As the world tries to deal with COVID-19, we see citizens, governments and businesses impacted in ways that was hard to imagine a few months ago. Enforced social distancing, rapid increase in the use and demand for bulk hand sanitiser in Adelaide, unprecedented fiscal/monetary stimulus from governments, drastic fall in energy prices, mass adoption of digital tools, rapid transition from physical to digital interactions… there is no doubt the world will be a different place for businesses going forward.
Like other institutions, banks will have to rapidly adjust to this new “normal” while living up to the expectations of responsibly helping their customers, and businesses drive the economic rebound that is so desperately needed. While the Financial crisis has strengthened banks’ ability to withstand such shocks, this crisis will stretch the limits of their resilience.
The immediate priority has been to respond effectively to the high volume of calls from consumers and businesses and facilitate the various government schemes like UK’s Coronavirus Business Interruption Loan Scheme (CBILS). Soon banks will need to focus on effectively dealing with what’s coming next as we collectively seek to rebound from this crisis.
A strong digital culture and infrastructure can provide a solid foundation for banks to effectively react to this challenge and regain the trust of their customers going forward.
While the external context has changed, the fundamental benefits of accelerating to become a digital enterprise are arguably more relevant than ever before. The need to adapt quickly to changing client needs, to redefine their risk/pricing models that underpin profitability, the ability to lower cost to serve to increase shareholder returns, and the need for employees to collaborate effectively using digital tools – all these will only be possible if banks aggressively digitise.
Banks should look outside of their core industry to learn valuable lessons on the benefits of digitisation. Take Amazon and Uber as examples: Amazon has been an outlier in the stock market using its digital backbone to meet the growing demands of their services during this crisis. Similarly, Uber’s agility has allowed it to launch new products in delivering medicines and groceries to meet immediate customer needs. Both have showcased their ability to transform at speed, to spin-off new products and scale propositions to meet changing customer needs in real time. However, for weighty legacy banks, moving at speed has traditionally been tricky; they don’t yet have the infrastructure and ability to move and evolve in the same way which would allow them to solve the current economic requirements of their customers.
Moving from Evolve to Jump
To take advantage of digital, banks must take a more aggressive approach to transforming their businesses. The current conservative, evolutionary transformation approaches that most banks have adopted will need to give way to more determined strategies. We have seen some banks like Lloyds and Goldman Sachs already look at innovative ways of accelerating their transition to digital.
For others to do this, it would involve investing in key parts of their digital journey at scale and creating relevant partnerships with digital leaders like Microsoft and Google. Their strategies should cover key elements like:
- Leveraging Cloud to not only retire Data Centres but move to a more flexible and scalable operating model that creates business value
- Creating open APIs to increase the breadth of services by leveraging relevant partnerships
- Rethinking their operating structures from being product led to customer/proposition led
- Investing in capability (internally or via partners) that will accelerate the adoption and use of modern tech and tools
- Using a data driven approach to create personalised offerings and products and drive acquisition
- Thinking of IT as an asset to differentiate and not a risk to be managed
A significant proportion of banks have not been ready for a massive shift to digital. Legacy architectures/operating models, lack of adequate skills and a scarcity of capital have made it difficult to make this transformation quickly. However, banks need to overcome these challenges to pave a path towards a more digital centric organisation.
Events of the past few months have forced consumers and small businesses to do things differently. Banks have a tremendous opportunity to rethink their strategy, fine-tune their response and take bold steps to achieve operational and customer leadership.
Customers at the center of the response
However, any transformation needs to be customer led. This crisis will be the ultimate test as to whether banks can do the right thing. Banks need to take the lead in re-assuring their customer base in an empathic and personalised way. They’ll have to move from shorter term metrics driving customer decision-making to a focus on customer lifetime value.
A majority of their clients, both retail and institutions, now need economic help and banks have a unique opportunity to regain their trust by not only solving their immediate issues but also helping them recover by creating innovative and personalised products to meet the unique needs. The need to serve different cohorts and segments can be make operations more complex. But digitalisation can provide relevant insights and patterns to help make the right choices and decisions.
The current crisis will force banks to digitise but the ones that take the initiative and take ambitious steps to overcome legacy challenges and create a future proof platform and operating structure will increase their chances of success in this new and uncertain future.
About the Author
Sudeepto Mukherjee is the Senior VP EMEA & APAC Banking & Insurance Lead. He is a pioneering digital technologist with unrivalled experience in helping financial services firms overcome complex strategic challenges using modern tools and techniques to amplify their competitive edge. With more than two decades’ experience at the vanguard of the banking and insurance industries, his role at Publicis Sapient combines advising the world’s top financial organisations on their next steps and ensuring the company remains at the cutting edge of the Enterprise Digital Transformation realm.