The global pandemic has accelerated the pace of financial services digitization

By Clayton Weir, Chief Strategy Officer, FISPAN

The COVID-19 pandemic has undoubtedly shaken up the financial services industry. Banks have been designated as essential businesses and have for the most part remained open, but the normal way of doing business has disappeared. Bank branches around the world are being forced to cut hours, limit the number of staff present and, in some cases, make customer visits by appointment only.

While people of all ages are getting more and more comfortable doing their personal banking online, business banking customers are also turning to digital banking platforms as an alternative to in-person branch visits. Banks are struggling to keep up with this rapid shift in the types of online service offerings their clients are demanding.

There may well be challenges for financial institutions brought about by the transition to digital banking, but there are also some very important long-term benefits that will outweigh the challenges in the long run.

The pandemic has pushed banks to start rethinking their innovation goals, and  to start asking what efforts will have an immediate impact on the client experience. The fact that embedded banking has suddenly become ubiquitous means that FISPAN is now in the position to bring about a big shift in how businesses consume banking products.

Since businesses suddenly need to eliminate manual and paper-based processes, they are looking to their banks for help implementing digital solutions quickly. This is where we see a huge opportunity with embedded banking. By embedding the banking experience inside the platforms that business customers already use to run their businesses (such as ERPs or accounting software), banks are able to easily provide their business clients with a more automated and streamlined treasury management process. The banks that are ahead of the curve and partnering with fintechs like us are beginning to better understand how their customers use their products in context, allowing them to innovate smarter and faster.

As treasury management processes become increasingly digitized, open banking represents a growing opportunity for innovation.The idea behind open banking is to allow customers to easily and securely share data held by their banks with third parties, such as other financial institutions or fintech companies, who combine it with data from other sources to yield new benefits to those customers.

As much as we’ve heard that financial technology is being disrupted or competing with banks, that has not been the case thus far. Competition in financial services has actually only benefited both banks and fintechs. Startup activity tends to increase after a significant economic event, and the innovations started in those early recovery periods typically become anchors for the next economic cycle. Once a few strong ideas find success and gain traction in the market, consumers will start adopting the technology and open banking will take off. We believe that there will be a proliferation of new financial services start ups and products that will come about as a result of the pandemic.

As we start to imagine what the post-pandemic future might look like, banks and corporate leaders need to ensure new initiatives and platforms like open banking, are supported and positioned to thrive, opening up the door for a faster rate of innovation and the availability of better experiences for their business clients. Removing opacity and friction from everyday financial activities in favour of transparency will improve competition and lower costs for individuals and increase productivity for businesses and could actually see the financial services sector come out of the pandemic in better shape than when it went in.