How the pandemic has accelerated the banking sector’s digital transformation

By Scott Wilson, Director of Customer Experience, eFax

There was a recent article on the World Economic Forum that talked about the three main trends concerning banking executives in light of the COVID-19 pandemic. To summarise, they were how new technologies will drive banking transformation over the next five years; that artificial intelligence will separate the winners from the losers in banking; and why banks will overhaul their business models to create digital ecosystems.

Two things stand out. The first is that these trends underline how it’s unlikely that, had there been no pandemic, banks’ priorities would have looked markedly different. Transformation has been high on the agenda for some time in banking (as it is in other sectors), while AI is rightly seen as a critical weapon in the war for wallet share, and overhauling business models is vital if established banks are to compete with agile FinTech operations.

What’s changed is the need for speed. As we saw from our recent survey of IT decision-makers, 60% of businesses are accelerating the speed of their transformation projects as a direct result of the disruption the pandemic wrought on their workforces, and it’s no different for banks.

The other observation these trends bring to mind is that everything comes back to digital transformation. Again, that’s not a new concept, but what many banks are now having to adapt to is the way that their customers’ behaviour has radically changed. An EY study noted that 43% of consumers say the way they bank has changed due to COVID-19 – with a particular emphasis on moving from physical contact (including limiting trips to branches and shifting away from using cash) to more digital channels.

So, the pressure is on for banks to digitise as quickly as possible. But what stopped them before? According to the results of our survey, the reasons were: a lack of budget, low levels of leadership buy-in, siloed departments, restrictive vendor services and having to deal with legacy systems.

Overcoming obstacles to futureproofed transformation

How, then, do they overcome these challenges? Despite the need for change, the pandemic has hardly swept the problems away. As banking IT decision-makers and their employers look forward, part of their future plans needs to consider how they ensure those obstacles are tackled.

When it comes to leadership buy-in, most banks will now have evidence that, when properly funded, transformation projects can deliver immense value.

However, they also need to be conscious that decisions made in March and April were crisis-focused; what they do now needs to be about futureproofing, aligned with those changing customer banking behaviours. What are the cultural changes that can be implemented so that siloed departments will never be a block on accelerating transformation? How can they be implemented in a working environment that has yet to be decided? Clearly, having secure, online connectivity is going to be critical, as is the ability to share, review and collaborate on documentation and files. But it needs to be in a manner that can be accessed by both bank staff and customers from any location, whether it’s in an office, in branch or at home, and on any device.

As part of this, organisations need to also be careful with who they select as their technology service providers. Established banks are competing with fluid, agile and flexible FinTechs, for consumer wallets that are more comfortable with new ways of banking. That means those traditional institutes need to choose partners with those attributes. Vendor lock-in, an inability to integrate with other systems or burdensome payment terms that stifle scalability will not support banks that want to accelerate their growth or deploy new digital products and offerings in the coming months and years.

Finally, there’s the question around what to do with legacy IT. Most banks have mainframes older than most of their staff – aside from the issue that the knowledge to service these systems is retiring and not being replaced, replacing them is a long-term initiative. Finding a way of still being able to use those systems, while transforming the rest of the organisation, is going to be needed if the relics of investments from several decades ago are not going to hold banks back.

The post-pandemic bank

The message from IT decision-makers is clear – accelerated banking transformation is possible with the right support in place. First and foremost, that’s financial, and it’s driven from the top. The evidence is there – the first months of the pandemic proved that consumer behaviour will change quickly, so banks need to evolve with it.  What they now need to do is ensure that they provide the right support, and make decisions that will futureproof their operations to tackle whatever happens in the coming months and years.