Digital by default and at short notice has been a hallmark of the recent pandemic. For financial institutions across North America, Covid 19 and the mitigation measures adopted did not discriminate between institutions. Whether a small credit union or a large international financial services provider, the need to shift to digital channels and ways of working was born of necessity but the impact will last long beyond the end of the current crisis.
A recent McKinsey & Company study stated that Covid 19 has accelerated digital transformation by an average of seven years. The companies surveyed included a broad range of businesses across many sectors but the pattern of a Great Acceleration was clear.
“Respondents are three times likelier now than before the crisis to say that at least 80% of their customer interactions are digital in nature,” noted Kate Smaje, a Senior Partner at McKinsey & Company in London.
The rate of change across financial services in recent years, driven by new technologies and innovative new providers, was already impressive in some corners of the industry. The acceleration and necessity of that digital transformation since the global impact of the pandemic became clear has exposed both digital laggards and catalysed fast action.
Digital is, of course, not just one ‘thing’ but involves changing the way things are done across an institution and the value chain. What may have been largely ‘business as usual’ for a digital-by-birth fintech or challenger bank, involved significant changes and ways of working for almost every institution. Even nimble challengers have had to contend with a remote workforce and the compliance, security and productivity challenges that go along with that. Not to mention a whole host of challenges that their employees were facing combining work and home.
A credit union or community bank, for example, that had relied on face-to-face interaction to onboard, service and win the loyalty of customers had to shift gears quickly. From disbursing PPP loans to call center operations, ways of working had to change and fast. We heard some interesting case studies at last year’s Fintech Talents North America about how institutions were responding to the crisis and the steps that they had taken to continue to serve their customers and support their remote and in person workforces.
Looking through the ICBA’s National Community Bank Service Awards, there are some fantastic examples of community banks showing impressive agility in responding to the needs of their communities. MainStreet Bank in Fairfax, Va., said it normally processes around 300 loans a year. During the PPP, the $2.3 billion-asset community bank processed 1,125 of them. The majority of the bank’s staff worked on split 24-hour shifts for three solid days in April with scheduled sleep periods. The resulting loans were worth nearly $195 million, which the community bank estimates saved roughly 10,000 jobs.
Thinking about how customers – individuals and businesses – have changed the way they access financial services points to significant changes in behavior that are likely to be permanent. A Deloitte / IIF paper – Realizing the Digital Promise – Covid 19 catalyzes and accelerates transformation in financial services – highlights some significant shifts in behavior. Globally, Mastercard reported a 40% growth in contactless transactions, In the US, the move to contactless was even more remarkable with Visa reporting at 150% increase in contactless payments. Not all of that would have been driven by Covid 19 but it has kicked the US in line with trends seen elsewhere. Quoting from the report Deloitte/IIF report, Alex Manson, head of SC Ventures at Standard Chartered asked, ‘could Covid19 be the transformation officer that has always been missing?’
It is also important to add that the shift to digital access has not been confined to the usual suspects identified by providers – new or incumbent. That many have been taken by ‘surprise’ by the rapid growth in uptake of digital financial services by older consumers speaks volumes but they have accounted for a significant portion of the growth in digital adoption since the start of the pandemic. This will hopefully feed into future product and service design as financial institutions consider how better to meet the needs of a broad range of consumers.
With almost a year of acceleration under their belts, we will be hearing from a diverse range of providers as they share how their digital road maps have accelerated and what that means for future strategy. We will dig deeper into the technologies and partners that have enabled that transformation and discuss the legacies of the crisis. Looking ahead, consideration will need to be given to how the subsequent economic crisis will continue to effect consumers and businesses even after the threats to health have abated.
The Great Acceleration will be discussed across the day at Fintech Talents North America. Register now to secure your ticket for March 24th.