During economic shifts both good and bad, the financial services world has to adjust, leaning on technology to do so. The current COVID-19 outbreak has highlighted the need for financial institutions to have robust and nimble digital infrastructure.
Financial institutions are experiencing a great deal of fear and anxiety amid tumultuous markets and a significantly slowed economy. While oceans of digital ink have been spilled signaling the arrival of remote work and remote living, the current crisis has thrown our societal shortcomings when it comes to economic continuity into sharp relief.
Fintech is vital to enabling financial institutions
Financial services institutions, while not nearly the most adversely impacted group of businesses, should view this as a catalyst for more rapid innovation and evolution. The industry faces security and privacy challenges, compliance issues stemming from heavy regulation, and a historically glacial pace of technological adoption—all of which fintech is able to help with. Enabling digital transactions and meeting customers where they are—on their smartphones—is vital to keeping the cogs of commerce turning. Fintech has the potential to catalyze the rapid improvement of financial services by making them more widely available and increasing the scope of financial products. Financial institutions have begun to embrace fintech, but accelerating their adoption of solutions that enable remote financial activity will help them and their clients weather the current crisis.
Importance of connected core systems
To facilitate the creation of new financial products and nimbly navigate a changing financial landscape, it is vital for banks to connect their core banking systems. Isolated legacy core banking systems are difficult to extract data from and don’t play well with third-party applications. Facilitating their connection with other applications allows for an expansion of the use cases for banking data, which is used to fuel mobile banking and other financial applications which allow customers to conduct business remotely. Connecting legacy systems involves implementing a layer on top of the core systems, which enables users to extract relevant data, normalize it, and share it with third parties. This basic first step is vital to enabling the rollout of new financial products and digitizing older financial institutions.
Mobile banking and payments
Financial institutions must enable mobile payments and digital banking activities via applications designed with the end user in mind to thrive in a remote world. 26% of transactions in the United States are still conducted using cash, with the under-25 demographic using cash in a higher percentage of transactions than any other. While that number has fallen in the past few years, there is a significant share of transactions that can be switched over to digital. Embedding mobile payments in the digital lives of consumers is the way forward for financial institutions looking to enable contactless payments in a remote world. Consumers want convenience, and to access financial products within other applications that make up their digital lives. Mobile banking software can help financial institutions build and launch their own mobile interfaces to provide customers with frictionless use of financial products. Mobile touchpoints with clients means it is easier to ship and test new financial products. While the majority of financial institutions offer mobile financial services, ensuring that those mobile experiences are optimized for the end user primes them for success in a remote world.
Virtual banking and chatbots
One way to maintain connection to clients during periods of isolation is to leverage video conferencing solutions designed to facilitate bank-client interaction. This ensures that bank employees are able to work remotely while still providing necessary services to customers. Another is to implement well-designed self-service portals for clients. Increasing clients’ autonomy and allowing them to carry out tasks by themselves eases the burden on overtaxed front-line agents, especially in times of socioeconomic uncertainty. Of course, the option to speak face to face with an employee should always exist, but limiting the number of times that happens is a cost saver and improves the client experience.
Times of crisis are difficult to navigate, particularly for those without the ability to continue working remotely—which is currently a significant portion of the population. Financial institutions must provide well-built, painless digital solutions to help mitigate the financial damage to individuals and businesses to help guide them through a tough situation. Banks should consider a digitally delivered guide on financial wellness could help customers manage their finances through a drop in income, or providing emergency loans at no interest may help keep people afloat between paychecks. Helping clients in these ways is not only the empathic thing to do, but may engender greater loyalty as well. Fintech solutions like digital banking platforms are crucial to facilitating these actions.
Increasing financial inclusion
There are nearly 1.7 billion unbanked or underbanked—meaning those who lack access to basic financial products and services like a bank account—individuals worldwide. A remotely operated world highlights the difficulties inherent in the life of an underbanked or unbanked person. Fintech solutions, specifically those aimed at leveraging the proliferation of smartphones to provide unbanked people with access to financial services, are the key to getting these people involved in the financial system. Inclusion is vital; it enables unbanked people to gain access to credit, loans, and other financial services that allow them to build a financial identity. Financially excluded individuals already have a difficult time navigating the financial landscape, and forced isolation increases those difficulties. Financial institutions must do a better job of extending services to those individuals and educating them on how to leverage inclusion to their benefit, particularly as potential layoffs and extended social distancing periods make it difficult to carry out financial transactions in person. Financial services companies that meet customers where they are, in this case on their phones and in their homes, will continue to be at a significant advantage over competitors.
Extending small businesses a lifeline
Embedded financial products enable financial services institutions to provide stopgap financing to small businesses that may be hit by a crisis. A prime example of an embedded financial product is WeChat Pay, a mobile payments solution built into WeChat, a wildly popular mobile messaging application. Continued access to capital for small businesses is an imperative to mitigate adverse impact, and financial institutions can easily extend that by leveraging digital touchpoints to be more human in a difficult time. Risk is always an issue when extending capital to a business, but loan origination software with proper analytics and credit decisioning logic can help to alleviate that risk.
Fintech enables remote access to critical financial products and services during crises
Fintech has the opportunity to facilitate access to financial products that are necessary to keep the wheels of the economy turning. Financial institutions need to embrace the opportunity that implementing fintech or partnering with fintechs offers, and look to ways to connect with and enable their customers conducting financial transactions remotely.