Covid-19 has kickstarted a rush to digitisation. Changes not expected for another 5-10 years will now be seen over the next 18 months, says Fenergo’s Greg Watson.
The Covid-19 pandemic has disrupted almost every aspect of business worldwide. Offices have shut down, employees have been working from home en masse, and financial institutions have had to find new ways to onboard and manage clients while adhering to strict social distancing protocols.
Almost overnight, banks across Asia have had to re-evaluate every system and process they had in place. And while this may have seemed a monumental task for some financial institutions, the dramatic reorganisation will ultimately yield positive effects for institutions and their customers alike, in the long term.
A long time coming
The financial services industry has been touting the benefits of digitisation and automated processes for years. And although many institutions have toyed with the idea of investing in new, disruptive technologies, many banks haven’t yet taken that step.
According to a 2019 report by Fenergo, the majority of financial institutions (68%) found that meeting regulatory requirements, data management and improving data capture were the biggest challenges they faced. And yet, most (87%) said it was difficult to get buy-in from senior management when it came to investing in new technologies.
Despite wanting change, a mere 15% of financial institutions surveyed had fully automated the collection of client data, even though 99% agreed that underinvestment in technology directly impacts client onboarding and retention.
Fast-forward to a post-pandemic world, and we’re likely to see a very different picture beyond 2020.
The future is now
Covid-19 has kickstarted a transformation of financial services in a way we’ve never seen before. The market uncertainty has resulted in a rush to digitisation, accelerating at such a rate that we’ll see changes over the next 18 months that we weren’t expecting for another 5-10 years.
Organisations that had previously put digitisation on the backburner are now making it a top priority. Banks that have traditionally been more manual in nature, particularly private banks and wealth management firms, are now faced with closures and business-wide teams working from home.
They are having to swiftly adapt and implement remote account opening solutions in the absence of face-to-face meetings. While their manual, largely paper and Excel-based operations worked okay when people were in the office, it has proven to be a major challenge while working remotely.
The technology that financial institutions across APAC require now is not just about digitalising client engagement at the front office, but how to be digital at the middle and back-end too. Clients expect and demand a seamless and frictionless experience regardless of the channel.
A digital awakening
As abrupt and chaotic as the pandemic has been, it’s taught us a very valuable lesson – that change isn’t in fact as hard as it might seem. Financial institutions that were dragging their heels have overnight started making progress on their digital transformation journeys.
As we move beyond the reactionary phase and into longer term planning, we’re likely to see a significant uptake of new disruptive technologies, such as big data analytics and artificial intelligence (AI) for customer lifecycle management (CLM) and onboarding.
We’re likely to see banks replace legacy systems with newer, agile ones. We’re likely to see a higher uptake of regtech solutions to help banks improve and streamline their compliance processes.
Digitisation is all about driving efficiencies, aggregating and absorbing processes, expediting compliance and onboarding, and most importantly, planning ahead in order to be able to cope with rising customer requests, at scale.
We already knew that simply relying on manual resources wasn’t scalable – it’s just taken a crisis of pandemic proportions to make banks sit up and realise just how badly things needed to change.
The future of financial crime
The coronavirus pandemic has made our financial systems more vulnerable, which has created a breeding ground for financial crime and fraud. In this unforgiving climate, financial institutions need to be more vigilant than ever; further driving the need to digitalise to help fight financial crime.
After all, we know that technologies, such as AI, can improve compliance processes and identify client risk faster than humanly possible, literally. So, will a ubiquitous uptake of regtech technologies reduce the amount of criminal activity that goes undetected in financial institutions?
Regulators seem to think so. Most regulators support the use of technology to mitigate risk; the Financial Action Task Force (FATF) encourages the use of digital onboarding processes, including digital identity and verification measures in line with recently published guidance.
The Hong Kong Monetary Authority (HKMA) and Australian Transaction Reports and Analysis Centre (AUSTRAC) also encourage the use of digital technology to identify and verify customers.
Of course, we could never expect to get rid of financial crime completely, but a highly digitised and automated financial services sector would certainly be better equipped to detect and prevent criminals from entering the financial system.
A new way forward
It might have taken a dramatic turn of events to get the ball rolling, but it appears as though the highly digitised, highly agile future of banking and financial services is finally coming to fruition. And although we can only speculate what banking might look like in a post-coronavirus world, we do know for certain that change can happen in an instant.
The good news is, for banks that have already undergone their digital transformation, they will be better prepared for whatever the future throws their way.
Greg Watson is Head of APAC at Fenergo.