It would be impossible to talk about predictions for the banking industry in 2021 and not mention the cataclysmic impact that 2021 and the pandemic has had on people, businesses and countries.
Unlike using the global financial crisis, banks have been able to step up as \”good guys\” this time around, rebuilding their reputations in addition to accelerating digital transformation. One of many outcomes is increasingly smart, efficient online payments.
In 2021, the banking industry innovated for the first time. This is the new normal. Overall, customers and society will be the beneficiaries from the changing industry. Here are my predictions:
Reputations are reborn
Banks across the globe pulled out the stops to integrate and adapt systems and procedures to help customers during the pandemic. They offered accommodations in loans, assisted governments using the distribution of financial relief, and supported consumers by upping contactless spending limits and virtual deposits.
In 2021, banks will risk losing that rosy glow as economic circumstances bring them to deal with non-performing loans, mortgage foreclosures, layoffs etc. But, beyond their role in society as providers of capital and liquidity, banks invested to sustain their reputations as trusted and good corporate citizens and employ their power to persuade their customers and providers to adopt higher environmental and ethical standards. This is in the areas of bank carbon-neutrality, sustainable financing, serving the unbanked, diversity and gender equality (as the number of women running a major global bank will double from one (Jane Fraser at Citi) to two). It's a start.
Coming of age in the way of working
Back in Q1, when bank employees started up their laptops on their dining area tables, banks that were strategically undertaking business transformation accelerated their efforts. The ones that were tactical, or on the fence, now understand with painful clarity this work must be undertaken strategically.
Cracks in process and the way of working and their resulting risks could be crippling. Especially from a back-office perspective, it's not enough to rely on \”organisational memory\” and collegial proximity for work to get done right. Advanced banks pushed the boundaries of remote work, and the proof of concept was successful. So, they're doubling recorded on developing digital twins and moving to the cloud. They're adopting the hybrid office/WFH approach to reduce health risks and reduce cost permanently. The watercooler should never be the same.
The death of cash
Ok, most likely the rumours of the death of cash are a bit exaggerated concerning will always be the need for cash (and, to some extent checks; the USA, for example, cannot seem to live without them). But the pandemic has permanently changed the way that consumers and small businesses bank, and also the demotion of cash has been accelerated with a decade by the pandemic. For instance, the Norwegian central bank said that cash payments in that country have plummeted to just 4% of transactions since March.
Implications? It will likely be critical to continue evolving payments to be smart, safe and flexible to compete in \” new world \”, in both retail and commercial banking. Also, the permanent alternation in the mix of channels might find banks' face-to-face engagement with customers fade. Branches aren't likely to go away entirely, but they will be reserved for high value activities – by appointment only. To pay, the personal touch has to be delivered digitally and intelligently.
The role from the bank as a \”financial wellness partner\” has been born. Banks will use customers' data, not just to personalise and differentiate banking experiences, but to make recommendations for products and services beyond traditional banking from across their ecosystem for everyone their customers well. Just as customers own their funds (physical or digital), in the future they will demand that they own their data (and can share it with whom they choose). Then retail and commercial clients will share their data in return for value.