Rebirth of reputations
Unlike with the global financial crisis, banks have been able to step up as “the good guy” this time around. Banks across the globe pulled out the stops to integrate and adapt systems and processes to offer accommodations in loans, assist governments with the distribution of financial relief, and support consumers by upping contactless spending limits and virtual deposits.
In 2021, banks will risk losing that rosy glow as economic circumstances drive them to deal with non-performing loans, mortgage foreclosures, layoffs etc. Beyond their role in society as providers of capital and liquidity, banks will invest to sustain their reputations as trusted and good corporate citizens and use their power to persuade their customers and providers to adopt higher environmental and ethical standards. This will be in the areas of bank carbon-neutrality, sustainable financing, serving the unbanked, diversity and gender equality (as the number of women running a major global bank will double from one (Jane Fraser at Citi) to two). It’s a start.
Coming to age in the way of working
Back in Q1, when bank employees cranked up their laptops on the dining room table, banks that were strategically undertaking business transformation accelerated their efforts, and those that were tactical, or on the fence, now understand with painful clarity that this work must be undertaken strategically. Cracks in process and the resulting risks can be crippling. Especially from a back-office perspective, it is not sufficient to rely on “organisational memory” and collegial proximity for work to get done right. Advanced banks pushed the boundaries of remote work, and the proof of concept was successful. So they’re doubling down on developing digital twins and moving to the cloud. They’re adopting the hybrid office/WFM approach to reduce health risks and reduce cost permanently. The watercooler will never be the same.
The death of cash
Ok, maybe the rumours of the death are a bit exaggerated since there will always be the need for cash (and to some extent checks – the USA, for example cannot seem to live without them). But the pandemic has permanently changed the way that consumers and small businesses bank, and the demotion of cash has been accelerated by a decade by the pandemic. For example, the Norwegian central bank said that cash payments in that country plummeted to just 4% of transactions since March.
Implications? It will be critical to continue to evolve payments to be smart, safe and flexible to compete in new world, in both retail and commercial banking. As well, the permanent change in the mix of channels will see banks’ face to customers fade. Branches aren’t going to go away entirely – but they will be reserved for high value activities – by appointment only. To compensate, the personal touch has to be delivered digitally and intelligently. The role of the bank as the “financial wellness partner” will be born. Banks will use customers’ data not just to personalise and differentiate experiences, but to make recommendations for products and services from across their ecosystem that serve their customers well. Just as customers own their cash (physical or digital), in the future customers will demand that they own their data and can share it with whom they choose.
Laura Crozier, Senior Director of Industry Solutions, Financial Services at Software AG