How Covid-19 will shift priorities across the financial services industry

Amid a health, societal and economic crisis, financial services will be looked to as a pillar of recovery by governments, organisations and individuals alike. Leading on from a recent survey of business leaders in the industry, Josh Rix, Director at independently-minded management consultancy Woodhurst, explores five key areas where organisations across the industry can make strategic changes to continue supporting customers in the best way possible. 

Convert actions into concrete, sustainable change

Organisations across financial services have undoubtedly demonstrated a flexible and resilient response to this crisis.

From the rapid distribution of over £23 billion in Bounce Bank loans to the movement of entire support functions to work from home, firms have redefined processes, realigned focus and reprioritised workloads to allow their people to work safely with the tools they need to support customers at this testing time.

In the immediate term, these positive actions need to be refined and embedded across the organisation to not only survive, but to thrive in the future landscape.

Leaders are leaning towards a long-term focus on reducing cost

With an impending recession and continued economic uncertainty, 53% of leaders agreed that the initial focus will be to reduce operational cost across the business.

This isn’t surprising given the bloated cost bases of the larger financial institutions and it’s easy to identify a number of areas that can be targeted to drive efficiency. The crisis has challenged the long held assumption that a large, fixed office space is a necessity and pushed nearly all customers towards digital channels that run at a much lower cost to serve.

Interesting 47% of leaders suggest that one eye should remain fixed on increasing revenue streams. We’ve seen challengers expanding their product set (see Starling and Monzo’s move into business banking) or monetising existing products (see Revolut’s new charge structure), but less activity from incumbents in this space.

AI will be an important aspect of transformation, but not as strongly as we thought

Only 68% of leaders agreed that their organisations would increase their use of AI and Machine Learning tools in the next 12-18 months, compared to 78% who said the same for cloud-based tools.

It’s reassuring to see that the majority are looking to utilise these innovative technologies to enable digital enhancements, but it’s concerning that almost 1 in 3 leaders aren’t planning to seek the benefits of AI.

From previous research, Woodhurst has found that AI tools, if implemented correctly, can drive cost efficiencies, streamline processes and improve the customer experience. As banks continue to generate more data via digital channels and as customers start to embrace a wider array of digital solutions, an investment in artificial intelligence tools could generate multi-year returns for the business.

Digital capabilities will be the driving force for long-lasting change

Overwhelmingly, leaders agreed that digital capabilities across their organisations were in need of improvement as a direct response to the crisis.

Again, this comes as little surprise. For almost three months the majority of customers could only bank via digital channels. It has forced an entire segment of the customer base to grow comfortable with digital banking solutions, who previously had been reticent to engage with anything outside of the branch.

For financial institutions it has caused a significant amount of operational strain, put their digital infrastructure to the test, and highlighted key areas where digital capabilities are failing short today.

Digitise data management, customer support and account opening

Despite arguably being the focal points for much of the digital transformation activity in recent years, data management, customer support and account opening were still cited as the areas that most required enhancement.

Data Management
Given the continued proliferation of data across the industry, coupled with current data landscape across many of the incumbent banks, it’s understandable that 62% of leaders agree that data management requires further attention.

Digitally enabled data management sets a strong foundation for further improvements across the organisation. By focusing on data quality and completeness, investing in tools and capabilities, and surfacing key data points where they are required businesses will be better able to drive digital enhancements in all areas of the business.

Customer Support
The crisis has clearly put customer support into stark focus – without seamless, streamlined digital options, organisations will be overwhelmed by customers, many of whom are experiencing significant financial distress.

Digital support tools extend far further than a chatbot that essentially replaces a set of FAQs. They should use predictive analytics to proactively anticipate customer needs, automate issue resolution processes where possible, and if resolution can’t be automated, empower staff with the data and tools needed to solve those issues at the first point of contact.

Account Opening
Challenger banks such as Monzo, Starling and Revolut have led the charge to show how seamless the account opening experience can be, providing streamlined, mobile-first processes can activate an account in as little as 24 clicks with a card and PIN received in just two days.

Where current accounts are concerned, some incumbents can match the challengers for speed, but the process still requires more effort on the customer’s part. Beyond the world of current accounts, customers still don’t have a strong array of digital solutions across the market.

Banks and providers of any financial product need to ensure their account or product opening journey is mobile first, as streamlined as possible and consistent across the entire product set. 

Creating a digital backbone for financial services
Many organisations have already responded positively with rapid digital changes that have given customers the support they need whilst reducing the load on operational teams.

The next step is for all firms to embed these positive changes so they become standard practices that can support future transformation initiatives.

From there, organisations can define their strategic digital objectives and begin shaping their people, processes, data and technologies to ensure that those objectives are met.

In an environment that will be typified by uncertainty and economic difficulty, the financial services industry could be a shining light in the recovery by leading with digital solutions to complex, human challenges.

For more information, download Woodhurst's ‘How will Covid19 affect priorities in financial services?’ white paper here.