The Great Reset: 7 Things that 2020 calibrated for the BFS Industry…

This is the last in my 3 blogs series for COVID and BFS industry…

While we all breathe a sigh of relief as 2020 goes by and hope 2021 would be healthy and prosperous, we cannot be all derogative for 2020.

Every coin has two sides.

While, 2020 meant havoc for travel, aviation, hospitality industry, it did do well for the digital and associated industries.

The Banking industry has always been treated to be siloed in terms of region, continents, first world and developing countries etc. What works in one geography may not work in the other.

The Great Reset

As we move through this health crisis, it’s clear the coronavirus (COVID-19) has recalibrated consumer and business behavior. Some changes we expect will be temporary, owing to the restrictions of mobility or consumer coping mechanisms. Other changes, however, will lead to structural shifts. While this pandemic was a major shock, the effect across the Geos in BFS sector has been divergent, and each road to normalization will vary.

The Great Reset further unfolds the recalibration between economies and way the consumers behaviours.

The divergence is in terms of both New Business Acquisition and Existing Customers Satisfaction.

Lets look at the 7 things that would be recalibrated in 2021.

1. Financial Inclusion and New Business Acquisition gets Regulatory Priority

Financial inclusion and New Business Acquisition was always a priority for banks. The true potential of speed of acquisition could never be achieved due to regulatory framework.

The classic Reg-Tech war prevented the regular banks to not be too adventurous.

For onboarding, you needed physical signatures, in person presence at branch etc.

COVID changed all this. Regulators realised the potential of technology for onboarding and KYC.

New n

orms for vKYC and eKYC were introduced. The funny part is that this has been done across economies and geographies.

2. Onboarding goes Digital

Across geographies, continents and countries, the regulatory authorities (Central Bank and Ministry of Finance), agreed to allow vKYC to be carried out for onboarding new customers.

Through this an appointment could be setup between Bank Advisors and Customers for carrying out a vKYC. This involved taking a photograph of the ID card, matching the customer selfie against the ID card photo, liveliness check (wave your hand, move your head). It goes a step further and allows digital signatures instead of physical signatures.

The long awaited dream of onboarding a customer without visiting a bank is a reality now.

Countries as Thailand, Vietnam, Malaysia, Philippines, India, Qatar, Greece, Nigeria, Kenya went into evaluation and implementation of the technology.

In fact the next level of AI based auto validation of customers, geofencing, geotagging and other state of the art technologies are being adopted to limit the fraud.

Fintech’s sprang up and made the most of it.

3. Rudimentary Old Policies just worsened things

While the focus on the new business acquisition was in a frenzy and new technologies were being adopted, banks missed on some of these to be extended to the customer service.

My bank locker needed a renewal. My RM talked to me every alternate day. But moving it from Dormant to Active Account needed me to visit the branch, sign and open the locker once.

A parallel from another industry, my SIM stopped working. While the new SIM can be delivered to your doorstep, an old SIM reissue needed me to visit the branch, get my photo clicked and submit the PhotoID Card.

Sticking to old rudimentary processes without a thought simply pushes the customers from the banks.

4. A Faster Adoption of E-Everything Economy

The economy seems to be promoting e-Everything. From eEducation, eCommerce, eProcurement to ePayments, everything seems to have an e associated to it. This is a permanent change.

In rudimentary economies as India and China, the shift has been radical. In fact, the no. of people shifting to buying groceries online permanently even post COVID is huge.

This would promote ePayments and shifting from a parallel cash based economy to a more credit based economy. This would lead to a change in the way the banks think and offer credit if they need to survive against the FinTechs as PayTm and Ant Financials.

5. SME Lending can be done without branch presence

While Retail Banking saw a lot of adoption of technology, Corporate and SME Banking was not left too far behind.

It was always believed that SME/ Corporate Lending was built on relationships and RM played a very critical role.

In a frenzy to boost economy and aid the Small and Medium Enterprises, multiple government policies were launched. In fact all governments launched programs to aid the business. The rollout of these programs was an issue.

Banks quickly adopted technology. Portals were developed for taking the applications online. The backend Operations were strengthened by the use of digital workflow and Business Process Management systems.

Customers could apply from Anywhere, Credit Officers could do Credit Analysis from their homes, Operations Managers could give approvals from their Home Office.

In fact, the concept of vKYB (Know Your Business)was introduced for online executing the checklist for factory visit.

Nothing was disrupted and yet the loans were disbursed.

US by itself saw a huge uptake of these by the use of technology.

6. Government Lending Schemes do not aways mean huge demands

Governments in their fair intent raised a lot of schemes for SMEs. To be fair, these were all in good intent.

However, while UK, Greece, Malta, US, India, Singapore, UAE, Malaysia, Australia etc. (virtually every second country in the world) launched the program, the uptake was a huge success only in the US. The other countries saw a few loans being disbursed. The response was lukewarm.

This was primarily because, the banks saw these as Loans. This meant that the same had to be repaid. The already ailing SME industry failed to clear the stringent norms of the Credit Analysis.

US on the other hand saw this as a grant to the industry for supporting at least the Paycheck. Hence the Paycheck Protection Plan (PPP) was a huge success. The FIFO concept for disbursing loans saw a huge demand overnight. The subsequent phases are being looked forward for a bigger uptake.

7. Customer Service needs a Human Touch

COVID happened suddenly. So did WFH. The reaction of the business was knee-jerk.

The worst affected was the Customer Service department. While technology worked in a few areas, customer service saw the other affect.

In an ad hoc move the chatbots were implemented. The chatbot technology itself is nascent and add to it the issue of a troubled customer trying to navigate his way through.

It seemed IVR days were back.

Result: Chaos and Dissatisfaction resulting in ANGER.

As time passed and anger vented in social media, the banks realised the importance of the Human touch in the Customer Service. The empathy element, allowed the banks to evolve and executives were given options to take calls from their homes and be effective.

The Customer also did not mind a few children crying in the background as long as their problem was getting resolved.

Conclusion

Banking is an industry heavily regulated and governed by facts and opinions which date back centuries. While it deals with a commodity which creates doubts and fights… Money, the entire transactions are built on trust.

Empathy and Humanness is the name of the game.

COVID suddenly changed things. We can easily say there would be a BC (Before Covid) and AC (After Covid) era as far as Banking is concerned.

While a lot of functions saw permanent long due fixes and technology came to the rescue. Others saw the importance of the human touch.

It would take a fine balance between the tech-reg-human to make it a success in times to come. Exciting times lie ahead and we would see the changing landscape of banks, its branches, financial inclusion, customer care and all elements.

The Great Reset has happened for good and now the evolution would result in the progression….

Looking Forward to see what next……