Feature: Future of Banking–The new normal banking ‘to do list’

Future of Banking with Ebenezer ASUMANG: Digitalized Christmas and an AfCFTA New Year

Banking has evolved world-wide since turn of the decade, and the winds of change are blowing faster everywhere within the industry. The ‘new normal’ has added bite to the speed with which industry players are going about business within the highly regulated space. It is evident that many banks are reinventing the wheel to move along with the digitalisation agenda, but there are still institutions lagging behind and should speed up to embrace the change that is enforced the more by the ‘new normal’.

The term ‘new normal’ is by far the most widely-used phrase today, as the behaviour of many has changed and will remain so even after the pandemic is over. This was a term used to refer to financial conditions following the financial crisis of 2007 – 2008 and aftermath of the 2008-2012 global recession. It has come to stay as we navigate our way in the novel corona virus pandemic era.

The ‘new normal’ has brought a new era in banking amid COVID-19, and the only way banks can succeed is through continous digitalisation, adapting to new competition, reinventing risk-management, and managing remoteness with workforces. Institutions should:

  1. Be swift in digital innovation prioritisation

The use of physical cash will likely continue to decline in favour of contactless payment options. Financial institutions must ride the wave of this trend as touchless payments and digital solutions become increasingly popular.

Digital-priority banking is here to stay. While some consumers will return to the comfort and familiarity of in-branch banking, it’s important for every in-branch operation to have a digital alternative if possible.

The new normal is here with us, and banks are expected to navigate and get accustomed to it with deployment of technologies and digitised data in different ways in order to stay in competition.

Consumers’ desire for digital banking services will most likely increase, forcing many traditional financial institutions to fast-track digital innovation efforts.

Front-end digital solutions alone are not enough, however. End-to-end digital processes are paramount as consumers’ and businesses’ appetite for on-demand service and approvals increase. Financial institutions should consider shifting resources, implementing new training programmes, and onboarding additional talent to support a digital-centric approach. This is especially important to factor into 2021 budgets.

Reinvent risk-management models

The COVID-19 pandemic has underscored the need to develop a dexterous risk management plan. Banks should be flexible enough to respond urgently to changing needs and provide support and reassurance in times of crisis.

This presents an opportunity to re-evaluate model risk-management frameworks and leverage systems that can support real-time data fluctuations.

Risk management plans must be nimble enough to evaluate liquidity constraints, rapid changes in creditworthiness, and stressed market conditions.

During the ‘new normal’ era, financial institutions should evaluate their earlier responses and develop protocols which can ensure resiliency, both now and in the future. The period will also require a shift from threat-mitigation to a longer-term response plan.

  1. Control the ever-changing banking workforce

While in the beginning the pandemic required an immediate focus on remote working solutions, it’s important to close any remaining gaps in technology or accessibility to ensure employees can effectively and perhaps permanently work from home. This raises questions about the future of corporate headquarters and in-branch operations. Financial institutions will also need to carefully assess their reopening strategy – keeping employees’ health and safety top of mind while reassuring customers and other audiences their safety is also a top priority.

The office environment may in fact change for good, with some employees continuing to work remotely even after the immediate risk subsides. Working to proactively establish and maintain open lines of communication can help provide support and drive accountability with remote employees. Further, transparency in business operations and workforce decisions can go a long way in developing trust and rapport.

Digital learning programs can expand employees’ skill-sets to make them more adaptable as roles are redefined to accommodate changing business needs. In addition to the above five essentials, a prolonged low (or even negative) interest-rate environment highlights the need for new sources of revenue – particularly as consumer needs and demographics continue to change.

As a long-term plan, banks should focus on reaching out to broader markets. Equally important is for banks to create efficiencies and reduce operating costs in the face of a prolonged decline in revenue and reduced liquidity if the pandemic’s economic impact is slow to subside. The ‘new normal’ is the future, and the future is now.

  1. Adjust to a revolutionised competitive landscape

The upswing of banking as a service provider, such as the partnership between financial institutions and Fintech firms, pose a real threat to many one-sided institutions. Additionally, banks can expect to see increased competition from online-only banks, stand-alone Fintech firms, and retailers who began offering lending products to capitalise on increased demand. These business models are highly effective due to their low operating costs, efficiencies driven by shared data, and uncomplicated interfaces with real-time approvals.

The reality is that many banks already collaborate with other third parties to help deepen financial inclusion. There has been partnership in the area of advancing shot-term loans to clients by the use of mobile technology. Although the partner institutions may not be seen as fully fintech firms, customers have been served well and the delivery has been nothing short of seamless and smooth.

There has been collaboration with third party firms in other areas which include portals for payment fees of various forms; payment of bills; and making purchases online or at designated points. The partnerships so far seem good – with a few intermittent hitches, but the future looks bright in this line.

  1. Investment in robust digital platforms which support financial inclusion

The digital economy is rapidly developing worldwide as the largest driver of innovation, competition and growth. Even though many people have been excluded, tremendous opportunities are available for the digital economy to support financial inclusion for sustainable economic development. Indigenous banks should by all means and at all costs invest strongly to make this a possibility in the new normal. Enough research should be carried out in this area in order to come up with the best innovations.

The writer has worked extensively in mainstream Banking & NBFIs. He is a Chartered member of the CGIA Institute, USA, a Google-Certified Digital Marketer and an Author.


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