“Each year technology makes the world more complex for people to understand. So, easy to use services for consumers are in particularly great demand.”
—– Alex Kreger, Founder of UXDA
The COVID-19 pandemic takes every sphere of human activity into the next level. Financial institutions are forced to move quickly to protect their employees, transform their operations, and serve customers in new, improved ways. The future of digital banking transformation is impressive, and it is predicted to entirely change the image of traditional banks, as well as bring more services to the customers. The rise of digital solutions in banking can result in increased data transparency, elimination of intermediates in the process, and alternative methods to access financial and intellectual data. All this can result in lower pricing on the operations and make transactions easier and faster.
It’s also unclear how long the pandemic will last. But one sure thing is here, this will not be a short-term event with fewer consequences. Industries, such as banking, should prepare for the long haul. However, the software revolution which has already disrupted many industries and has made some industries essentially obsolete is still rapidly transforming the financial services industry. Digital transformation in banking has already started, although the process in this sphere is quite slow.
Life for many of us has changed beyond recognition compared with just a few years ago and one of the biggest changes has been doing electronically what we had historically done more in person. That means video conferencing for meetings and socializing, shopping online, digital banking, and so on. The question is how much of this change will prove to be permanent versus how much is temporary. If COVID was to end overnight, would old patterns of behaviour return or would new habits become permanent? For the banking industry the answer is probably more towards permanent change.
According to research by the RFi Group, a financial services insights provider, 71 per cent of consumers globally are now using digital banking channels weekly – a 3 per cent year on year increase while daily use increased 6 per cent in the same period. It is clear that COVID alone hasn’t suddenly caused the shift to digital, rather it has simply accelerated it as more and more people have digital ecosystems as part of their lives. For instance, the shift away from cash towards digital payment methods has been building gradually for years.
Even without COVID, these trends were expected to accelerate in the next few years. The World Economic Forum recently predicted that 50 per cent of goods consumption could be made online in many developed markets by 2030. Banking post COVID-19 will look more like these:
- Increased digitalization of day-to-day transactions:
The transition towards digital was inevitable for routine activities such as checking balances, payments and transfers, even credit and debit card applications. Many of these activities are habits, and once habits are embedded they are unlikely to change. So, with even more people banking this way because of COVID-19, these routine activities will stay digital.
Branches will serve important moment needs for customers:
As COVID-19 fades, people will still have a psychological need for human interaction at important life moments. People need to feel reassured when it comes to life events like sending a child overseas for education, managing generational wealth transfers, establishing a wealth plan, bereavement or buying a home. This means we can expect some return to “normal” post-COVID and branches will see a significant proportion of this type of activity.
What remains to be seen is how far people will be willing to use video conferencing as part of this, which may in turn depend on factors like how long social distancing remains.
- Established banks will compete like “challenger” banks and partner more:
Increased digitization for customers will also drive more partnerships between banks and platforms like online retailers and social platforms, so you can bank where you spend or socialize. Separately, as we’re seeing new digital entrants to retail banking markets around the world, we also predict that established international banks will begin to challenge with increasingly scalable digital platforms inside and outside their home markets. The benefit of both changes for consumers will be clear: more choice. For the established banks it’s an opportunity to compete in new markets, segments and marketplaces.
- Bank branches will become more like service salons:
The way branches look and feel will change. Branches will become less about rows of tellers managing daily transactions, which can now be done online and more like service lounges. Agents will be on hand to guide customers through transactions on their own devices, and space will be broken up into more casual seating areas for deeper private conversations. Changing the layout of branches in this way will also support any ongoing social distancing.
- Regulatory collaboration on accelerated digitalization:
Regulators and banks were able to work together to rapidly help customers keep banking during the early days of COVID-19, including collaboration to support greater availability of digital and video banking services in some markets. This cooperation will grow as digitalization continues to accelerate and evolves into new areas like AI and machine learning.
COVID-19 has become a disruptor of strategic plans of many banking institutions but it has also served as a wakeup call to institutions that failed to envisage the future as being digital. There has been a rude awakening and banks should have no excuse in moving towards digitalization if they have not done so already. Undoubtedly experts can only predict but nobody can be certain about what the post-coronavirus world will look like. However, there is one reality that has been proven without a doubt; Change can happen in an instant. The key is to imagine possible outcomes and set in motion those initiatives that can position organizations most advantageously.
In general, AI and data analytics will be key areas of focus for investment in digital capabilities, as banks shift from using these not just to monitor transactions but also assist customers via “conversational banking”. Banks will be merging human and digital channels to provide help to customers more quickly and at a lower cost. For example, customers can begin a conversation in mobile apps with an AI chatbot, which is capable of answering simple questions immediately but enquiries that are more complex get passed on to front-line colleagues.
With the growing popularity of instant messages and demand for 24/7 banking services, conversational banking involving AI chatbots enables banks to engage with customers more promptly and effectively. It seems clear that normal post-COVID will not be the same as life before. COVID-19 has made us focus as a society on new solutions to familiar problems in order to help us live our lives during the pandemic and some of these developments will be permanently embedded. But while some parts of service industries like banking will change, the human element will persist particularly where complexity is involved and reassurance is needed.
About the Writer:
Ebenezer ASUMANG, CGIA worked in mainstream Banking & NBFIs. He has full membership of the CGIA Institute, USA, a Ghostwriter and an Author.
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