Post-pandemic banking: digital accelerator?

David Mullins, Head of Global Financial Services and Insurance Industry Consulting, Atos

The Covid-19 pandemic has dramatically accelerated the shift towards digital banking. Lockdown and social distancing have brought about dramatic changes in customer behavior, transferring economic activity online and increasing consumers willingness to bank digitally. What will this shift mean as we emerge from the pandemic and how will digital help meet our banking needs in the future?

The pandemic has been a major disruptor for the banking sector. Before the pandemic, it’s fair to say that some parts of the sector were behind the curve on digital transformation; the focus, typically, was on using technologies to drive down costs and increase efficiency rather than necessarily to grow business.

With requirements for social distancing, the effect of Covid-19 has been to accelerate the shift to digital and the evolution of a cashless society. Customers no longer make routine visits to their bank; they use cash less; and contactless payments have dramatically increased. In fact, 50% of customers globally interacted with their bank through a mobile app or website at least once a week in 2020.¹

This turn towards digitalization has, by virtue, led to rising customer expectations of their banks and other providers to facilitate fast, convenient cashless payments as the norm. This has created what we might call a digital deficit for many institutions – a gap between what their customers want and what their IT and organizational infrastructures can readily and robustly support.

Those businesses – and they are not just banks, they include digital giants and retailers – who have no digital deficit, or who can rapidly eliminate it, are winning in this new increasingly cashless world. The industry has moved beyond the tipping point of new digital operating models. This is about transforming banks’ whole business models, with customer experience at the heart of this transformation.

So what’s next? And how can banks respond?

This is not about clever technologies. It’s about reinventing the end-to-end customer experience and applying it right back to the core of the institution.

As engineer and investor Marc Andreessen famously wrote back in 2011, ‘software is eating the world’. Just look at the music industry, which has gone from vinyl, to CDs, to full streaming in a few years. The same is true for financial services institutions that are increasingly software-driven. Cloud is on the critical path. The impact of legacy and the shadow it casts is front and center.

One of the principles of future transformation will be architecture: if banks don’t rapidly address their legacy estates, their ability to embrace open banking platforms will be limited. Wholesale transformation of business models needs to be outcome-based.

The digital shift that’s taken place since 2020 has left a permanent change on the industry. Some parts of financial services will be almost unrecognizable by the end of this decade – and perhaps even sooner. Banks need to act now to be ready.

_{1 Accenture. 2020 Global Banking Customer Study.}