How banks can refresh their digital strategy into the new normal
Long before COVID-19, online shopping and home delivery had become a normal part of the daily life for many people around the world. However, the current climate has seen a massive increase in the use of delivery and subscription services such as Amazon, Tesco, Ocado and Waitrose grocery stores, and Netflix, with the latter acquiring 16 million new blocked global accounts. In addition to these types of services, digital-only banks are seen as a model to better function as a financial services company in times of uncertainty.
Our analysis revealed that consumers are wondering how to manage and plan their finances and how to cope with the “new normal”. With the temporary closure of many physical banks, the dependence on online and mobile banking services has skyrocketed. Six million (12%) UK adults have reportedly made the switch to digital banking in recent weeks simply by downloading their bank’s digital app. With reduced in-person support, the analysis also found that a quarter of existing digital customers use their banking apps more often during the crisis. We are confident that this trend will continue and expand after the coronavirus.
However, the switch to digital banking has raised fears that the elderly and vulnerable, who represent millions of users, are being “left behind”. While a record number of customers aged 65 and over have reportedly switched to online banking since the crisis, not everyone in society will be able to make the switch.4 Additionally, vulnerable people who adopt online banking could be particularly vulnerable to fraud, which was also on the rise during this period.5 Whatever trends emerge, it is clear that banks and other financial service providers need to keep needs diversified of these important customer segments at the heart of their future strategy.
How banks react
Banks are now seeing call centers inundated with customer support calls – during the pandemic. In order to curb the spread of the virus and adhere to strict social distancing measures, many high street banks have cut back on their services, such as Lloyds Bank and Barclays, which have closed a multitude of their locations. Customers are advised to use telephone and online banking services rather than going to physical stores for security reasons.
Many companies are fighting for their survival and depend on vital support like CIBILS. Over 300,000 businesses have informally requested help from the program, and those seeking help are struggling – with only 2% of them successfully accessing the CIBIL program. A large number of companies (38%) 10 even abandon banking applications during the crisis due to slow due diligence processes.
As a result, banks struggle to address key issues to help their customers access the support they need, while fending off threats from new entrants in the market, keeping an eye on their bottom line, and implementing robust support models for the future. Even after COVID-19, more and more customers expect to do all of their banking without having to leave the comfort of their couch. So what can banks do to prepare for the “new normal”?
Rethink your digital strategy
Banks have a responsibility and an immediate need to manage and protect their revenues, processes, systems and people in these uncertain times. However, these uncertain times also provide an opportunity for banks to pivot and position themselves for the future with a thoughtful digital strategy and roadmap. With the far-reaching impacts of COVID-19, digital strategies now require a 360-degree view for banks, ranging from service models to talent and location strategies.
Phase 1: Tactical response
The first phase is a tactical response, where banks take immediate action to support their employees and customers in operational change. This phase will see banks allow their staff to operate remotely and see a rapid shift towards digital channels. During this period, banks will see an increase in calls to their call centers and will need to ensure that these calls can be answered, with vulnerable customers being prioritized. Working on a flexible workforce will help keep jobs, provide better customer service, and encourage their customers to continue banking and being active.
The second phase focuses on the priority elements of the end user. For example, banks will need to review their customer journeys and ensure that they are able to support digital channels, and how they can better support their customers, such as virtual support services.
Phase two: priority items for the end user
The second phase focuses on the priority elements of the end user. For example, banks will need to review their customer journeys and ensure that they are able to support digital channels, and how they can better support their customers, such as virtual support services. Having more online and simple tools will make their customers’ lives easier and reduce stress on call centers. During the phase, strategic and personalized thinking will be required to create a migration plan on how their workforce returns to their in-person roles in a way that matches their culture and ways of working.
Phase Three: Adopt a Strategic Direction
The third and final phase is to adopt a strategic direction, in which banks will have to evolve their service, their service model and prepare for the “new normal”. Banks need to develop scenarios taking into account post-pandemic factors, such as the economic customer and the “new normal” of operation. These scenarios will support our clients’ ability to reinvent their business models, embed resilience, and adapt and evolve their cost base and operating models. Generating prioritized initiatives to drive future growth based on market analysis and competitive benchmarking will ensure stakeholders are aligned with their future vision.
Based on the trends we have analyzed through customer interviews and the current acceleration of digitization, having a dynamic and robust digital strategy is now more important than ever. Financial services companies will need to be able to keep up with changing customer expectations and demand and be able to mitigate operational challenges in a proactive and agile manner. We are entering a period where a strong digital strategy is becoming a necessity rather than a luxury – welcome to the new normal.
(The authors, Allagancz, Remy Olsen and Cassim Virani, are senior business leaders at Capco Global Management & Technology Consultancy)