The Covid-19 crisis has ground many economic motors to a halt. Social distancing is, almost by definition, economic distancing. Old decision-making models are getting thrown out as unprecedented times call for a new playbook. And in such times, banks have an important societal role to play as systemic stabilizers.
Of course, like most industries, financial services have been hit hard. Banks have been forced to migrate their workers to remote setups; deal with an unprecedented influx in demand, particularly in digital; navigate cybersecurity and compliance issues; and manage high deferral rates among customers. Furthermore, they have a responsibility to help their customers during this difficult time.
And key to banks’ strategy in fighting back against the Covid-19 crisis are technology solutions.
Dealing with an influx in demand from clients
For many banks’ clients, these are worrying times, and in many cases, they require on-demand access to banking services. Of course, this is particularly problematic in a period of social distancing and lockdown. Banks need to ensure that their digital channels provide clients with the functions they need.
However, banks need to do more than just offer digital services to their clients; they need to ensure that they can support the influx of customers accessing the services, having enough people power to answer questions and troubleshooting, among other services, via their websites, apps and social media channels.
In some cases, this may mean re-allocating employees to help with frontline services. TSB is one organization that has reacted accordingly. The British bank has reassigned 250 low-workload employees to respond to customer requests via online chat applications. This, in turn, allows the bank to respond to a greater number of customer demands.
The rise in remote work
Like other industries, many banks’ workforces have had to go remote in respecting social distancing and the lockdown. This presents problems in itself, with digital systems getting overwhelmed, meaning the bank may not be able to function internally among employees, or externally for clients.
To combat this issue, banks can organize and stagger employees’ usage of key tools on the system to ensure only vital operations are being performed at the vital time. CitiGroup and Wells Fargo, for instance, are stopping employees in different time zones logging onto the server at the same time, therefore reducing strain on the system.
Furthermore, banks – such as Gulf Coast Bank – are providing their employees with access to VPNs so that they have more online security while working from home, or when working from personal devices.
Collectively, these measures can not only help banks to ensure employees are able to effectively and safely work remotely, but also that they can continue to provide their services to clients.
Clients deferring on loan repayments and guaranteed loans
Unfortunately, many individuals and businesses have taken significant financial hits as a result of the Covid-19 crisis. And, subsequently, some have been forced to defer on loan repayments and guaranteed loans. Of course, this creates significant challenges for both banks and their clients.
To best support their clients during these difficult times, banks need to be understanding and sympathetic to the precarious nature of customers’ individual financial problems. Many banks have set up loan deferrals and raised authorized overdrafts on a case-by-case basis.
Banks also need to prepare tools to manage customer databases as the rate of deferrals rises. They can do so by working closely with software providers to be as effective as possible in implementing such measures. At Sopra Banking Software, we’ve helped a lot of our clients to implement mass treatments for postponing loans payments and to prepare state guarantee-supported loan reporting.
Changes in compliance and regulation
Banking regulations are always in a state of flux, but given the current crisis, some are being delayed. Banks need to be aware of such delays to ensure they remain compliant, as well as new dates occurring around regulation, so that they can be prepared to make necessary changes, as and when.
Below is a list of some key changes occurring in compliance and regulation around the world:
- The European Banking Authority has postponed EU-wide stress tests to 2021 to allow banks to prioritize operational continuity
- The European Central Bank has postponed the release of Basel III Banking Rules Reform from January 2022 to January 2023, due to COVID-19
In the UK
- The Bank of England cancelled the 2020 annual stress tests of eight major UK banks and building societies
In the US
- The Fed, the Options Clearing Corporation and the Federal Deposit Insurance Corporation have issued an interim final rule, which provides banking organizations that implement the Measurement of Credit Losses on Financial Instruments before the end of 2020 the option to delay for two years
The above are just a few examples of changes occurring in compliance and regulation, but there are plenty more, and more to come. Banks need to be in regular contact with software providers, who are already adapting their offers to fit with new compliances and regulations.
Fraud and cybersecurity
Unfortunately, the current crisis has seen a spike in opportunistic fraudsters, looking to exploit the situation to take advantage of organizations and individuals. And despite the fact that only 2 percent of surveyed financial services leaders view security as a critical issue in the short-term, it could cause significant damage to banks and their customers, Non-tech savvy bank customers are at particular risk from some of the main threats. These include the following:
Phishing – emails claiming to be from national or global health authorities, which encourage victims to provide personal information or to open attachments containing malware
Business Email Compromise schemes (BECs) – an email scam that mimics companies the recipient has previously done business with, but this specific email requests a transfer of money to a new account or changes the standard payment practices.
Telephone and SMS fraud – fraudsters are sending SMS and calling victims, pretending to hospital officials and claiming that a relative of the recipient has fallen sick with the virus and request payments for medical treatment
Of course, banks need to keep on top of novel and trending cybersecurity threats that target the banks themselves, and their customers. And they need to keep their customers alert to the latest threats. Many retail banks have been keeping their customers informed, as well as telling them not to respond to any SMS or email asking for personal information. Banks can also train their staff in best practices in detecting and avoiding cybersecurity threats, measures that will protect banks and their customers.
A time for digital transformation
Digital transformation is a term that’s long been touted in the financial services industry. But it’s now more important than ever. The Covid-19 crisis has forced banks to increase their digital offerings, improving online services and expanding digital touchpoints with customers. All banks – including those that were already advanced in their digital transformation efforts – can see the current situation as a chance to direct even more resources toward digitization.
Below is a brief list of digital areas where we believe banks should invest:
Digital Banking Engagement Platform
New digital products and services, as well as creating fully digital experiences for customers, requires the capacity to engage across different channels, including social media, chatbots, mobile and the Internet of Things, just to name a few.
Banks also need to have the capacity to design and launch new products and offerings instantly, creating new customer journeys on the go to integrate, secure and orchestrate innovative services from fintech companies easily.
Banks can rise to these challenges by adapting to a Digital Banking Engagement Platform, which allows them to create and nurture an ecosystem of partners and developers, thus securing and managing the development of Open Banking APIs, adopting a unified platform for APIs to design, build, test, secure, manage and retire APIs, while using just one platform.
Social media banking and chatbots
Even before the current crisis, social media banking and chatbots were gaining plenty of traction. That’s only increased in a period of social distancing and lockdown. And in a post-Covid-19 era, customer expectations will have changed. They will expect more digital and remote banking options.
This can include chatbots, like the one implemented by State Bank of India (SBI), which can address enquiries on banking products and services. The chatbot is trained with a large set of past customer questions and can handle frequently asked questions.
And then there’s WhatsApp banking, which permits banks to communicate with clients via the social media app. This is likely to become increasingly prominent in Africa, where restricted access to physical branches creates a higher need for digital services. Mansa is a great example of a bank already offering this service.
The current crisis will, inevitably, come to an end. But its effects will be felt for a long time to come, not least of all in the financial services industry. There will be changes in customer behaviors, technology expectations and working culture, and banks need to be ready for this change, restructuring outdated systems and practices, retraining employees and adopting an agile approach to digital banking.
Technology will be at the heart of successfully navigating the short, mid and long-term problems banks face; and those that act fast and effectively will create a strong platform to build on for years to come.