Banks are uniquely positioned to aid the recovery from the Coronavirus pandemic as they typically hold the keys to the economic resources that businesses and individuals need to get back on their feet. But what can (and should) banks be doing to promote public welfare and economic prosperity? Here, Teodor Blidarus, Founder and CEO of FintechOS, explains the duties banks have to support recovery from the pandemic, and the importance of digital transformation in aiding this.
Q: What responsibilities do banks have to help the global economy recover from the pandemic?
“Banks don’t just have a moral duty to help the global economy recover amidst the Coronavirus pandemic—they also have a practical duty. When entire sectors are being decimated, it is up to industries like banking (which are faring far better than hard-hit sectors like hospitality), to step up. Banks must help their distressed retail and SMEs customers weather this storm.
This doesn’t mean that banks must shoulder the full responsibility of getting economies back on track. Governments have launched several support schemes during the pandemic, and banks should work in partnership to facilitate access to services and enhance schemes to benefit those hit hardest.”
Q: Is the current banking system enough, should we be asking for more?
“Banks are already under increasing pressures to keep up with market demands. The pandemic and the shift to remote working means they have been expected to serve and support employees and clients seamlessly—whether that’s updating processes or rolling out new products and services en mass. Outside of this, banks were already dealing with trying to reduce bureaucratic overload and increase digitalisation so that they can provide more personalised services—and all while trying to reduce unnecessary costs.
Banks are quickly realising that these market changes mean they can no longer provide a ‘one size fits all’ approach. Customers are demanding increasingly hyper-personalised experiences, and banks need to look at innovations that allow customers to adopt the self-service tools they expect today.”
Q: Have setbacks in digital transformation prevented banks from providing support?
“There is a lot of disparity within the banking sector when it comes to digital transformation. While there are certainly digital innovators, there are also a lot of digital laggards. Which means we are likely to see the digitally ambitious institutions, alongside fintechs, consolidate their position and acquire market share. If the innovation gap continues to widen, these innovators will be in a better position to serve and support customers, while digital laggards will struggle with the “ABCs” of going digital.
Which means regulators should be cautious of being overly protective of the old ways of doing business. This watchful approach will see banks become complacent and will prevent them from embarking on digitalisation, integration and automation—and will in turn see them fall behind the competition. This complacency is heightened when a crisis hits—we’ve seen first-hand the impact of the COVID-19 pandemic on those not digitally astute. Rather than being reactive, banks need to shift their focus to being proactive, looking to other industries that are innovating as inspiration—only then can the industry challenge the status quo and offer more to its customers.”
Q: What technologies will help banks in serving their communities better?
“There is no denying that banks served our parents and grandparents well, but banks need to keep up with the pace of change. COVID in particular has changed the game and has further accelerated the need for remote and digital services.
Yet digital journeys provided by challengers and incumbents are still simplistic, wallet-like, and siloed. A big part of our financial life remains undigitised, and new, hyper-personalised experiences across a broad range of products and services are required.
This is even more important when we consider Gen Z as a demographic. Traditional banking systems were not designed for the needs of the “social customer”. For Gen Z it is not about the number of transactions or scalability, but instead, it is about flexibility, the ability to tailor new products and services fast, and most importantly, the experience economy.
Open banking is a new playground in the financial sector and can be a bridge to this change. Banks and other third-party providers now have the opportunity to innovate without restrictions—and this is a huge step in the right direction.