The COVID-19 pandemic has caused mass disruption to the financial services sector, impacting both customers and staff. There is a huge amount of pressure from customers and regulators to keep operations running effectively. The initial response phase of business continuity is now over, and institutions need to plan for the “new-normal”.
Financial services were deemed an essential service and employees seen as ‘key-workers’, whilst regulators have demanded that financial institutions treat customers fairly and flexibly.1 Government interventions to provide financial stability have included;
Outlined below are some of the major disruptive changes seen in the Financial Services industry.
Rapid changes to the workforce
Across the country, large parts of the workforce moved to working from home, changing the needs of employees, particularly those in contact centres / customer services departments. How do you operate a virtual call centre to ensure that customer calls are dealt with? The systems which once may have been needed for parts of the workforce to stay connected remotely have been adopted en-masse allowing operations to continue, whilst the checks and balances controls in place to ensure regulatory compliance (e.g. fraud prevention, Client Asset Segregation (CASS) and Anti-Money Laundering (AML) ) are having to be made more flexible to adapt to the current situation.
Over the medium term, it is almost certain that some of these changes are going to stay and what was a short-term fix now need to made fit for purpose for the long run.
Systems and tools playing catch up?
A jump to remote working ‘default’ toolsets, including Teams/Slack/SharePoint/etc. have facilitated the rapid shift to remote working. This has occurred in an ad-hoc and often fragmented approach, with various parts of organisations adopting differing standards and operating at differing levels of efficiency. How can firms progress from an initial tactical response through to having a clearly defined toolset with widespread adoption?
Enhanced systems and tools unlock access to the five operational efficiency levers (Operating Model, Process Standardisation, Simplification and Automation, Organisation Capability, Supplier Relationship Management, Real-estate footprint). Firms should look to perform a deep analysis of the current setup, levels of adoption, consistency of use and areas for optimisation in order to setup to work in this new mode for the long run. Focus should be on areas where operational processes are now being managed virtually, handoffs between operators are at increased risk of become ineffective or inefficient. Elements of process simplification, reducing handoffs or automation e.g. robotic process automation will enable potential efficiency gains.
This output will form a long-term technology strategy, streamlined set of tools and processes which can be further optimised and customised to suit the new ways of working.
Retail premises accelerating towards a ‘bricks and clicks’ model
One of the trends seen across the financial services sector is the decline in customer use of retail premises as customers switch to using digital services such as online and mobile. Both extensive and expensive to run, high street premises have been going through a process of evolution e.g. some firms have been moving away from the traditional banking window model and moving to a digital shop front.
This trend has accelerated during COVID-19 due to limited access to highstreets and reduced footfall. However, with increasing needs and remote customer services at capacity, the ability to access financial services is now more important than ever and the face-to-face branch staff are a critical part of the puzzle. Providing face-to-face interaction will still be important to some customers, particularly when it concerns important financial decisions.
With the acceleration of the trend to the use of digital apps for banking and insurance, this is a key opportunity to firmly embed the progress the customer journey has made over recent years from using predominantly branch-based services through to a hybrid approach. This has the potential to enhance the customer experience whilst also reducing costs.
Evolving products to meet customer needs
Traditional financial services products have historically been inflexible, e.g. term deposits, insurance cover sold on an annual basis where in-life changes require an admin charge, mortgages locking in interest rates over long periods of time. Disruptive impacts to society and the economy changing so rapidly, there is an opportunity to provide a suite of more flexible products, meeting today’s consumer needs. A key consideration from organisations is that the backend legacy systems powering these new types of products will need to be optimised to provide this level of service without increasing costs, a major challenge that organisations have struggled with long before COVID-19 but is of critical importance as a result of the pandemic.
Banks have gone through a period of evolving online and app-based customer services, providing more flexible access to those products and services whilst insurance companies have until more recently, lagged behind. Financial services customer facing IT services have faced a number of high-profile failures e.g. TSB in 2019 and Lloyds Banking Group in 2020, during the pandemic access to customer services during times of crisis was seen as critical and continued demand put them under more pressure than normal. Responses to this challenge should include further investment in digital channels, enhancing portals with AI powered chat bots. This would bring the ability to meet customers’ needs on a ‘real time basis’ whilst reducing required contact time. It could also help firms meet regulatory requirements as well as reduce the risk of fraud.
There’s not much which is new in terms of industry trends created by COVID-19, however what is new is the pace at which these changes have happened. A maelstrom of changing customer needs, disruption to the banking workforce and the need to rapidly redesign how these can come together using a consistent technology enabled approach. The organisations which can respond and adapt their operating models more quickly, will be well placed for the future.
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