How financial institutions can boost business resilience after Covid-19

Work and life will never be quite the same again after Covid-19. For the financial services industry, the pandemic created an imperative to reconfigure operations to ensure business resilience. But, it also offers an opportunity to transform and reimagine business models. We spoke with Patrice Amann of Microsoft to find out more about how financial institutions must adapt if they are to thrive in the 'New Normal'.

Q: How do you think the pandemic has affected businesses in the financial services industry? What do you consider to be the biggest challenges?

The comment from Satya Nadella, Microsoft's CEO about how Covid-19 has forced two years of digital transformation in two months went viral earlier in the year, and this has been witnessed in all sectors of the economy, whether public or private. Some industries have been impacted severely such as hospitality and travel, all others have been impacted to a lesser extent. Financial Services Industry, however, has faced some specific challenges.

When the pandemic struck and countries went into lockdowns, the immediate challenge was that all financial institutions, as a key wheel of the global economy, needed to rapidly migrate to remote working. Suddenly, no one could go to their usual work location and execute on daily business to keep the economy going: this was a huge business resilience issue. Some institutions that were progressing their digital transformation were already well prepared for this, but others struggled as infrastructures were not ready and strong enough to connect all employees from home. 

Another challenge was that many institutions still have a lot of paper-based processes. This indeed varied across regions and sectors but slowed down execution of very simple and straight-forward processes.

The biggest challenge, however, was the connection (or disconnection) between financial institutions and their customers. This issue touched all segments across retail, commercial and corporate banking.

For example, in the retail segment, some older or more 'at risk' customers, are often more comfortable doing banking in branches. Yet, with lockdowns, they were forced exploring interactions through mobile and/or web channels with mixed success due to accessibly issues.  We also saw some commercial banks being slow to implement the various government stimulus support packages in a consistent way and be able to report easily to the performance of these packages.

Finally, it created huge challenges for call centers. Social distancing reduced their capacity just as they were seeing spikes and escalations in call volumes.

Q: Has Covid-19 become a wake-up call for financial institutions in terms of digital transformation?

Digital transformation has been a key driver for financial services for the last couple of years. It is all about enabling banks and insurers to deliver innovative customer and employee experiences with speed and agility, while also managing the realities of risk, regulation, legacy systems and cost pressures. So, I wouldn't call it a wake-up call, but the pandemic has rapidly accelerated the execution of this journey, as many institutions realized they were too slow and not agile enough in responding to a specific situation. It has accelerated internal cost-cutting transformations, but the main driver has been to improve customer service and resilience.

There is always a reason to not speed up digital transformation, or to not do it now. As financial services recovered well from the last crisis in 2008, and is a profitable business, the general attitude was probably about 'why change now?' There was lower urgency and very few companies were really anticipating such a potential big disruption to their business model with a worldwide pandemic that forced changes in people's behaviors.

It is often hard to force or accelerate a change in operations, business models and even culture as you might only see and measure the relevance of the decision after having been through the journey.

The banking industry now finds itself in a situation where the pandemic has been the trigger that is a key acceleration of their transformation. Some banks had to discover that the hard way. In the New Normal post Covid-19, financial institutions will need to reconnect better with their customers and offer differentiated digital customer experiences and deliver greater value. This will really be a game changer. Banks also have a social responsibility to help their customers and communities recover. As the recovery progresses and the economy recovers, customers will be loyal to the banks that supported them through the challenges.

Q: How is Microsoft helping financial institutions to provide the best digital experiences and the agility to rapidly adapt?

This is part of Microsoft's DNA. Our mission statement is to empower every person and every organization on the planet to achieve more. I think this resonates particularly well right now, as the financial services industry needs to adapt to a new reality.

Through this notion of enabling others, we are helping this industry adapt by providing the best technologies, solutions and services through people to accelerate digital transformation. That will not only ensure business continuity and boost operational efficiency. It will also transform the business to be more relevant to the customer.

We provide a trusted, secured, compliant, hyper-scale infrastructure. This will expand financial institutions' own capabilities, operational capacity, business agility and speed to market. We have a ready-to-use platform that can be scaled and gives access to innovative services, such as Artificial Intelligence (AI), Machine Learning (ML), intelligent automation, advanced analytics, cognitive services and so on.

As we bring together a broad ecosystem of industry partners, we are helping to deliver a range of measurable business outcomes with agile solutions in areas like payments, risk management, cyber security and, of course, differentiated customer experience.  

