When COVID-19 quickly evolved from an emerging disease in China in late 2019 to a full-blown global pandemic a few months later, the banking and finance industry could have been forgiven for thinking: “Here we go again.” Having not long recovered from the fiscal nightmare of the Global Financial Crisis (GFC) of 2008-10, executives were bracing for another economic tsunami as borders closed, communities went into lockdown and the term ‘social distancing’ was added to the dictionary. The only certainty was just how uncertain the future looked.
About 18 months on and it is evident the economic fallout of the pandemic has not been on the same scale as the GFC. Despite massive challenges, banks have deployed technology and displayed impressive agility to continue to serve customers, maintain productivity and reassure regulators. Indeed, global professional services network Deloitte has credited the banking sector with playing “a crucial part in stabilizing the economy and transmitting government stimulus and relief programs” in many Western nations.
For all the positives though, the banking and finance industry faces a rocky road as COVID-19 continues to impact economies, stifles growth in traditional product areas, takes a toll on brick-and-mortar branches and accelerates the need for digitization across almost all areas. The International Monetary Fund had already tipped global GDP to decline by 4.4% in 2020. Even with a possible rebound in 2021, it could still be $9.3 trillion lower than expected before the pandemic. Financial hardship is a certainty for many, with the Deloitte Center for Financial Services estimating the U.S. banking industry may have to provision for up to $318 billion in net loan losses from 2020 to 2022, representing 3.2% of loans.
Another challenge for traditional banks is the rise of fintech companies, which are heaping even more pressure on the sector by offering real-time, 24/7 solutions that appeal to many consumers, particularly digitally savvy younger generations. The popularity of online-only or ‘neobanks’ that operate solely online has helped make fintech one of the fastest-growing industries globally. That growth shows no signs of slowing down. Indeed, PWC has reported 88% of incumbent financial institutions believe that part of their business will be lost to standalone fintech companies in the next five years.
Given such an outlook, it is no surprise banks and finance companies are committed to finding ways to reduce overheads, enhance efficiencies and improve their services. From embracing digital innovation to reinventing processes to meet the needs of an ever-changing and crowded market, it has never been more important for banks and finance companies to be ahead of the curve when it comes to the following industry trends.
As the pressure builds on banks and financial institutions to reduce costs and drive efficiencies, smart executives are partnering with respected outsourcing providers that have the experience, technologies and workforce talent to deliver results. Valued at $85 billion in 2020, the global BFSI (Banking, Financial Services and Insurance) outsourcing market is projected to reach almost $175 billion by 2028 as more institutions join the almost 80% of retail banks that already outsource at least one part of their business operations.
There are numerous benefits for outsourcing in the banking industry, including:
Once seen as the domain of call centers and data entry specialists, many banks and financial services institutions are looking to outsource more complex or technical teams to help boost their capabilities, including:
The need for banking and financial executives to be more agile, innovative and open to new ways of doing business is growing by the day. Learn more about why developing an innovative, cost-effective customer acquisition strategy can help cement your organization as the bank of the future.
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