It’s the great hope emerging from the pandemic year: Innovation in financial services has helped many banking organizations not only survive but, in some cases, thrive.
By comparing crisis response in previous eras, we can observe the key factors that met at a nexus to birth a pandemic response both unique and unprecedented:
- The power of AI and Big Data enabled bank leaders to observe changing market behavior at a large scale and in real-time.
- The transition from location-based services to seamless online touchpoints allowed banks to serve customers 24/7, anywhere.
- Proven but still fresh, fintech accelerators introduced new digital experiences, poised to address problems unique to the times.
- The digital tools bank leaders have at their fingertips make a previously unimaginable rapid response possible.
“Rapid” puts it mildly. From EY: “The speed of change is key. There is no benefit to monitoring what your customers are saying or watching them get frustrated with a particular process if you can’t change it quickly.” Indeed, the speed at which COVID-19 prompted change is not a one-off; it is the new speed at which savvy leaders and customers expect to operate going forward.
Examples of Financial Services Innovation During the Pandemic
Let’s consider what disruptive innovation in the past year looked like and how today’s financial leaders can hope to maintain that responsiveness and remain competitive.
The Rise of Digital Payments
Digital innovation in financial services was the real MVP. Banks of every size had to manage a surge in digital payments, and the 2020 increase is just the beginning. In a late-year Accenture report, about 75% of surveyed bank executives said that the pandemic increased the urgency of their plans to modernize payment systems. And just in time: nearly 420 billion transactions worth $7 trillion will shift from cash to cards and digital payments by 2023.
Like their customers, disruptive technology solutions are reaping the benefits. The Financial Times named Square its top-12 company in 2020, noting its 265% increase in market value: “Square’s core business providing point-of-sale tech to small merchants has taken a back seat during the pandemic, with its side hustle Cash App becoming very much the main event.” Cash App is Square’s peer-to-peer service.
With the assets involved, it’s no wonder digital payments are one of many factors influencing new and revised regulations in the financial industry.
Shifting Traditional In-Person Tasks Online
The future of financial services depends on bank leaders willing to evaluate new solutions. Even after decades of increasing digitization, a few financial tasks remained decidedly analog — until last year, anyway. Online applications and electronic signatures “are a way bank leaders have changed their relationship to technology” and streamlined the process of people conducting bank business from home, a BusinessWest piece noted.
In Singapore, for example, the United Overseas Bank is the first to pilot Sign with Singpass, a digital identity framework, allowing customers to confirm transactions and product applications with a digital signature, Forbes reported.
Using Data to Better Meet Customer Needs
The insights offered by Big Data allowed financial leaders to pivot as the pandemic progressed and headlines updated. In a piece on financial innovation labs, head of ING Labs Olivier Guillaumond had a positive take on the transformation fostered during the past year: “COVID-19 exacerbated the need for digitization. Digitization creates more data. So now we have more data fueling AI, which leads to more personalized services. It’s a positive circle.”
That is to say, mostly positive; Guillaumond also notes that more data creates more breach vectors, adding that an increasing number of fintech startups focus on cybersecurity.
Work-from-Home: A Passing Need or New Reality?
Customer needs aren’t the only factors bank leaders must consider, especially with a workforce returning gradually, and in some cases reluctantly, to the office. To remain competitive, many organizations are having to reevaluate the old rules of “seat time” for employees, considering the push-pull of maintaining security versus the innovation, team-building and efficiency benefits of cloud-based services that support remote or hybrid work.
Of course, cybersecurity remains a crucial consideration. Phishing scams increasingly victimize work-from-home employees, one group found, and The Wall Street Journal calls a hybrid workplace “a cybersecurity nightmare.” However, the horse may already be out of the barn, as the journal says of today’s slowly-returning workforce, who have new ideas: “After a year of working in solitude, many (employees) have come to expect more control over how, when and where their work gets done and to have greater autonomy relative to their managers and organizations.”
So bank leaders are finding that staff needs and company culture will influence changes to the financial industry, along with customer demands.
The Soaring Risks of Financial Services Cybercrime: By the Numbers
Identifying the Right Tools for Teams to Work Together
Along with a culture of strong business-continuity planning, technology has made it possible for banks to continue business-as-mostly-usual throughout 2020 and 2021. Video-call services and team portals made possible what was once unthinkable.
“It’s clear COVID-19 has disrupted the global economy with lasting implications for corporations and consumers,” said Matthew Blake, Head of Financial and Monetary Systems, World Economic Forum. “Despite this challenging backdrop, fintechs have proven resilient and adaptable: contributing to pandemic relief efforts, adjusting operations and offerings to serve vulnerable market segments, like micro, small and medium-sized businesses, while posting year-over-year growth across most regions.”
These video-based and cloud-hosted tools that were lifesavers in 2020 will only become more critical for an innovative response.
Diligent’s Business Continuity Planning Guide
Maintaining Innovation in Financial Services
The crisis phase of COVID-19 inspired digital innovation in financial services, but the lessons learned were even broader. As the dust settles, today’s banking leaders decide what tools and trends they will carry forward into the new reality of remaining competitive. Along with our financial services clients, Diligent has gained insights that ensure our services continue to support the industry. Our commitment to adapting with and supporting our financial services clients is the reason why Diligent’s solutions for finance are trusted by 82% of industry institutions in the Fortune 100.