Finally, as financial institutions operate in a highly regulated industry, they always must look very closely at compliance issues and ensure that their controls meet regulatory requirements. We therefore provide a framework of risk assessment as well as tools and functions for Banks to operate in a compliant way and stay in control of their operations. 

Q: What are Microsoft's three most prominent products that are helping financial services organizations meet the demands of today?

The first one is obvious; it's Microsoft Teams platform, part of our Microsoft 365 solution. This has been critical in enabling remote working and we have seen a tremendous demand. When we look at the numbers, we see a huge increase in usage. Many large institutions are now using this Microsoft Teams as a standardized way to communicate and collaborate not just internally, but also for some of them to interact with their customers and business partners.

The second solution is Microsoft Dynamics 365, and by extension our power platform, which is our low to no-code environment, driving a massive transformation through rapid deployment of process automation. We hear of customers who, almost overnight, digitized processes and built agile workflows to ensure business resiliency and improve customer experience.

The third is Microsoft Azure, our hyper-scale cloud offering. This has been critical for banks. It has contributed to build resilience by enabling remote work with the support of virtualized desktops. And, it has helped banks to accelerate their process of digitization and to implement and scale solutions to respond rapidly to their customers' needs.

Across all our products, our mission is to democratize access to technology and drive tech intensity so that technologists and non-technologists alike can rapidly build and deploy applications.

Q: Online or digital is not accepted for many transactions in many countries. Do you foresee regulators starting to shift their thinking on this? For example, do you think we'll see more insurers pushing regulators globally to allow digital signatures to deliver end-to-end digital experiences?

10 years ago, regulators wouldn't even want to talk to us as their mission is to supervise financial institutions, not technology providers. We have been starting to work with some of them to learn about what is a regulated industry and how we need to contribute to help financial institutions to operate in a compliant way. We have been working with regulators for more than eight years now and we are all developing a better understanding of what needs to be done to operate services in a compliant way. Not just from a technology perspective, but also from a legal perspective so we can build the right solutions that are compliant by design. Over the years, we have been able to build regular contact and interactions with more than 120 regulatory bodies.

We've also been running, for 8 years now, a Regulatory and Compliance Summit open to all regulators around the world. It started as an annual in-person event, but with the pandemic, it turned now into an almost quarterly communication that we run digitally, and where we discuss the latest trends and what needs to be done. This will help the industry move forward and take advantage of the public cloud.

Increasingly, we are seeing regulators partnering with us: they provide us guidance and directions, and on our side we help them to better understand our Cloud Operating Models and the efforts we are making to support their guidance.

The main issue for banks is that they need to stay in control of what they are doing. So whatever we can provide in terms of tooling, contracts, services, and solutions that can help banks to stay in control is good for the business and is supported by the regulators.

Q: Covid-19 is changing people's relationship to work. We observe an acceleration of remote working trends. How do you see future of work?

We absolutely acknowledge this trend. There is a massive shift to remote working in many industries, including financial services. Some have gone from zero to 100% remote working simply because there was no other choice. And we have had recent communications with large banks who are saying they will continue with remote working.

There are some institutions, often those with very large headquarters and campuses, which are not ready to re-open at full capacity. So, remote working will probably be a long-term trend. That means, from a technology perspective, we have to provide the best communication and collaboration tools and make sure they can be deployed and used in the very best and easiest ways. Our tools are not only empowering employees; they are also enabling solutions for communicating externally with business partners and customers.

This is an area where we are starting to see new behaviors. Some institutions are offering new digital ways of interacting with customers, such as online appointments and video calls. These external calls need to be recorded for compliance and together with our partners, we have some great solutions that elaborate on the regulated recording. This is a massive and growing trend and it's important to support it from a company and management perspective.

But work from home needs to be fine-tuned as it might have an impact on mental health. At Microsoft, for example, we have programs to support our home-working employees in this regard. And we also help our customers to manage this kind of situation in the most efficient way and help them fine tune their own remote working environment.

As Bank employees work remotely for extended periods, the challenge will be to keep them engaged and supported emotionally. Banks have typically trained their employees through traditional classroom locations. Banks will need to build capabilities to help them train their employees virtually.

Q: How do you see the impact Covid-19 has made on customer behavior and how do you think financial services can improve it in the long term?

