Banking Reimagined: Digital 2021 Post The COVID-19 Pandemic

The healthcare emergency worldwide due to the COVID-19 pandemic has created disruptive effects across almost every business sector globally.

From finding new modes of working remotely to creating new revenue streams and digital business channels, there has been a massive shakeup of the way normal was defined in the business world.

The banking sector did not come with any exceptions in this regard. From Mastercard reporting a massive 40% rise in contactless payment to leading banks witnessing revenue generation through digital channels rising to nearly 75% (from the 25 earlier), the implications of the pandemic are never too small for the sector. In fact, the unprecedented economic emergency that has sprung up in almost every nation due to the pandemic may create an opportunity for banks to act as an enabler to help the economy recover faster through easier loans and debt financing.

With signs of effective vaccines popping up globally, the growth prospects for the banking sector looks even more promising as more requirements for financial support will emerge from consumers and businesses to revive the economy.

But can businesses, especially banks, expect normalcy to return to pre-COVID 19 levels in 2021? The answer is “No” as some reforms that were started to combat working conditions during the pandemic are likely to stay for the long term. But going digital will always be the key driver of efficiency and sustainability for banks irrespective of market conditions.

So, what will Digital 2021 be like for the banking sector post the COVID-19 pandemic? Let us examine a list of possible outcomes:

Greater Adoption of Open Banking

A recent survey by Accenture pointed out that 90% of bankers agree that the widespread adoption of Open Banking can improve organic growth in business by as much as 10%. With more regulatory pressure imposed and tighter competition, banks across the globe are moving to a more inclusive open banking mode of operation wherein they partner with non-banking companies like Fintech players to monetize their financial data more effectively by sharing the same with them through open application programming interfaces (API). In the Post COVID world, there will be heightened demands for various flexible payment instruments by consumers in almost every sector. Banks alone will not be able to cater to all these needs. This is where fintech companies can leverage core financial data available with banks to roll out innovative banking and financial services to customers directly. One major example would be companies linking their services and sales with an official WhatsApp account and leveraging the messaging giant’s new payment features to offer a new mode of convenient payment for their customers.

Heightened Focus on Digital Experience

very well result in this increased usage pattern sustaining its intensity even after the pandemic in 2021 and beyond. Hence, banks need to devise strategic workarounds to transition their legacy physical customer operations into a digital-friendly virtual one. For example, the onboarding of customers as well as merchants could be turned into a completely digital activity. Banks would also need to reinforce their security policies to thwart cyber threats that may increase due to more people getting into online banking experiences for the first time.

Smarter Personalization

Banks need to step up their digital landscape to accommodate these rising needs.

Growth of Digital-Only Banks or Neobanks

The pandemic’s far-fetched consequences really pushed the envelope for things people could do online without stepping out ever from their homes. Digital-only banks or Neobanks which do not have physical branches at any customer location but serve customers through a digital platform found to be immensely popular during the pandemic. From opening an account to conducting transactions through mobile apps, these new-age banks offer all banking services without the customer having to physically enter a branch. Even before the pandemic, it was projected that by 2023, Neobanks will have nearly 85 million or 20% of Europe’s population as customers. The accelerated shift to digital banking due to the pandemic will only make the stakes high for the growth of Neobanks post the COVID-19 era.

From a governance model, regulatory authorities that were slow to respond to rising market needs learned their lessons from the pandemic. In 2021, they are expected to be more accommodative of market needs for banking channels like Neobanks and will certainly resort to introducing more relaxed rules for opening such channels easily.

The post-pandemic world will certainly be different for all stakeholders in the banking sector. Consumers will show greater affinity for digital services thanks to their behavioral change brought about by the pandemic. For merchants, the focus will be on how to enable the best finance options for customers to keep them engaged throughout a sales transaction. For the other two entities, the government and the banks, the onus will be to ensure that the right infrastructure and the right guidelines are in force to facilitate business activity seamlessly.

How banks leverage newer digital supply chains and platforms to improve their business uniquely will be the key factor that determines who will rule the market post the COVID-19 pandemic in 2021 when normalcy is expected to return.

Debasis Mohanty

Debasis heads the delivery for all client engagements at Verinite. He has a long track record of delivering high quality, responsive, secure and cost-effective business and technology solutions in BFSI domain. Outside his work, he is an amateur animator, a sports enthusiast, a voracious reader and a Trivia buff.