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Visualizing the New Normal in Banking

Maxwell Maltz told us that, “Most 'crisis situations' are opportunities to either advance or stay where you are.” With that in mind, which banks are best placed to move ahead after the current crisis?

Early 2020 was a time when most banks were embarking on digital strategies, in varying degrees. Then the COVID-19 pandemic struck and suddenly everything was upended – in a very real sense, the world entered uncharted territory. Recovery from the global pandemic will happen, but there is much discussion and speculation about the pace of revival and what the so-called “new normal” will look like. However, there are some things we do know, and these factors will certainly shape the future of banking.

The Rise of Virtual Banking

When the pandemic hit, banks acted quickly to protect their employees and customers. Many reduced branch hours or closed completely, and staff were encouraged to work remotely. Banks with cloud solutions were able to pivot quickly from office-based to working from home, and therefore able to remain fully open for business even with their offices closed.

Meanwhile, retailers and businesses of all sorts were forced to close physical locations, and those that could remain open (essential businesses and online sellers) would either prefer or require electronic payments. With lockdown orders in place and bank branches closed, customers of all ages turned to digital banking. At a time of social distancing, real-time digital banking, virtual wallets and contactless payments came to the fore – and transaction limits have increased to encourage use and reduce physical contact.

With new habits forming, customers are unlikely to flock back to branches when they reopen. On the face of it, banking has changed forever, and the future belongs to digital banks. But what exactly do we mean by digital?

Digitization … or Digitalization?

Almost all banks have digitized to a certain extent. For the most part, analog processes have been converted to digital – for example, computer records have supplanted physical ledgers. In practice, many digital processes and workflows replicate analog processes. Elon Musk refers to this as “design by analogy” and there are many examples beyond financial services: online newspapers with mastheads and columns like physical papers, or mobile devices designed like telephones, with an assortment of button images and traditional ringtones. Digitization is an evolution of what went before, placing a floor under what’s acceptable. However, digitization can also put a ceiling on what’s achievable.  

In comparison, digitalization requires a return to first principles – i.e., for banks to actively question every assumption they think they ‘know’ about a given problem or scenario. Banks can then apply these findings and what they envision to best leverage digital technologies and digital data in a way that redesigns (and often redefines) how work gets done. In this way, banks can transform how they process information, interact with customers and generate revenues. In essence, digitalization marks the first step of a digital transformation journey to a whole new world of possibility.

Banking after COVID-19

Banks that have truly digitalized will be well positioned for success in the post-pandemic world. Indeed, those with advanced strategies will help shape the look and feel of that new world. So, what will it look like?

Automation, Automation, Automation

In many respects, the pandemic is accelerating what was happening anyway. Bank customers are getting accustomed to automated banking with minimal or zero human engagement. As boundaries between banking and technology continue to blur, wholesale digitalization of banking seems inevitable. It follows that banks with advanced digitalization strategies can ride this wave of automation to:

  • Harness the power of advanced analytics to achieve a 360-degree customer view and deliver products that align with customer needs
  • Accelerate the adoption of artificial intelligence (AI) and machine learning (ML) to offer a better customer experience and permanently reduce costs
  • Adopt cloud solutions that offer scalability, elasticity and pay-as-you go pricing to align bank processing costs with business success

Now is the Time to Accelerate

Many commentators predicted that 2020 would be the “year of the fintech” as truly digital banks began to redefine the customer experience. But, since the onset of the pandemic, leading challenger banks have seen a significant drop in app downloads. In the UK, Monzo, Revolut and Starling saw app downloads decline 18% -36% in March. Although incumbent banks still face challenges, it seems likely that customers are keeping their money where they feel it is safest – with traditional banks, which have built customer trust over many years.

While trust in traditional banks may buy incumbents some time to catch up with digital challengers during the current crisis, it’s clear that the demand for digital banking will continue to rise, and now is the time for traditional banks to find ways to accelerate their digitalization strategies. Some banks are already working with fintechs to exchange business know-how for technical expertise, while others work with partners to begin a transformation journey. There are multiple options for banks to choose from, but maintaining the status quo is not one of them.


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