The coronavirus pandemic sent tsunami-like waves across the global economy and virtually everyone’s personal and professional lives. It’s easy to be overwhelmed trying to forecast what jobs, businesses and industries will be like when the waves settle, but a more constructive approach is to make informed assumptions based on an analysis of what’s happening today — what customers are doing, how employees are adapting, and what key business metrics indicate.
To that end, we’ve been gathering metrics, insights and perceptions about the longer-term effects of the pandemic on financial institutions (FIs). We also met virtually with chief operating officers from some of the world’s largest FIs to share and validate our thinking. (For an expanded take on our thoughts and advice, see our white paper, “Five Financial Industry Objectives for Catalyzing Order from Chaos.”)
Informed by this work, we offer the following five new realities facing FIs, and lay out concrete steps that they can take to better serve customers and employees — which will also have the effect of maximizing competitiveness in the post-pandemic era.
Efficiency ratios (cost divided by revenue) will likely increase, given expected revenue declines and their impact on cost structures.
To offset this, FIs must optimize costs and embrace agile operating models to scale with highly variable processing and customer interaction volumes.
Actions to take now:
Accelerate high-impact digitization initiatives. FIs should examine planned and ongoing digitization initiatives and identify customer journeys that can be digitized immediately for maximum impact. For example, while many FIs have digitized the customer onboarding process for retail deposit products, manual interventions remain that require multiple branch visits, such as know-your-customer processes or providing documentation for mortgage, small business and commercial products.
Invoke structural cost management. The emerging environment will be structurally different, with more digital interactions, process digitization, digitized collaborations, and work from home (WFH). FIs must review their cost structures and rationalize investments that were planned using pre-COVID-19 assumptions. A detailed analysis of cost drivers across various internal and external spend categories is essential to not only control costs but also to prioritize investments to improve productivity in the new environment.
Accelerate lending services digitization. Lending operations, especially servicing, are still heavily call-center-based. Lenders need to seamlessly integrate the lending experience with the broader banking experience and enable at least all standard transactions to be carried out online with various proactive tools and features, aiming for “zero call center operations.” Several customer service capabilities, such as escrow, payment changes, charges and property information, can be easily digitized in a seamless fashion.
Improve and industrialize WFH capabilities. Many FIs have scrambled and spent heavily to implement WFH capabilities. However, they must now transition their workforce from maintaining business continuity to being productive and ready for further disruptions from COVID-19 or similar shocks. Better security, easier application access and improved response times should be priorities.
Institutions will need to expand their focus on how they ensure the safety and security of customers, data and the bank.
Branches must be welcoming while incorporating proper social distancing practices and maintaining new hygiene and disinfection standards. Data must be secure when customers interact digitally. Cybersecurity end points must all be secured without compromising workflow and service and sales experiences.
Actions to take now:
Redesign branches not only physically but also operationally to ensure the customer’s physical safety. Install physical barriers, touchless terminals, smart ATMs, and ultraviolet systems to sanitize cash and surfaces. FIs should also implement appointment-based branch visits.
Extend customer data security tools to WFH endpoints and enhance security training for WFH associates.
Focus on the customer experience outside the branch to minimize time in the branch. Enhance relationship depth at the branch with contextual and personalized interactions.
Modernization initiatives must be broadened and accelerated to create the autonomous banking now required.
This will entail a digital revamp of all interactions and realigning the workforce to interact with the next generation of digital systems. In consumer lending, for example, banks must train associates to address a greater scale, variety and complexity of calls. In parallel, FIs should invest in building out capabilities for the future. In the short term, institutions may put wrappers around existing processes and platforms; however, in the long term, they’ll need to reimagine the front, middle and back offices. Banks must prepare for a world of zero paper, cashless payments and contact-free transactions.
Actions to take now:
Migrate customer journeys from being omnichannel to entirely digital. Banks can enable all transactions to be completed online and digitally with guided navigation via chatbots and “zero” contact center operations. The quality of security and hygiene during the customer journey will become a brand differentiator. Video interactions must be mainstream and tightly integrated into a reimagined customer experience, whether for sales or support.
Provide tools with which customers can completely automate their banking. Inward remittances, along with bill pay and other outward remittances, are mostly automated. Enhance these capabilities with automated savings, spend management and robo-advisory capabilities.
Lay the foundation for zero back-office and zero-agent contact centers. Design and test fully automated back offices, as well as artificial intelligence (AI)- and bot-managed contact centers, to address more than 90% of customer queries.
The industry must be reimagined by leading enterprises.
The pandemic is viewed differently by different generations and personas. Gig workers, small businesses, and the self-employed have faced different effects than salaried employees. On top of these variations, there are differences by industry. New views on savings, investments and risks tolerance are emerging. Net-new behaviors are emerging that will impact the design of the next generation of banking products and services. FIs must accelerate personalization in products and experiences beyond just banking needs and life events.
Actions to take now:
Engage your customers to understand the impact of current events on their banking and nonbanking lives. Double down on treating each customer as a unique segment rather than as a member of a predefined segment with generic needs. Design products and features to help them meet their financial goals given their life constraints. One example is bundling checking accounts with preapproved low-interest credit limits for gig workers to smooth out variances in their income.
Build agility and flexibility into product and pricing engines to quickly create customized and tailored products for the emerging needs of different customer personas.
The bank of the future should play a greater societal role in addressing the financial and economic impact of current and future pandemics and other crises.
Institutions can help small businesses restart and be viable again. New services could help restore financial health to individual consumers with tailored plans to achieve or improve on pre-COVID-19 financial status.
Actions to take now:
Offer tools and proactive advice to customers on how best to manage their money. Use customer transaction analysis, cohort comparisons and predictive AI tools to nudge customers toward optimizing their financial lives with smart spending and saving strategies.
Assist small business customers with government programs such as the CARES Act Paycheck Protection Program. Become their partners to claim and use the provided funds, and to follow the process to get the maximum forgiveness. Provide small-business customers with tools and predictive analysis to better manage their cash flow and to prepare financially for potential future shocks.