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.
1 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.