Banks: It’s time to rethink your business strategy
- Posted on June 10, 2020
- Estimated reading time 31 minutes
Working from your kitchen
Banks have felt the full force of the crisis. Whether it’s the move to remote working, handling unprecedented call volumes from stressed customers or trying to get funds to businesses as quickly as possible, COVID-19 has dramatically altered the banking landscape and changed the way we live and work. Many are saying we’ll never return to the way things were.
Recent months have shown that banks can learn and adapt fast. Satya Nadella, Microsoft CEO, recently commented: “We’ve seen two years’ worth of digital transformation in two months.” For example, banks are already assessing whether they’ll need large headquarters in London or New York. For example, Barclays CEO, Jes Staley, argued that "the notion of putting 7,000 people in a building may be a thing of the past,” given that the global bank is now being run by staff “from their kitchens."
Now is the time for your bank to rethink the way forward.
Respond, reset, renew
Most banks will pass through three phases as they recover from the impact of the pandemic:
- Respond: Typically, banks have been in respond mode for the first three months. The focus has been on business continuity, secure and flexible remote working (including offshore), handling major increases in customer demand and maintaining core operations.
- Reset: We’re seeing many clients already moving into the reset mindset (three to nine months). This phase includes reconfiguring operating models for scale and agility, managing non-performing loan (NPL) risk exposure and implementing major cost reduction programs to drive profit.
- Renew: Over the next nine to 18 months, banks will look to position for future growth. The priority will be on innovation, in terms of new products and business models, differentiation and opportunistic M&A.
Some banks are already heading towards the reset phase, which gives them a rare opportunity to focus on what matters – and to stop everything else.
Rethink how you do business
The opportunity to draw breath and reflect is essential, given the activity of the last two to three months. From our work with clients, we encourage you to focus on five priorities:
- Cost containment and optimization: Focus on NPL exposure and manage net interest margin (NIM). Apply automation, analytics and AI at scale to reduce spend and operational risk.
- Talent agility: Transform your remote workplace by using advanced collaboration tools. Put employee experience first and proactively reskill your people in order to retain and motivate talent, and significantly improve customer experience.
- The resilient core: Create operational flexibility through a DevOps/agile culture. Eliminate legacy spend, move to the cloud and promote digital services. Increase your security capabilities, given heightened exposure to breaches through remote working. Reassess regulatory risk management models.
- Customer care and operations: Balance human and machine intervention to provide customer reassurance while handling massive surges in demand. Drive digital adoption and personalize engagement, especially around advice and financial well-being.
- Products and services: Simplify application processes and product features, especially for business loans and mortgages. Partner with Fintechs to speed up service experience. Segment and prioritize customer groups based on credit and risk profiles. Identify and support those most liable to default.
What are banks doing?
Here are some examples of how banks are rethinking the way they operate:
- Bank of America has allowed retail customers to defer credit card payments online with a simple two-click process; 25,000 people applied within two days.
- DBS in Singapore is working with two startups, Oddle and FirstCom, to help crisis-hit cafes set up an online food ordering site in three business days. DBS will absorb the setup costs and waive fees for the first six months.
- Lloyds Banking Group plans to equip 2,000 customers over the age of 70 with free tablet devices and provide training to help them access online banking.
- Spain's CaixaBank is helping retailers hit by the pandemic to sell over social networks and messaging applications. CaixaBank has launched “Social Commerce”, which lets retailers manage online purchases directly from their profiles on social media.
- Companies like Kabbage, Lendio, PayPal, Square and Intuit are now successfully and quickly accepting and processing PPP (paycheck protection program) applications.
- RBS has set up priority routing for vulnerable groups or key workers, such as NHS staff
- One Australian bank used digital channels to support over 70% of new credit applications by changing eligibility criteria and softening credit policies. Another Australian bank integrated its digital marketing platform with robotic process automation to apply repayment holidays and extend existing facilities for specific customer groups.
I’m sure you’re aware of other examples. But it serves to illustrate how differently banks are approaching the challenges coming out of the crisis – and thinking in a very different way from before.
Now is the time to rethink your business.