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The COVID-19 pandemic is considered as the most serious challenge to the commercial banking industry since the global financial crisis of 2008. The commercial banking industry is working to manage its revenues, customer expectations, and growing pressure on consumers while trying to find the right strategies and steps to recalibrate for the future. This is crucial because, with the right priorities and actions, commercial banks could moderate the economic damage that is being caused by the coronavirus crisis. They are at the heart of the economy and their stability is crucial to keep the system up and running. Here are a few ways in which we have seen the impact of Coronavirus on commercial banking industry and how they can adapt to ensure business continuity and long-term positioning.
Management of Internal operations.
Banks have already taken a series of actions in reaction to the spread of COVID-19 like establishing a central task force, suspending large-scale gatherings, segregating teams, making arrangements for remote working, and refreshing external-vendor-interaction policies. This includes developing, documenting, and communicating a plan to ensure productivity and business continuity across all departments. They also have to maintain their supervisory and compliance functions that were never designed for remote work in the first place.
Digital workplace planning and cloud adoption can bring in more efficiency, cost-effectiveness, and numerous other advantages to financial institutions like commercial banks. It also gives banks the ability to respond quickly to the changing market as they can scale up and down according to their needs. Banks can also use intelligent automation tools to automate routine work. It enables them to handle the recurring works easily in a short period of time. These technologies are transforming the banking and finance industry with more flexible and agile business models for growing needs in this digital world.
Credit impact and Customer relationship.
Since hundreds of thousands of consumers are under lockdown or quarantine, they might lose their job or source of income and this affects their ability to pay for credit, mortgages, and business loans. Some business sectors like tourism and airlines are hit hard and they need several months to make up for their lost revenues. However, banks can step in and help their customers in this difficult time to potentially improve their customer relationships.
They can use their customer segmentation data to identify which customers need help to overcome this crisis and which customer needs better outreach. Based on these data, the banks can waive fees, initiate credit forbearance programs, and give access to fixed savings accounts to help the customers. They can also digitize their whole process to meet the customer demand for refinancing.
Decline in profits
The main source of revenue for commercial banks is through the lending of loans. Since companies and businesses do not take loans at present, the revenue of commercial banks has decreased significantly. This would be the first decline in the banking market industry’s profitability since the global financial crisis of 2008.
To combat this, banks can cut costs and minimize spending on activities that don’t build core capabilities. Setting up a control tower process is helpful in this case to evaluate which costs can be trimmed. Apart from freezing non-essential employees and saving infrastructure costs through remote working, commercial banks can save a huge amount of money in winding down unused software licenses. They can also serve customer call volume more cost-effectively by employing Artificial Intelligence chatbots and other digital processes.
Fraud risk and cybersecurity
The impact of coronavirus in the commercial banking industry is large, but we can ignore the fact that it has accelerated the digitalization and usage of electronic payment methods, internet banking, and mobile banking. The banks may also hire temporary support staff or contract with other agencies to support the high volume of service calls and they would need to ensure they do not violate data privacy, customer data-sharing agreements, etc. But as employees and consumers adapt to this new digital environment, they also bring in a new set of issues like cyberattacks and fraud.
This is why it is important to protect the commercial banking industry’s entire value chain from the inside out. Global cybersecurity leaders like Intone Networks collaborate with banks to deliver a focused, risk-based security strategy that delivers the best defense system that helps them face this digital future.
Commercial banks have a pivotal role to play in this economic crisis. They need to have an effective resiliency plan that can help them recover from the impact of and handle massive social disruption. They need to do these while ensuring business continuity in the digital age. Innovators like Intone can help the commercial banking industry enable sharing, management, communication, collaboration, governance, and controls to achieve higher overall business performance with their digital workplace planning, Robotic Process Automation (RPA), and cybersecurity services.