While the COVID-19 crisis has had a deeply unsettling impact on global economies and society, it has also forced us to rethink how we do things. The pre-pandemic approach to business is no longer relevant. Failing to challenge your old mental models, by which we mean entrenched norms, assumptions, beliefs and behaviours, will hold you back when navigating an unprecedented crisis.
“In the midst of every crisis, lies great opportunity” – so said the great Albert Einstein and the words ring particularly true today. Rather than surrendering to the crisis, it’s about finding the kernel of opportunity for transformative growth. And if you cannot find it, you must create it.
Banks and other financial services institutions are central to keeping the flow of capital surging and providing an economic lifeboat during the crisis. That’s why we want to explore how they can challenge established industry attitudes to not only survive but expedite long-overdue changes.
Are you embracing advanced technologies?
Adopting innovation and advanced technologies in a strategic way and reimagining themselves as ‘as-a-service’ platforms and digital ecosystems brings the opportunity for financial services businesses to drive cost and operational efficiencies and enhance customer satisfaction.
A World Economic Forum survey found that, since the onset of the pandemic, 57% more banking leaders than last year now see new technologies as having the most significant influence on banking over the next five years. Within that, 84% cite the transformational potential of cloud, now a priority area for a quarter of respondents, while 77% of banking leaders believe AI holds the greatest potential for transforming their sector.
There’s still service and digital transformation to be done by large sections of the financial services market to bring it into the future by understanding what the new consumer wants – digitally-enabled, mobile, frictionless and convenient service in real time. Consider that just a month into lockdowns Lloyds Bank already saw 50% more people registering for online banking than the previous year, with customers feeling more confident using mobile and online banking. Many understand this but remain hindered by legacy technology.
Develop into breakthrough areas
Banks and other financial services firms face mounting competition from outside their own industry, from global tech powerhouses such as Google and Apple with their digital payments tools, Alibaba’s Ant Financial and its mobile and payment platform Alipay, and Facebook and its blockchain-based Libra initiative.
Don’t be afraid to experiment and change your strategy to develop into breakthrough areas to protect your competitive edge. Heed the example of the ever-evolving Amazon, which has made itself indispensable. Its huge array of products and services allows it to embed itself more and more into its customers’ lives, achieve a richer and deeper understanding of their needs, enhance their stickiness, enable cross-selling and attain a bigger wallet share.
Now delving heavily into financial services, it also taps into the new “cashless society” and, importantly, all these strategic decisions, such as Amazon’s partnership with Worldpay to enable ever more frictionless payments, further boosts reliance on its ecosystem. What bolt-ons can you create to become more valuable to your customers’ lives?
Collaborate and co-create to grow
Digital tools have become a non-negotiable over the past months – that’s where mutually complementary industry collaborations can kick-start immediate value creation. Banks can benefit from tech-savvy peers or players from other industries with the digital expertise and framework that can level up banks’ capabilities and enhance the end user journey.
BNL Gruppo BNP Paribas and Vodafone Business, for instance, have joined forces to offer a more secure, engaging and sustainable digital banking experience. Vodafone brings the necessary mobile technology for enriched customer communication and 5G technology, and together they will work to create new applications including wireless ATMs, video and mobile services, and virtual reality tools.
Another strong example of collaboration and co-creation is Swift, which in 2018 established a first-of-its-kind cross industry standard with ten corporates and twelve banks, to provide a superior cross-border payments experience for multi-banked companies. With this strategy, Swift pinpointed precisely what corporates are looking for and missing – a faster payments experience, real-time tracking, certainty of credit to end-beneficiaries, transparency, and predictability of transaction fees and foreign exchange rates.
COVID-19 has opened up opportunities for financial services leaders to shift their traditional competitive mental models. Ask yourself: are you leveraging the opportunity for out-of-the-box industry collaborations to hone your product and reach your growth objectives?
Adopt the omnichannel approach
The heightened digital experience during lockdowns has significantly impacted consumer habits and we believe that an omnichannel experience is likely to be more sought after in the near and long-term future. We have seen the emergence of “appification” – as new-age companies interacted via apps, the majority of customers started expecting it from every business. They want to transact on the apps and communicate in real-time with service providers via multiple channels.
Traditional banks can reach these customers only through enhancing their multi-faceted and always-on communications channels, which again can be achieved through strategic collaboration. Look at TSB, the first UK bank to partner with Adobe’s omnichannel platform to collate all of its customer data specifically to gain a fuller view and be able to act on customer data patterns within minutes rather than days. Banking leaders should aim to break down siloes and have the same kind of 360 degree visibility across their customer data sets to identify areas to add more value quickly.
Continuous innovation – flip the back-to-front model
Most established legacy organisations are not customer-centric. They operate back-to-front and are product or service-focused. Their systems are not designed for interaction, transaction or real-time dialogue. They are not flexible or modular – you must use the whole system, instead of picking and choosing pieces of it to tailor services or capitalise on cross-selling possibilities.
Consider a wealth management division at a bank or an insurance firm whose systems don’t recognise that the same consumer often has multiple relationships with the organisation and is present in various parts of the system – for example, a life insurance prospect could also be a customer for vehicle or property insurance. However, if the company doesn’t offer an integrated solution and user experience, that’s a giant missed opportunity.
One transformational thing you can do now is flip the back-to-front model and introduce an intermediary layer, or ‘intelligence layer’, between the front and back ends. This can be done faster and cheaper than replacing entire core systems. It also allows external developers to connect with the intermediary layer, with the benefit of open innovation and greater access to data. Once you pool the data into a centralised data lake, you can analyse it, and apply AI, machine learning and deep learning to predict what people need at a granular level. That’s the key to sustainable growth.
Only 17% of customers trust the activities of financial institutions during times of crisis. That’s a startling figure and points to the immediate need for banks to reshape their old mind-sets. There’s a lot riding economically on the next steps taken by financial services groups and their ability to adapt by challenging outdated mental and business models. According to McKinsey, the dire impact of COVID-19 on retail banking could see revenue declines of 16-44% for Western Europe.
COVID-19 brought trends such as remote working, video conferencing, omnichannel communications and mobile transactions, which are here to stay. Consumer behaviours have shifted, with 60-85% of consumers in Western European markets wanting to carry out everyday transactions digitally – and that’s not just millennials and Gen Z but also those over the age of 65. If these emerging trends remain then retail banking is set to undergo up to three years of acceleration in digital banking preference just this year. There’s no time to lose in exploring the rich opportunities on offer.