The current COVID-19 situation seemingly has provided a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing organizations to further up the adoption curve almost overnight.
The ‘6D’ chain reaction of technological progression of the last decade – digitization, deception, disruption, dematerialization, demonetization, and democratization – could hardly touch some corners of financial services in 2019. While on the other hand, the new environment of 2020 looks like it will drive the digital transformation on another scale entirely.
Businesses that once mapped digital strategy in one- to three-year phases in the pre-coronavirus world must now scale their initiatives in a matter of days or weeks as the luxury of time seems to have disappeared completely.
On the one hand, COVID-19 has already dramatically accelerated the need for incumbent firms to digitize. And whatever the outcome when the pandemic subsides, financial service firms old and new will learn valuable lessons about what their customers want, their business resilience, and how to compete in a digital-first (and potentially digital-only) market.
New behavior will transform the fintech industry’s future
Traditional customer touchpoint channels are running out of steam. JPMorgan Chase temporarily closed approximately 1,000 branches in early March – around 20% of its total footprint – to protect employees, yet continued to provide essential services to its customers and communities. Traditional channels are reporting a decline in use during the pandemic with only 15% of customers saying they prefer branch banking as an interaction point within the virus scenario – a significant reduction of seven percentage points compared with 22% choosing a branch visit before the crisis.
Consumers around the world are switching to contactless to help with social distancing, accelerating the adoption of contactless payments that were already underway.
A survey, ‘North America Online Payment Methods 2020 & COVID-19’s Impact,’ reveals that nearly one-third of American consumers became first-time users of contactless payments since the pandemic, and the majority of them plan to continue making contactless payments post-COVID-19. As such, contactless payments in the U.S. are projected to rise eight-fold between 2020 and 2024.
Meanwhile, a report from RBR’s Global Payment Cards Data and Forecasts shows how the growing pace of contactless card issuance and acceptance combined with consumer behavior changes are driving growth in contactless payments.
Consumer sentiment is evolving as the next “normal” approach. Shifts in consumer behavior toward digital services are resulting in monumental changes in the banking industry. The pressure is on for incumbents to adapt to the new world by offering the digital experience that customers are starting to expect more now.
Circumvention: Addressing customers’ end-to-end needs – digitally
The current situation has sharpened the need for fintech companies to learn from digital disruptors. With everyone facing the need to prioritize digital over physical, this trend has been accelerated by the dramatic start to this decade. This new environment is driving greater adoption of digital technologies across the whole fintech industry.
Fintech players around the globe are rapidly using AI, digital payment systems, virtual assets, software solutions, and AR, to deliver better crisis management solutions like contact-less banking, digital-only customer service, and payments, e-KYC and verification, credit rating analysis, consumer behavior analysis, etc. across the financial services industry.
Enhancing the customer journey, investing in understanding customer behavior, and innovating to offer a bespoke CX is vital, as is the capability to bring competitive services to market quickly. Fintech players should, therefore, leverage this time to accelerate their digital strategies to drive their transformation journey further.
In this fast-changing world, financial services firms need to invest in digitalization and functionalization and increase efficiency while improving their ability to adapt to change. This will become a dominant factor in their future success or likely default.
What does the future hold?
Just like any other industry, the fintech industry, too, will have to rethink and innovate its business model. The key here is to make good use of both the existing and new assets to create new avenues for growth in the future. There is a need to think big and out-of-the-box. In a post-pandemic world, many new needs arise that aren’t well-served by traditional processes.
For example, take the traditional, brick-and-mortar bank branch model. Because branches have been forced to shut their doors to customers temporarily, many are accelerating digital transformation efforts that will enable them to make their services available online.
Some fintech companies that are geared primarily toward mobile platforms also excel in providing services like underwriting, presentation, data visualization, etc. They will help set the right context for transactions. Their capabilities will gain more relevance once more, and more people will start adopting digital channels for payments.
Adoption of cloud and scalable technology architecture, cloud-based solutions, and blockchain technologies is something to help fintech organizations to withstand the challenges being posed by the outbreak so that they can continue to operate seamlessly and effectively.
The need of the hour is to keep users well-informed about their current financial situation as well as empower them while providing options to plan for their future. It is a crucial element when many are struggling with the uncertainty of job security and stay-at-home orders. The key priorities should be to maintain service and support for customers in changing times and that emergency loans and payment holidays are in place for those who need it.
The journey to the next normal includes modernizing the application portfolio aggressively, migrating to resilient and secure clouds, embedding security and compliance across operations, driving the digitization of processes into intelligent workflows, creating self-serve capabilities, and re-inventing a new relationship with customers.