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By Laura Crozier, Global Director of Industry Solutions, Financial Services at Software AG

Looking ahead to what is in store for the banking industry would be impossible without taking the pandemic’s transformational changes into account. Covid-19 has accelerated trends which were already underway in most industries, and banking is no exception. While the industry has been transforming for years, progress has been piecemeal as a result of regulatory complications, data protection considerations and a reluctance to change old ways.

The crisis has presented banks with a golden opportunity to regain the trust lost in the last financial crisis. Here, banks have had the chance to be the “good guys” by supporting their customers throughout the current turmoil. Research from Modularbank cites tech as a key factor for UK consumers when choosing a bank.

This year saw digital transformation finally start producing results, bringing tangible improvements to their customers. Expect to see this transformation continue further in 2021:

Banks will regain consumer trust

Banks across the globe pulled out the stops to integrate and adapt systems and processes to help customers during the pandemic. They offered accommodations in loans, assisted governments with the distribution of financial relief, and supported consumers by upping contactless spending limits and virtual deposits.

In 2021, banks will risk losing that rosy glow as economic circumstances drive them to deal with non-performing loans, mortgage foreclosures, layoffs etc. But, beyond their role in society as providers of capital and liquidity, banks will invest to sustain their reputations as trusted and good corporate citizens and use their power to persuade their customers and providers to adopt higher environmental and ethical standards. This will be in the areas of bank carbon-neutrality, sustainable financing, serving the unbanked, diversity and gender equality (as the number of women running a major global bank will double from one (Jane Fraser at Citi) to two). It’s a start.

Getting used to new ways of working

Back in Q1, when bank employees cranked up their laptops on their dining room tables, banks that were strategically undertaking business transformation accelerated their efforts. Those that were tactical, or on the fence, now understand with painful clarity that this work must be undertaken strategically.

Cracks in process and the way of working and their resulting risks can be crippling. Especially from a back-office perspective, it is not enough to rely on “organisational memory” and collegial proximity for work to get done right. Advanced banks pushed the boundaries of remote work, and the proof of concept was successful. So, they’re doubling down on developing digital twins and moving to the cloud. They’re adopting the hybrid office/WFH approach to reduce health risks and reduce cost permanently. The watercooler will never be the same.

Cash on its way out

Ok, maybe the rumours of the death of cash are a bit exaggerated since there will always be the need for cash (and, to some extent checks; the USA, for example, cannot seem to live without them). But the pandemic has permanently changed the way that consumers and small businesses bank, and the demotion of cash has been accelerated by a decade by the pandemic. For example, the Norwegian central bank said that cash payments in that country have plummeted to just 4% of transactions since March.

Implications? It will be critical to continue evolving payments to be smart, safe and flexible to compete in new world, in both retail and commercial banking. Also, the permanent change in the mix of channels will see banks’ face-to-face engagement with customers fade. Branches aren’t going to go away entirely, but they will be reserved for high value activities – by appointment only. To compensate, the personal touch has to be delivered digitally and intelligently.

As we head into the new year, banks will embrace their role as personal financial advisors. To this end, they will provide tailored services unique to each customer’s financial situation, while also consulting around products and services which extend beyond the traditional banking ecosystem. Consumer data will ultimately play a pivotal role in making this a reality, and will help to build stronger relationships as we emerge from the current crisis. That said, the drive to digital will also lead to a greater appreciation for the value of data among customers, who will be more careful about who they share their data with and for what purposes.

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