By Sudeepto Mukherjee, Senior Vice President, Head of Financial Services EMEA & APAC Publicis Sapient

COVID-19 has impacted the global economy and infiltrated businesses across every industry. While in a stronger capital position than they were a decade ago, banks have encountered unprecedented operational challenges such as enforced remote working of employees and increased pressure on customer call centers.

Beyond these short-term impacts banks are facing a quadruple whammy of their reputation, operations, income and capital being at risk in the medium and long-term.

But this extreme experience has also provided valuable new insights into how customers will use and interact with banks and also, crucially, highlighted the need to formulate their approach to helping them more effectively in this “new normal”.

For, as necessary as it has been to help both business and retail customers adjust to the crisis, it is now just as important to implement the next steps: putting into action their plans for life on the other side of the curve and taking the opportunity to accelerate a transformation program to achieve operational and customer leadership.

The banks’ readiness to not only solve for current issues but also build a foundation to help in the next stage in what will undoubtedly be a long and uncertain period is crucial to helping their customers, businesses – and their own people – drive the rebound that is so desperately needed.

Moving forward, we believe banks will need to revisit their risk-based approach to these challenges, while realigning priorities to set themselves up for longer term success through the lens of digital transformation.

Banks on the front line of recovery

Prior to the emergence of COVID-19, and in the 10 years since the last financial crisis, incumbent banks have been focusing on resilience, customer leadership, revenue growth and operational efficiency .

 The economic impact of the crisis now in full effect, banks are pivotal to helping customers (both retail and business) to weather the storm where the financial stability of customers is the primary concern. Whether through facilitating government intervention schemes such as the UK’s Coronavirus Business Interruption Loan Scheme (CBILS), providing mortgage holidays or offering reduced cost or free overdrafts, larger banks have been able to step in with initiatives to support vulnerable customers. Banks like Lloyds have also been offering technical support and training on digital platforms for the elderly and Barclays have initiated a £100m community fund to support charities that help the vulnerable.

We have also seen new banks stepping up, with OakNorth and Aldermore being added to the approved list of organizations able to give out loans under the CBILS scheme in April.

New banks are in a strong position to flex their operations in this scenario and as they have been able to quickly to run their business completely remotely causing little or no impact in terms of service to their clients.

The characteristics of these challengers: Born digital, cloud-native, with modular architectures, open data and cultures that allows them to develop customer-led propositions fast, has meant they are able to respond rapidly. 

Customers at the center of the response

All solutions must start with the customer.

This crisis will be the ultimate test as to whether banks can do the right thing. They’ll have to move from shorter term metrics driving customer decision-making to a focus on customer lifetime value. More so than ever before, a majority of their clients now need economic help and banks have a unique opportunity to regain their trust by not only solving their immediate issues but also creating a template for serving them in the medium/long term with innovative and personalised products and services.

  Beyond the immediate fixes and government interventions, banks need to revisit their communications, policies, business rules and operational processes to ensure they are fit for a very different economic, sociological and reputational era. And on the point of reputation, customers will be looking to banks to cut them some slack. Flexibility and regular, relevant engagement are key elements of the response.

The role of digital transformation

The availability of new digital capabilities means that banks can fundamentally change their response from previous crises.  Empowering customers to not only digitally serve themselves but also use data to offer a very personalised service through the crisis can provide both stability and longer term growth.

Strategic acuity, operational efficiency and resilience, and fast decision-making have always been key drivers for banks. Digital transformation serves as the catalyst to enable banks to act and implement changes faster than ever before.

Firstly, through the formulation of rapid tactical responses to current pressures. And second, through strategic development, operational shaping and the technical and cultural know-how required to effect transformational change for the future. But getting into the headspace of business beyond the curve now is key.

The unprecedented events of the past few months have forced consumers and small businesses to do things differently. Depending on how they respond, banks have a tremendous opportunity to rethink their strategy, fine-tune their response and take bold steps to achieve operational and customer leadership.