With over 200 countries affected by the current pandemic, there has obviously been a significant impact on the overall global economy as a result. In the short-term, many countries have been on lockdown, adopting individual policies and limiting economic activity. However, consideration of longer-term impacts is also of paramount importance as there will likely be a snowball effect of consequences on businesses even as things return back to “normal”.
Where are we now?
As to be expected, this exceptional situation has led to some not-so-positive variations in GDP.
It is clear that adopting a structured action plan is fundamental to spearhead the development and seize opportunities in this new and unprecedented environment. A detailed analysis of the main impacts, challenges and opportunities faced by the financial services industry paints a clear picture of the gaps in which new strategies can be implemented. A detailed report from our NTT DATA UK colleagues in LATAM provides an outline:
What are the fundamental issues?
Social distancing and lockdown policies put into place resulted in many businesses being unable to operate, therefore ceasing all income possibilities and increasing the immediate need of credit loans in order to stay afloat. The lockdown has also decreased the use of certain payment methods, particularly those that aren’t ‘contactless’.
A higher number of Defaults occur as a result and there are medium-term issues arising from the slowdown in attracting new customers and a decreased income generation, leaving elements such as dividends at risk.The increased volatility and instability of the market has led to liquidity challenges. As such, central banks have already tried to provide more liquidity to the financial system, leveraging their monetary policies and Quantitative Easing programs.
As social distancing continues to affect personal and business interactions, customers will be reluctant or unable to visit branch locations, further contributing to the decline of the branch channel.
Strategic solutions:
Considering these unexpected changes, the key to making a comeback is adapting business models to suit the new environment rather than waiting for ‘normalcy’ to implement old models.
Business continuity plans have been already implemented and strengthen compliance with the regulator is definitely a key priority of Financials Institutions’ Top Management.Organisations now communicate and manage their employees in a completely different way which is a key example of adapting to this new normal. Remote basic activities are likely to become a standard, on one hand requiring an increase of digital operations and network needs, but on the other hand, defining a clear set of procedures and communications regarding performance rules and the best practices for remote working.
Regarding the relationship and communication with customers, there has obviously been a decrease in the use of face-to-face channels, however, this has resulting in a significant increase in the use of mobile and web platforms outlining a key need for digital development in organisations. Cybersecurity becomes a key piece to look at to have a strong first line of defense against potential attacks.
This increased use of technology has boosted customer demand and expectation for a fully digitised experience, particularly in the financial sector. This must encourage organisations to prioritise focus on digital channels and digital transformation journeys.
Conclusion:
While the challenges remain significant, financial institutions must act to minimise the crisis and its impacts turning them into development opportunities and successful digital transformations.
All innovative technologies (like Big Data, Ai, IoT or Blockchain) and new digital mechanisms brought on by this situation will definitely play a pivotal role. It can be considered as a new pillar from which to restart and build a more agile, resilient and sustainable business model, adapting to the “new normal” that has been set in motion.