banks and other institutions. Right now, the communication between the financial institutions and customers is highly customized. Education, engagement, and constant updates are the main elements of that customer interaction.
Artificial intelligence is at the core of updated and refined marketing plans. Many banks have now built their own virtual assistants that notify customers for any upcoming bill due dates, current amount balances, charges etc. For instance, whenever a customer has been charged more than once for a purchase, Bank of America’s virtual assistant will provide full guidance on how to file a dispute. AI-related services provide companies with valuable customer insights. These services are based on the notion of DIY (do-it-yourself), as customers tend to prefer doing everything by themselves through a mobile app. This is what provides various insights about customer behavior. Therefore, this trend is what led to the newly appreciated 360-degree customer approach.
Banks are currently looking to represent their customers across the entire organization, utilizing a holistic 360-degree customer view. The digital transformation of financial services provides tremendous insights on identifying the exposure of each customer. It is not about the actual product anymore, but about the household or the small business that needs assistance during this crisis.
Content marketing has been also radically transformed, from presenting the assets of a brand to indicating how to solve the problem of each customer. Increasing brand awareness is not the main goal of content marketing for financial institutions. Instead, content marketing is now embracing the type of help that a financial service could provide to customers. Many analysts suggest that an ad explaining how to help the customer dealing with personal economic concerns is more effective than an ad that just promotes the brand and its elements.
The holistic digital transformation of financial institutions
Some of 12,000 bank branches have closed within the past decade in the US, representing a 12% drop. Currently, due to the outbreak of COVID-19, many banks decided to close a lot of branches as most transactions and other activities can be executed online. Analysts predict that there will be a need for another 20% to 30% of branch consolidations in North America within the coming year. Digitization is also incorporated inside the remaining branches and is a major part of the industry’s digital transformation.
Financial institutions now start from understanding what comprises the ideal customer experience and then they proceed fast to find the way to digitize the whole customer journey. Some companies start from their existing technology and digital solutions, while putting the customer “on top”. It is a smart way to realize the points where the customer experience lags behind in terms of quality. However, to achieve this identification and the respective development and improvement of the existing digital solutions, companies are now on the hunt for the right talent, the right people to digitize the whole customer journey. Investment in FinTech is another trend as banks are increasingly interested in optimizing automation within all their services. Speed, agility, innovation, and seamless integration are the focal points of this holistic transformation.
The pandemic has transformed the way financial institutions do business and digitalization will continue to be in the spotlight.