Coronavirus: How will it impact the financial sector?

The bank branch may be the first COVID-19 casualty!

Customer experience is now reliant on digital

In recent years, traditional banks have been in a frantic race with pure players (FinTechs, neobanks, challenger banks, and Big Techs) to attain digital agility. As customer centricity and personalization became overarching themes for all FS players, the digital channel came to define customer experience (CX). And, now, under virus-related travel restrictions and home confinement, digital has become a consumer lifeline.

Financial sector implications are significant because traditional players were not digital trendsetters. In fact, pre-pandemic incumbents were playing digital catch-up through neobanks, while the other camp (FinTechs, challenger-banks) were thriving within their digital-native element.

Previously, traditional banks leveraged their critical brick and mortar asset – local branches – to offer valuable in-person customer connection. Now, however, widespread confinement and lockdowns have upended that advantage. And while telephone support may be an anemic replacement for in-person facetime, even call centers are taking a hit these days.

Timing is everything, and because new-age players initially conceived mobile-first CX, they are reaping competitive advantages during this challenging and ever-changing period. And when it comes to the three most active sectors during the COVID-19 period (payments, account consultation, and stock purchases), pure players are positioning themselves as nimble, above-and-beyond partners, standing by their clients’ side during a crisis.

As a result, the gap between new players and traditional banks may widen – especially if the incumbent response is sluggish based on a reputation for generally slow decision-making processes.

From omnichannel to single-channel digital

Today’s well-positioned players are those that have massively and natively invested efforts into the digital channel to enhance customer experience while prioritizing technology, service variety, scalability, and responsiveness. And because they created their solutions in the cloud, new players can quickly meet technological challenges spurred by the increased demand for their services, and they can develop offers and responses to meet customer expectations. Their open and scalable platforms allow quick connection with the APIs of startups to enable integration into their service offerings.

Conversely, traditional players rely on cloud-lite or barely platformed models. In this context, launching a new product and connecting it to core banking requires substantial IT development and human mobilization, which is highly sought after at the moment, constituting an additional obstacle in terms of reactivity.

Within this single-channel digital paradigm, a clear competitive advantage exists for players with a proven platformed approach.

Confidence remains the outstanding point, will it change sides?

During a crisis, there is often a tendency to fall back to traditional, familiar processes deemed to be safer. But in the financial sector, things are not that simple. Opposing forces weigh on incumbent banks. They have a solid, deeply-rooted financial base. But on the other hand, they have stakes in many countries and in various asset classes that can affect the perception of their long-term financial stability. It will, therefore, be interesting to observe what users consider most (financial strength or geographic exposure and asset classes) when renewing their trust in established firms.

As for the new players, their existence is largely dependent on cash injection from investors. Therefore, it remains to be seen if they have cash on hand to ride out the crisis or whether private and public investors will continue to play a supportive angel role.

As the scale of today’s health, economic, and social crisis remains unknown, fate is reshuffling the cards in the high-wager poker match between FS incumbents and pure new-age players. Each has strengths (customer experience and digital-channel maturity for pure players, and a solid financial base for traditional players) and challenges linked to their DNA.

Long-term resilience rests more on organizational intelligence – and the strategic ability of executives to pivot – than on a firm’s structure. So, we are bound to have champions in heavyweight classifications as well as in lightweight, niche categories.

Elias Ghanem

Expert in FinTech, Insurtech, Payments

I am the Global Head of Capgemini’s Financial Services Market Intelligence Group. I am responsible for Capgemini’s global portfolio of financial services thought leadership initiatives, with a focus on an outside-in perspective, including the renowned yearly World Reports series and Top Trends books in Financial Services. I oversee a team of strategy consultants and sector analysts who deliver a wide range of strategic research to help Capgemini’s financial services clients across the globe to address complex related to the future of Banking and Insurance.
I was previously the Chief New Technologies Officer (CnTO) and FINTECH Lead for Continental Europe at Capgemini FS, with the mission to closely work with the Financial Services Institutions on their major challenges of digital transformation. My focus has been on engaging with FinTechs and InsurTechs scaleups to actively and efficiently embed them with Capgemini Financial Services clients. For that purpose I launched the Capgemini ScaleUp Qualification program, an end-to-end methodology to evaluate scaleups maturity to effectively collaborate with corporate. By end of 2019 more than 70 ScaleUps around the globe were already qualified though this unique-in-its kind program.
I am a Payments expert, with 20+ years of industry experience at Visa and PayPal with roles spanning from APAC Head of Visa Consulting, up to PayPal regional MD in South East Asia & India and Middle East. Since 2013, I am a serial Fintech entrepreneur, launching Telr (www.telr.com) in Singapore and Dubai, an online Payment Gateway, which has won the “2014 Start-up of the Year” award in MENA. I advise several high-growth and disruptive payment startups in Washington, Singapore, Barcelona, Beirut and Dubai and sat at the Board or Chairmanship some of them. I am a certified “Scaling Up” coach; an inspiring thought leader, and enthusiast speaker on the future of payments in Emerging Markets.
Elias has lived in US, LATAM, APAC, Middle East and Europe and is fluent in English, French, Spanish, Portuguese and Arabic.