The people of Britain are faced today with new challenges coming from every direction.
Health, finances, employment, education, personal pursuits and other aspects of our lives have been hugely disrupted and many are left reeling in dismay and facing great uncertainty. Planning for the future may seem futile while we continue to live and work on the shifting sands of a global pandemic.
Covid-19 has not just thrown our personal lives into turmoil - businesses and economies have suffered the greatest blows since the world was last at war. That said, Britain has proven itself to be one of the most resilient nations, and it will continue to recover but not without strong and substantial support from the government, industry leaders and in no feeble way, our banks.
The Chinese philosopher Confucius said, ‘It does not matter how slowly you go, so long as you don’t stop.’ Unfortunately, in this case, he is wrong. Against a backdrop where competition will only become more intense, every nation will vie to refill their coffers to pay off debt and return to growth. Geopolitical dynamics will become more tense as trade wars and the uncertainty of post Brexit agreements affect the economy. It is easy to conclude, therefore, that speed is of the essence if we are to propel the nation forward as one of the strongest global players on the global stage post Covid-19.
Why will Britain’s banks need to take a leadership role and carry the mantra of rebuilding better and stronger?
Banks must recognise their responsibility to help deliver a solid social and economic future for us all. The power they have over the entire economic (and therefore social) environment is vast. As they lend money to consumers and businesses, they make money and stimulate cash-flow and spending. It is a delicate balance but the core of economic stability, albeit within a complex interdependent monetary and fiscal architecture.
Today in Britain, mortgage lending is on the rise, but consumer lending is falling. In partnership with the government, banks have poured £75 billion of support into holding up 1.63 million businesses. But what happens when all this lending is due for repayment? More people than ever are now taking debt payment holidays. Vulnerability has increased. Businesses, many of which are not yet set to open for several weeks or months, have accrued huge loan balances, and we have yet to understand the full impact of Covid-19 driven unemployment when furlough finally ends. Youth unemployment itself is expected to cost the UK £7 billion next year.
Effective and prudent management of the internal balance of payments between borrower and lender will, to a great extent, be the bedrock of recovery and growth. Put too much pressure on recovering monies due, or not lending enough, will have significant consequences. Intelligent data driven insights and decision making, not least focused on KYC (Know Your Customer), KYO (Know Your Organisation) and detection of sophisticated criminal activity, along with appropriate deployment of digital capabilities to stimulate CX (customer experience) transformation are just a few aspects of the suite of solutions available to help banks balance the scales. Pro-active identification of vulnerability (in terms of both consumers and businesses) to avoid long term delinquency or write-off is fundamental. Without this, the risks will be greater.
From chaos comes opportunity
History teaches us that from chaos comes great opportunity. Banks are in prime position to lead industry to realise such opportunity and innovate. From supporting the UK open banking infrastructure initiative to developing new generation products and services required for the new ‘normal’, they can also harness the power of Artificial Intelligence, Robotic Process Automation and data to deliver customer experience transformation and build better operational resilience.
The banking community has seen through its own experience of the pandemic that change can happen fast: digital transformation plans have been accelerated from years to a matter of months and there has been a recognition that radical change in customer expectations is driving a new face of banking with easier access and automation. Meanwhile it has also been business as usual (banks have stopped over £1.6 billion of fraudulent activity in 2020 in partnership with the police). Yet banks themselves are under immense cost and revenue pressures, and there are many increased risks that will prevail for years post Covid-19.
So how do we minimise the risks?
Having worked with many banks and financial services organisations, and as we continue to support the transformation of this sector, we see five key strategic focus areas as imperative for the banking community to address:
- Governance – assessing the outcomes of business practices, especially in respect to forbearance on debt, particularly that held by SMEs.
- Resilience – whilst many organisations adapted to new ways of working relatively quickly, many were caught short due to a lag in adoption of cloud technology.
- Vulnerability – the exponential rise in vulnerability of customers and the need to provide a safety net to ensure customers are treated with fairness, empathy and respect. n overwhelming debt delinquency pandemic is on the horizon.
- Fraud – financial crime and fraud is on the up, and incredibly, even the criminals are advertising on social media sites on ‘how to’.
- Innovation – speed to transform and innovate will be dependent upon a bank’s strategy, culture and talent pool. Laying the foundations of a healthy and purposeful culture that is entrenched in value rather than cost and efficiency is imperative.
The speed at which Britain recovers is highly dependent on how the banking community addresses the challenges and takes advantage of the opportunities to future proof their own business models. How they lead will determine the pace at which we return to growth and beyond. Actions taken by the banking industry now will determine the shape of millions of people’s lives as well as the future of business and the economy. It is the banking community that must carry the mantra if we are to grasp the opportunity to thrive in years to come.
Capita offers expertise, a track record of CX transformation and business process management and can help you build better outcomes for your customers and stakeholders.