How Covid-19 is Proving the Catalyst for Digital Transformation

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From crisis comes innovation and opportunity. This is no different. The ‘new normal’ in financial services will be an increasingly digital one. It is up to the incumbents to finally invest in this.

Last week I wrote about how event organisers globally are going to have to adapt to survive over the next few months. This is actually a factor across many verticals. The LinkedIn post I have seen the most of over the past few days is asking slightly cynically, ‘who led your digital transformation? A) CEO, B) CMO, C) COVID-19’. Gallows humour, sure, but a huge amount of truth in the statement nonetheless.

Positive things sometimes happen out of terrible things. The current state of affairs is no exception. A unique set of circumstances is driving innovation and invention. For years, incumbent financial institutions have discussed and evangelised their digital transformations. They would emphasise that they are THE bank who understands the millennial consumer. They are THE bank that have the product set that matches the various digital touchpoints that are currently in vogue. They would employ ‘digital gurus’ with backgrounds in marketing and advertising to ram home this point; often at financial technology conferences…

In reality though, a lot of the time, incumbent financial institutions have been playing catch-up to the times and the consumer trends. They have been handcuffed to stagnancy through the fact they have been working with ‘legacy’ architecture. These IT systems simply lacked the investment needed to drive the agile processes needed in the modern consumer age. The rise of the challenger banks in the UK, and the demographic success such organisations have had predominantly with young urban populations have brought this face into sharp focus. As well as recent major system failures such as with TSB in 2018.

The current situation means now more than ever, the incumbent financial institutions are having no choice but being forced to innovate for a few simple reasons;
Firstly, they like a huge amount of the workforce are now working from home. Canary Wharf has seen a weekday footfall drop of 80%; reflecting the fact, no one is working there! Everyone is at home; that means immediately the banks employees have to go through their own digital transformation in the way they communicate with each other. There is a reason Zoom’s stock continues to rise.

Secondly, we are all in the same boat, and are not using bank branches. Everything has to be online. Services that were once in person now need to be in the digital toolkit to work remotely. Banks have had to adapt to this quickly and make sure their UX is as strong as possible.

Lastly, the way Covid-19 is transferred also means the much-predicted ‘death of cash’ is finally looking ever more likely with UKFinance pushing the rate of contactless payments to £45 per transaction.

The challenger banks are seen as the bastion of this innovation. They are naturally digital platforms; their agility as organisations, and the fact they were launched for the digital consumer. A lot of these things they were doing already and doing them well. Unfortunately, they have not been immune to the deadly economic impacts of this pandemic, with Monzo and Starling both announcing earlier in the week they were having to furlough some of their staff. However, when the green shoots come I am sure they will continue to lead the way and the incumbents will follow.

As a business, in the coming months we will be running a series of digital conferences and webinars to keep our community updated with the rapidly changing situation in the fintech. These are intended to support the industry and showcase the continue innovation in digital finance, payments, blockchain and regtech. If you are interested in being involved in these as a speaker of a panellist, please email me.