Spending patterns have changed drastically. Customers are cutting back on travel for example, and increasing their online experiences across shopping, entertainment, and banking. I think financial institutions have a great opportunity to reset their relationships with their customers by offering online frictionless solutions and standardized contactless secured payment solutions.

They can also be proactive and think about what next best action or next best offer they can provide to customers. For example, with Artificial Intelligence, banks can proactively reach out to customers experiencing financial difficulties to offer a specific loan payment deferral or connect SMEs with a government aid initiative. But there is no great AI without great data, so Data Estate will become a major topic for financial institutions to get better insights and deliver more business value to their customers.

Q: From a banking perspective, regulations in many countries allow processes such as customer onboarding to be completed fully digitally now. Do you think the pandemic will also have an impact on regulations in other countries?

Banks are a key engine of the economy and regulators have a duty to ensure they do the right thing and don't introduce or increase risk in the way they operate. I think regulators will always be cautious about making sure banks operate in a compliant way. But they might also allow some flexibility to foster agility.

For example, we see more e-signatures happening and we're seeing a better understanding and partnering with big players in cloud solutions to ensure offers are acceptable to regulators. This must always be done in a very compliant, secured, and trusted way. So it depends on building partnerships with trusted companies, who will do whatever they can to support the norms and standards and work hand-in-hand with regulators to enable banks to be more flexible and agile when delivering new solutions to the market.

Q: How do you see the future of branch banking post-Covid-19?

Some bank branches closed during lockdown and, although most are now open with social distancing in place, this has accelerated the trend towards more interaction through digital channels. From a customer perspective, many want to see more digitalized processes, so they don't need to go to a branch for non-routine transactions, such as a loan application.

I don't think branches will disappear, but they will be redesigned, and you will see many more digital experiences within physical branches. Sometimes, even with no human presence at all. I can foresee a virtual greeter welcoming and directing customers to self-service tools and I can see us living in a world of remote advisory relationship managers. This is, by the way, already in use or piloted in some 'flagship' branches, where you already can have a video conversation with a relationship manager. Potentially, we could even have 3D avatars. It is all about driving effective and engaging digital outcomes.

What is essential to enable all these new scenarios is to become a data-driven organization. That would enable Artificial Intelligence and advanced analytics implementations to better understand and help customers. It's all about smarter banking.     

I am confident that in the next year or so, we'll start to see different value propositions within the branch. People will no longer stand in line waiting to be directed by a physical greeter. You may self-serve directly or be welcomed by a virtual or robotic greeter.  These are exciting times that will make banking much easier and more fun for consumers.

Q: How does responding to Covid-19 together with VeriPark help financial institutions steer a course through the uncertainty and shape their future path?

Microsoft and VeriPark have worked closely together for 19 years to create a specific suite of financial services products. These include, Customer Experience & Relationship Management, loan origination, onboarding, business intelligence and AI.

Our partnership with VeriPark has even expanded over the last six months. We have been working together on collective technology and IP to create a Covid-19 response to bring to market specific solutions and capabilities. These will really help financial institutions to reduce costs, improve customer relevancy and drive satisfaction. Ultimately, we are helping banks to create a truly omni-channel strategy and create outstanding customer experiences.

I also strongly believe that VeriPark's solutions enable customers to self-serve more easily. VeriPark has been ahead of the game with Next Best Action recommendations and now we are making it even more predictive so we can drive additional value and enable banks to be more proactive in serving their customers.

Q: What do you think should be the three key priorities for financial services industry in the post-Covid-19 world?

The New Normal will be different in several ways - from an individual behavior standpoint, an economic standpoint and even from a political perspective. Financial services will be transformed deeply.

Ideally, key priorities for these institutions will be:

• To keep employees safe and engaged. This is essential to support new remote and hybrid ways of working. For me, take caring of your employees should be your number one priority.
• Exploring how new innovative technology, such as Artificial Intelligence, Machine Learning, cognitive services, intelligent automation, blockchain, and even virtual reality, can improve customer experience. This can drive differentiation by being more predictive. It can also help manage risk in an optimized way and protect customers as they do more online transactions with their banks and insurance providers.
• Invest in digitalization and automation, as this will drive costs down while improving customer experience. Any transformation engine needs to be fueled by investment which will be generated by operational efficiency and cost savings, not through additional budgets.
   

Thank you, Patrice.