By Rick Hall, Managing Director, Banking and Financial Services Practice, BKM Marketing
In the banking industry, there is little question that COVID-19 forced digital adoption at an unparalleled rate. Years-long timelines for preplanned digital transformations were suddenly condensed into a matter of months — as “shelter in place” mandates forced consumers across the globe to move their financial activities online.
And move online they did: A report from Deloitte1 shows that, by April 2020, 35% of American consumers had increased their usage of online banking tools. Four months later, half of the respondents to a Bank Administration Institute (BAI) survey2 said they were using digital products more than they did before the pandemic.
As the promise of recovery peeks over the horizon, we can now step back and appreciate the staggering rate of digital adoption — and the permanent change it has cemented in our culture. The same BAI report showed that almost 90% of consumers plan to continue their increased usage of digital products even after the pandemic is safely in the rearview mirror. But we must also ask ourselves what all of this really means.
Have you made the right bets on technology? Did you inadvertently fragment your technology delivery further by investing in and launching tech solutions too quickly? And as you navigate the complexities of connecting with post-pandemic consumers, how can you make sure your investment dollars are aligned with real customer needs?
These are just a few of the unknowns that we are dealing with — because, at the end of the day, we don’t yet know how the financial services industry will operate moving forward. As 2021 marches on, it will be fascinating to see how the tech bets of banks across all asset classes demonstrate their relevance to customers.
To ensure your place in the future of finance, here are three questions to ask yourself when deciding whether your tech investments are designed to meet the challenges ahead.
1. Did these tech investments drive long-term operational value (e.g., better customer experience, improved financial performance, etc.)?
In 2020, most institutions had to accelerate their investment decisions to address the operational need to move to digital. Almost across the board, such investments were necessary, but now that the immediate threat is behind us, it’s time to determine whether those solutions served as life-saving stopgaps or long-term platforms for growth.
For example, with in-person banking largely out of the question last year, banks needed onboarding technologies to help them open new accounts remotely and manage know your customer (KYC) requirements. But the real question is whether these investments actually resulted in a better customer experience and improved financial performance.
We haven’t yet heard whether these investments created reductions in staffing for operational areas. The pandemic has cleared the path for many banks to reduce their number of branches. For instance, Wells Fargo, one of the largest banks in the United States, plans to shutter 1,400 branches eventually after it closed 65 in July 2020 alone.3 But technology solutions need to address the operational benefits, too. After all, the challenge isn’t whether technology can create efficiencies in processes — it’s whether it results in efficiencies in costs. Your C-suite must answer this question if you hope to create the long-term value you desire.
2. Did your tech investments enable you to fulfill the real needs of financial customers?
In March 2020, businesses across all industries had to rethink how they would communicate with consumers under this new normal. Because trust is the cornerstone of a financial institution’s long-term success, banks needed to communicate to customers that they were strong — and that they were actively adapting to meet customers’ urgent needs. In response, I saw a lot of institutions take a Band-Aid approach. For instance, they might have hastily implemented a digital solution hoping to capture and retain customers whose loyalties were tested in response to this new reality.4
You can (and should) promote your recent investments in the customer experience, personalized experiences, branchless capabilities, account opening and onboarding efforts, etc. However, you should also determine how your continued response will align with the concurrent changes in consumer behaviors. Are you any closer to fulfilling the real needs of financial customers?
To determine this, you need to baseline your relationships and then track them going forward. It is no secret that consumer behavior has changed dramatically due to the pandemic, and though you may not have caused those changes to happen, that doesn’t mean they aren’t important for you in the future. At a minimum, you should begin to track modifications to digital, online, call center, and automated clearing house (ACH) payments now versus before the pandemic.
3. Have you built resilience into your banking systems in anticipation of future crises?
While what banks do hasn’t significantly changed since the pandemic began, how and why they do that work is irrevocably transformed. Early reads of 2020 financial results seem to indicate that scale (meaning the ability to rationalize large tech investments to drive efficiencies) was critically important.
The Paycheck Protection Program (PPP) rollout offers a perfect example. Because the need for financial relief was so urgent last spring, the PPP was rushed through implementation and went live before many banks had the opportunity to establish processes for accepting the flood of loan applications — much less acquire the software needed to process those loans.
Chaos ensued. Some institutions had to limit applications to customers with pre-established bank accounts and existing loan products,5 which left small business clients rightfully confused and frustrated during an already stressful moment. And even by January 2021, we were still experiencing issues with the software rollout.6
COVID-19 isn’t the last crisis we’ll go through, so we can bet that scale will continue to matter in 2021 and beyond. To learn from the scale-related stumbles of 2020, integrate resilience into your banking systems and fast-track a return to innovation. When it comes to relieving customers’ lingering worries, it’s all about communicating seamlessly across digital, social, and offline channels — all at once.
Believe me when I say that competitors can and will continue to get better at this. Not only did traditional banks change their tech delivery and capabilities this past year, but neobanks benefited from being in the right place at the right time. If you view your competitors as only the branch across the street, your bank’s future relevance will be limited.
Final thoughts
When COVID-19 disrupted life as we knew it, banks were forced to accelerate their rush to implement new digital technologies — requiring the entire business to pivot in the process. Now that the worst of the pandemic is (hopefully) behind us, banking executives would be wise to examine their hasty investments through a more critical lens and ensure they are aligned with customer needs.
Unfortunately, the financial services industry has often lagged behind others in equating effort and investment to results. This is unsustainable. You need to measure everything you do and align it to your strategy so that you can adjust. It is less important for you to be right all the time and more important to course-correct once the data uncovers a misstep. To ensure you are on track to respond to the next crisis, ask yourself the above questions and see what you can learn from your pandemic response.