In the new reality of a COVID-19 world, the distribution landscape for banking will look very different.
There is an urgent imperative (and opportunity) for banks to reimagine their branch networks. Due principally to declining customer demand, we expect there will be fewer branches in the future, which are also likely to become smaller and more digitally-enabled. Instead of focusing on serving customers with transactional business, they will become more advisory, assisting customers with more complex products and financial decisions.
Customers were already widely embracing digital banking before COVID-19, but the trend will become even more accelerated now. Customers will expect and demand the ability to self-serve or be remotely served (e.g., through an online chatbot or digital assistant) across a banks’ entire product range. Banks will need to accelerate and scale their own infrastructure programs to drive digital functionality, fulfilment and personalization – which will often be in partnerships or joint ventures with agile, innovative fintech players. Banks will need to continue to utilize sophisticated data & analytics information to target the right products and services to individual customers, with the right frequency, through the right media.
Call centers will also need to be re-thought. With customers more able and willing to self-serve, the call center role, like branches, will potentially to shift to become more advisory rather than fielding routine transactional queries and requests. Fuelled by the explosion in popularity of video conferencing during the pandemic, we could see a new breed of financial video advisors. Meanwhile, there may be a trend to move all or parts of existing offshore service center functions to near-shore locations instead to ensure greater operational resiliency – which was an issue during COVID-19 in some cases.
Many small and micro businesses were heavily cash-based prior to COVID-19 – taxi drivers, barbers, tradespeople, some small retailers. There will be an opportunity for banks to redesign and enhance their merchant services offerings – often in partnership with payment service providers – to bring these businesses online. We will see a growth in new, integrated solutions and e-commerce packages.
How far will cash come back? As societies emerge from lockdowns and people begin to move around more freely again, cash usage is likely to increase, especially as some may have hoarded cash at home when the pandemic began or as a result of retail stores reopening. However, any rebound is likely to be limited and temporary. Card and contactless payment services have usurped physical currency. Digital and cryptocurrencies are also set to take increasing hold – along with the prospect of government-backed central bank digital currencies (CDBCs) moving nearer. Even if cash never dies out completely, a steep long-term decline is probable – a casualty, in part, of COVID-19.
A small window of time exists now for experimentation and review, before a new normal template begins to appear. Clearly defining the role of branches and contact centers is one of the critical questions facing banking in the new reality.
Programs to extend and improve digital delivery – through customer facing digital channels and the associated functionality, core banking platforms, IT systems and the cloud - need to be accelerated and scaled beyond individual products or channels to become enterprise-wide.
With so much more data in circulation through the ‘digital default’, it is essential to have the right data & analytics tools in place to leverage the information. Machine learning and AI capabilities will be needed to drive effective personalization and customer engagement.
Explore how these trends are unfolding in your country using the interactive map below.