Acceleration of Digitization
"COVID-19 has made most of us hyper-aware of every touchable surface that could transmit the disease, so in a post-COVID-19 world, it’s expected that we’ll have fewer touch screens and more voice interfaces and machine vision interfaces" Bernard Marr, What Does The Future Look Like Post-Coronavirus - 9 Future Predictions. Fintech thought leaders Theo Lau's (quote on right) and Bernard Marr's insights both show a remarkable side effect of COVID-19, the acceleration of digital. What is commonly called “voice first” and machine vision interfaces in mobile payments had slowly been rolled out by early adopters, but in the new reality of fear of disease transmission, it will be something that consumers will demand. PWC’s Covid-19 CFO Pulse survey confirms this: “FS firms, including asset and wealth management, banking and capital markets and insurance, have been going through a rapid digital transformation... Once the COVID-19 situation stabilizes, firms may not be able to compete if they haven’t built systems, products, and processes that meet client demands in the ‘new normal’.”
In The Financial Brand, Jim Marous tells us that: “As the shutdown caused by the coronavirus pandemic extends, more consumers are adjusting to vastly different daily behaviors. From increases in working from home and ordering take-out food to reductions in visiting friends or going to a workout facility, everything has changed… According to J.D. Power, only 46% of consumers will go back to ‘banking as usual’.”
Based on our survey results, the finance sector has been one of the most responsive to customer needs, with 31% of those surveyed developing a new product or service, 30% accelerating development of an already planned product and 45% introducing new initiatives during the pandemic to better connect with customers. Several respondees mentioned specific philanthropic projects such as pro bono initiatives - in one case all employees and their family members were provided with a supply of masks and hand sanitizer - and events for charities being part of their response to COVID-19. One organization used the time to work on their Diversity and Inclusion initiatives, and several others said they focussed on more client interaction and communication including webinars and education to address the impact of the pandemic.
Beyond disruption in products, the workplace is another place that has seen radical change. CNBC reported on how financial traders were affected: “While many global companies are telling all staff to work from home, for some banking roles, this isn’t possible. Traders, for example, often deal with sensitive data, requiring workstations and technology that meet certain compliance standards and cannot be used at home. ” Goldman Sachs, Citi, JP Morgan and Bank of America moved employees, in some cases, to backup offices and developed shifts splitting up time between work and home along with “other protective hygiene measures”.
In our survey of finance professionals, 80% of respondents said that either everyone (49%) or the majority of staff (31%) were working from home. For those who needed to remain in the office, just 2% reported than they did not have some form of safety measure in place, from hand sanitizing stations to changes in location.
A consistent theme in the financial industry right now has been comparisons of the coronavirus pandemic to the Global Financial crisis of 2007–08. Mike Mayo of Wells Fargo recently told CNBC: “In the global financial crisis, banks were the problem… The silver lining from that is that banks are prepared for a situation like this, and they want to be part of the solution this time.” In the Wealthmanagement.com article “How to run a financial advisory firm during a recession” Erik Bergquist interviews several financial advisors that share similar thoughts about the financial crisis being a great lesson for what the industry is dealing with now.
Pat McClain, Co-Founder and Senior Partner at Allworth Financial offers this advice: “(during) the last crisis we did have a hiring freeze and we went through the expense line of the whole business. If you think about our business, most advisors will work on a 30% to 40% margin and the assets under management comes right off the top, so the margins are compressed. We didn’t furlough anyone, but we pulled back on the marketing budget and tech spend and all capital improvements, and we are doing the same now. You want to make sure on the back side of it that you are healthy. The last thing you want to do is lay people off because there is going to be a recovery, and this is a service business that is built around good quality people. If you do touch people, you don’t want them to be client facing because there needs to be that consistency in the client experience; your firm can’t look like it’s struggling. This is the fourth one I’ve been through—it is steeper and faster than the previous ones, but we learned what the recovery should look like.”
That PWC CFO Pulse survey mentioned confirms that 2008 has “strengthened our ability to withstand systemic shocks”; additionally PWC found that “only 55% (of financial services) are considering deferring or canceling planned investments as a result of this crisis, compared to 67% of all sectors.” An Investopedia article reinforces the stability of finance as a sector and a profession during this crisis; three of the "9 Businesses That Thrive in Recession" are accountants, financial advisors and economists. Jim Chappelow writes: "People who have substantial assets want to ensure that they're well taken care of, especially during a recession. Financial advisors often see an increase in work as people become concerned about the stability of their investments and seek guidance on how to protect their assets."
A McKinsey report published this June echoes Clarke's sentiments; its authors conclude: "Nothing will pay more dividends to advisors in the long run than deeply servicing their existing clients."
In a recent Finovate Podcast, Alyson Clarke, of Forrester Research had this to say: “To hit a recession is preparing for the upturn…. If we think back to the last recession, they didn’t survive so well when the economy improved. What financial services firms and banks need to do, they have to focus on reengineering around the customer, not the product. Reengineering to become more agile so you’ve got the ability to adapt quickly.”