By Jennifer Geary, General Manager, EMEA at nCino
“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger: the other for opportunity. In a crisis, be aware of the danger–but recognise the opportunity.” ― John F. Kennedy
JFK observed that in Chinese the word “crisis” is made up of two brush strokes representing danger and opportunity; this has proven particularly pertinent for the financial industry through COVID-19. The COVID-19 pandemic has upended nearly every aspect of our personal and professional lives. It’s also no secret that there’s been a fundamental shift in how customers choose and purchase products and services. For years, traditional banks’ technology systems were a huge obstacle hindering digital transformation. Many still run parts of their technology on antiquated programming languages, and years of patching have created complex estates that consume huge portions of IT spend. Executives at these institutions are aware that this isn’t sustainable, and the pandemic has served as a catalyst for the acceleration of digital transformation across the industry.
While the pandemic continues to evolve, clear trends have emerged, showing the dangers that are in front of FIs who hesitate to transform and the opportunities that exist for those who are willing to embrace change.
A personalised view of the customer
The reduction of physical bank branches continues its momentum with just last month Virgin Money announcing the shuttering of 12 branches in Scotland. Combined with an ever more sophisticated range of digital banking services, consumer attitudes and expectations of what a bank should provide continue to evolve. Customers have come to expect the same experience of their financial services providers that they have elsewhere in their lives, and as result, financial institutions are increasingly looking for ways to improve customer service and deepen engagement. For many financial institutions (FIs), being able to offer a personalised digital experience for customers is a priority. Many FIs have struggled to implement personalisation due to siloed legacy systems. However, these organisations need to break down these silos and ensure that information is free flowing to gain a better understanding of their customers and serve them more proactively. Platforms built for the world we live in now harness the power of artificial intelligence and machine learning to give FIs the ability to create the much-sought-after ‘single view’ of each customer, and create micro-segments allowing them to make decisions based on real-time data and intelligence.
Transforming one change at a time
Large-scale digital transformation is a marathon, but you don’t have to do it all at once. FIs can meet their goals and create value through a series of shorter sprints. Micro-transformation is about taking those first steps. It’s understandable that in the current environment, overhauling your entire infrastructure at once may be a challenge. Even in times of economic uncertainty, implementing small but mighty micro-transformations is a strategy that allows FIs to drive optimisation, embrace continuous innovation and stay one step ahead of the competition. With large digital transformation projects, users can feel overwhelmed by all the changes. However, with micro-transformations, this can be minimised as users will be introduced to the changes gradually, allowing them time to adapt and form new habits. Another benefit is that staff are given the time and incentive to learn new processes and systems and benefit from direct and immediate value in terms of time savings, increased efficiency, a better user experience or improved customer engagement and satisfaction. It’s all about getting some “quick wins” under the belt, by implementing smaller, bite-size technology projects that can have a focused but measurable impact on the organisation.
Using technology to support ESG
Environmental, social and governance (ESG) issues are emerging as some of the most important considerations for the financial industry. In January 2021, Larry Fink, CEO of BlackRock, issued specific directives calling on firms to align with global efforts to reach net-zero greenhouse gas emissions by 2050. Details include “the need for better data to improve disclosures of emissions and set rigorous short, medium and long-term targets to reduce them”. As Fink addresses, data is critical to ESG efforts. In order for FIs to succeed they need to be able to digest this data effectively; however, legacy systems struggle to keep up with new demands.
Digital transformation is seen as the key to unlocking further potential in ESG initiatives, with 33% of executives in financial services stating that they are looking to increase spend on digital transformation to enhance their organisation’s ESG efforts. Meeting ESG reporting requirements is becoming increasingly important as customers, investors and other stakeholders are seeking to learn more about a company’s ESG track record. And companies themselves are looking to dig deeper on their own strengths and weaknesses in order to take meaningful action. Having the right technology to help is critical.
To be successful, FIs need to assess their whole portfolio with regard to ESG risks and facilitate collaboration between compliance and credit teams. It will be an increasing challenge to stay ahead of the regulatory curve, requiring organisations to bolster their data capabilities with intelligent tools. With newer technology, platforms can be configured to add covenants and fields to help collect, validate, and analyse ESG data and turn it into actionable insights.
FIs cannot afford to simply cannot operate as they have in the past. While the rise of digital has been mounting similar pressures for more than a decade, the pandemic has significantly exacerbated and accelerated its disruptive force.
