How did UK banks and finance firms respond to Covid-19?
The Covid-19 pandemic has been a transformative experience for banks and financial services businesses. Under fierce conditions, a window of opportunity was created for companies to expand their digital services and invest in new technologies.
Finance firms have been promoting digital capabilities for many years, however the pressure exerted by the crisis has propelled the issue to the forefront. Confronted with the immense challenge of delivering a great customer experience despite the closure of branches, offices and call centres, businesses enlisted the help of modern technology to tackle unexpected obstacles.
Much has already been said about the pace of digital transformation across the financial industry in this time. However, we at Yobota wanted to delve deeper. Specifically, we wanted to understand how many of these changes will prove to be permanent, and how many were just temporary solutions.
So, we polled 250 business leaders within the banking and financial services space to find out. Here’s what we discovered…
Where did businesses initially channel their investments?
As Covid-19 initially took hold, there was a flood of investments as businesses looked to reinvent their offering for the new digital landscape. Our Q2 2021 survey found that the overwhelming majority (79%) of banking and financial services companies had successfully adopted new technologies to pivot their services since March 2020, with similar numbers (76%) saying their organisation had put technology far more at the heart of its operations and business model than was the case 12 months before.
Although technology spending has been on the rise for years, accelerated digitisation created new investment streams. The number of firms that deployed cloud computing increased significantly in this time, with 54% of businesses having made first-time investments – signalling a determination to fix the legacy system problem. Artificial intelligence (36%) and big data (33%) were also adopted by many businesses for the first time since the pandemic began. Tellingly, only 4% of the financial institutions polled said they had not invested in any brand new technologies.
The results of this round of tech spending are overwhelmingly positive. Three quarters (75%) agreed that adopting new digital solutions had meaningfully improved their customer experience, with many benefitting from an enhanced ability to utilise accurate data to improve and personalise the user journey.
Elsewhere, Yobota’s research found that 75% of the sector’s business leaders had been able to streamline administrative processes, and 65% had lowered operational costs.
Lessons learned from Covid-19
Despite the impressive progress made on the digital transformation front, our study uncovered some teething issues.
More than half (54%) of respondents admitted that they had initially struggled to understand the best technology to adopt, while similar numbers (55%) were concerned they’ve taken a short-term view rather than anticipating customers’ longer-term needs.
Ingrained cultural attitudes are likely to sit behind these fears, with 53% of business leaders worried that an inflexible approach to technology adoption in their organisation means they are not well placed to adjust quickly to changing customer demands.
Overall, though, the overwhelming success of innovation projects throughout the past 18 months has inspired long-term optimism within the industry: the majority (73%) said they are confident they can withstand future disruptions due to the technological progress they’ve made during the pandemic.
What do the next 12 months have in store?
Yobota’s research also considered the mid- and long-term developments that have been intensified by the pandemic, and which are likely to reshape the financial sector.
Promisingly, the data provides a compelling narrative of the crisis forcing sustainable digital transformation, with the vast majority (65%) of businesses planning to ramp up digital spending over the coming 12 months, and two-thirds (67%) seeking to diversify the tech they use.
Improving the quality of their core technology systems is a priority for 74% of firms, with recent market changes having established a clear need to modernise business-critical infrastructure. As we have already seen, this is primarily driven by moving from legacy systems to cloud-based solutions.
Areas of focus also include investing in better data analytics to support enhanced decision-making (73%), and the deployment of application programming interfaces (APIs) (67%) that accelerate the introduction of new products and services.
There is a broad acceptance that digital-first services are becoming the primary mode of engagement, with businesses now under mounting pressure to ensure their online channels are future-proof. Evidently, business leaders are looking to technology as they build intuitive, personalised and frictionless user experiences that can adapt to evolving preferences.
Ultimately, then, the customer remains at the heart of future IT projects, with three in four (75%) firms intending to improve digital experiences by upgrading their website or mobile application. Meanwhile, 63% plan to automate customer interactions through chatbots and robo-advisors.
The drive for new technology means that three in five (59%) banks and financial services companies intend to pursue a partnership with a technology provider in the coming years to achieve their digital transformation goals.
While Covid-inspired digital transformations have paid off handsomely for many, the work is far from over. Looking ahead, banks and financial services companies must continue to extend and scale digital technologies to cater to ever-changing market demands, while leveraging the support of experienced technology partners where needed as they build for the future.
Hassan is dedicated to helping established and challenger banking businesses use next-gen technologies to deliver exactly what their customers need. Founded in 2016, Yobota is a London-based technology company with a fast, flexible, cloud-native core banking platform, which allows clients to create and run innovative financial products in record time.