Accelerating Digital Transformation in the Covid-19 Era

 Businesses across industries are grappling to capture market share, retain existing consumers, and attract new customers. Customer loyalty is fragile especially in times like these, yet it's important to the survival of many businesses. Banks are no different.

According to the 2019 Deloitte Banking and Capital Markets Outlook study, the global banking system has rebounded from the 2008 recession, and it has been not just lucrative but also resilient than ever before. However, the unusual events of 2020 have thrown the system into disarray and presented banks with a slew of new obstacles. They've had to fast absorb innovation in the last several months. As we move forward from this crisis, there must be deeper technology integration into banking solutions and services and the sector must usher in a new era of digitalization.

Banking on Business Continuity

Even the most technologically reluctant customer is now compelled to use digital banking channels as a result of the pandemic. For future growth, banks must capitalize on this trend. To be fair, there have been a lot of ingenious applications to address some unique situations in the last few months. For example, the adoption of Near Field Communication (NFC) technology to facilitate contactless payments and money transfers has increased significantly. However, to drive the sweeping reforms that the sector will need to recover and survive in the coming years, a focused long-term vision and roadmap are required.

5G networks, a wide range of smartphones, comprehensive data plans, and efficient mobile apps can all be brought together in the form of video transaction models that offer remote banking services as well as a human connection to ensure customer loyalty. BMO Harris Bank in Chicago has integrated technology and personal connect particularly well with a Smart Branch where tellers interact with customers via video screens and help customers use their smart devices. Customers can also avail themselves of on-demand videos to learn more about products and services.

Investing in Technology

Technology-assisted change is no more a nice to have, but a necessity for success. But the reality remains that it is a costly endeavor. As the world recovers from the pandemic, a new economic catastrophe is looming, and banks must make the most of their technology investments. Small and midsize banks, in particular, must devise strategies to maximize their return on investment. Banks must invest in smart digital strategies that will enable smooth continuity, business resilience, and exponential growth in an increasingly connected and disruptive market scenario, with customer requirements and engagement at the center of their transformation drive.

Even the most traditional banks have been forced to digitize their processes and systems. Most banks have been looking for digital solutions to better their business outcomes, ranging from client acquisition and improved revenue management to ecosystem management, billing and invoicing, and hyper-personalization.

Reports indicate that the top five American banks (JP Morgan, Bank of America, Citigroup, BNP Paribas, and HSBC) had an annual IT budget of USD 42 billion in 2019, which is close to USD 50 billion combined annual IT budget of technology giants Amazon and Alphabet. For the most part, banks have been focussing on cloud adoption, introducing mobile apps, and upgrading key services.  

They also put a strong digital core in place as the transaction and accounting engine, with a modernized middle layer handling integration, orchestration, data analytics, and ecosystem management. However, in the wake of the COVID 19 pandemic, it has become evident that the change process must be quickened. To transform a business, digital technologies must be implemented across the board.

Improving Customer Experience

Emerging technologies such as AI and ML, for example, have a lot of promise for improving customer experience and providing hyper-personalized solutions to increase customer loyalty. The possibilities are endless, from employing NLP algorithms to promote voice-based services like Bank of America's Erica to turning cellphones into digital wallets with Barclay Bank's Grab and Go feature on the Barclay card.

Banks can also employ technology to make it easier for customers to schedule appointments online. This would be a wonderful solution to safeguard the safety of tellers and customers alike in today's socially distant reality by controlling the flow of visits while also maintaining transaction volumes for the bank. Banks could employ the same technology in the future to improve their resourcing efficiency by matching custodians.

New Vendor Engagement Models

To address revenue leakage, banks must investigate new vendor engagement models and totally new collaborations. Outcome-based pricing models will force banks to prioritize their budgets by requiring ROI-driven digital transformation plans. They can also use this opportunity to adopt incremental strategies rather than large-scale transformations.

Predictive technologies can be used by technology partners to improve maintenance models and reduce downtime. Banks should also think about engaging with fintechs to take advantage of modern technologies and improve the consumer experience. To summarize, digital transformation in the banking business should not be viewed as merely a technological upgrade; rather, it should serve as a springboard for rethinking customer service.

Furthermore, any digital transformation strategy must be in line with each bank's business model. With customer data at its core, a bank's digital transformation initiative must aid in the delivery of new insights and better products and services to secure company security in the post-COVID era.