Not so long ago the world was bracing for a COVID-inspired economic tsunami. Finance and banking executives, haunted by memories of the Global Financial Crisis, watched on with dread as countries closed borders, businesses laid off staff and governments rushed out stimulus packages. In a sign of the times, the Deloitte Center for Financial Services estimated the U.S. banking industry alone may have to provision for $318 billion in net loan losses from 2020 to 2022.
While such losses may still occur and the path ahead remains uncertain, it is increasingly likely the global economy will not reach the dark depths of the GFC. The rollout of vaccine programs and easing of social restrictions are inspiring hope among many in the finance and banking industry that there is light at the end of the COVID tunnel.
Given such optimism, the focus is now turning to finance trends that are likely to emerge post-pandemic and how leaders can ensure they are ready to utilize them to gain a competitive edge. Here are a few key trends shaping the industry:
If anyone needed a reminder of how the pandemic has changed the way people do business, consider research and consultancy firm Forrester’s finding that 14% of online adults in the U.S. used digital banking for the first time after COVID-19 entered their world. A rise in the use of online banking services was inevitable but the fact more than 14 million Americans now consider a digital bank to be their only bank is clear evidence that such services are here to stay. This emphasis on digital banking is also set to heavily impact traditional brick-and-mortar branches. Having already been scaling back on branches, the rush to digital banking during the pandemic will see more institutions forced to balance the need to continue providing physical access to certain customers with the cost benefits of reducing such footprints.
The combination of lockdowns and social restrictions has inspired a wave of ‘forced saving’ for many consumers. While the bottom fifth of the economy in terms of income have continued to experience financial hardship, the remaining higher income groups appear to have accumulated more savings during the pandemic on the back of a drop in forecasted spending. This signals a trend in finance where institutions could find themselves in demand for short-term loans from lower-income households, while consumers in a stronger financial position may be more open than normal to seeking avenues to invest their surplus funds.
Customer experience remains a key driver for consumers, with data showing those who enjoy a great CX are five times more likely to recommend a brand to others. In the rush to digital innovation, it is essential financial institutions don’t forget the power of the human experience and continue to deliver the care and attention that will determine whether people stay with them or not. It has never been easier for customers to change financial providers and that is why every effort must be made to provide first-class service. Making the onboarding process faster and creating a seamless customer journey will go a long way to winning favor, while a focus on accessible and socially responsible banking will instill an all-important sense of loyalty. The key is to dedicate as much focus to customer needs as the unrelenting desire to sell products.
While AI-enabled chatbots were part of the pre-COVID landscape for banks and financial institutions, they are now front and center as smart operators relish their ability to improve efficiencies and save costs. In a world where consumers increasingly recoil when put on hold by a bank’s customer service line, Gartner research has found 70% of customer interactions are expected to involve the likes of machine learning applications, chatbots and mobile messaging by 2022. The sophistication of today’s chatbots are light years ahead of previous iterations and forecast to save companies $8 billion per year by 2022.
The flipside of an increasingly digital banking world is the imperative to safeguard customers’ data. With some customers still apprehensive about adopting online banking, one high-profile misstep has the potential to not only fail to convert newcomers but lose the trust of those that have already joined the revolution. With consistent media headlines about cyber fraud and hacking, it is no surprise that EY customer research has found only 60% of consumers are comfortable sharing personal information with their primary financial service provider without any assurance regarding data protection and security. As the pandemic inspires more people to explore their digital banking options, it is those institutions that implement and, as importantly, promote best-practice software and security measures that will best position themselves to thrive.
As the finance industry evolves off the back of the pandemic, there will be a growing need to find, foster and retain skilled talent to lead innovation and ensure exceptional customer experience. This includes looking beyond traditional talent pools, especially if remote work is to be considered in business continuity planning. Despite an increasing focus on automation, there will always be a need to access first-class human resources and outsourced teams are an efficient and cost-effective way of doing just that. Outsourced teams or staff give local staff additional time to concentrate on high-value tasks, while labor cost savings of up to 70% in outsourcing hubs such as the Philippines can be funneled back into onshore teams, initiatives or developments.
The one goal all banks and finance providers share is to be well placed to soar once the pandemic finally comes to an end. With global professional services network Deloitte declaring the “bank of the future” is destined to fail unless it develops a smart, cost-effective customer acquisition strategy, discover a range of tips for ensuring your organization has all bases covered.
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