The Taiwan Banker

As the pandemic eases, the world is gradually reopening. The United Kingdom took the lead in lifting all pandemic prevention regulations, and various US states have also lifted indoor mask orders. Since mid-May, masks are no longer required in EU countries while traveling by air. European nations such as Greece, Switzerland, Bulgaria, Sweden, Croatia, Lithuania, and the Czech Republic also reopened their gates to tourists this month. Dubai International Airport, the world's busiest airport, saw 12 million passengers in the first three months of this year, twice as many as last year – signifying a recovery in air travel. Even as Europe and the US lift all restrictions, the habits established during the lockdown period have persisted, particularly in finance. The functions of bank branches have undergone major changes in the meantime, and digitalization and digital reservation systems are here to stay. The breadth of digitalization has been significantly expanded, bringing online customers more and more transparent choices in financial services. The global economy is slowly restarting. The International Monetary Fund (IMF) estimates that growth will drop from 6.1% in 2021 to 3.6% to 2022 and 2023, but the fintech market has not stopped growing. The Research and Markets research firm estimates that the market will expand to $31.5 billion by 2026. The pandemic has changed the industry, and digital finance has surged following the disruptions. Vodafone Business’s financial service trends report published in May indicates that financial services will embrace technology and digital transformation, digital channels will continue to gain strength, and customers will increase their requirements for financial products and services and personalization. The standards of digitalization have also been raised, including requirements for digitalization of the working environment, as well as overall support by financial institutions for remote work, which will be a key consideration for the future of work. Chatbots take on increasing responsibility Since the pandemic began, many financial services have moved online, transforming into online digital experience journeys. Friendly, efficient tellers are starting to be replaced by AI-powered machines, including chatbots, virtual assistants, and more. However, consumers still require high-quality and personalized services. Therefore, financial institutions must continue to learn about their behaviors and preferences and build databases to fulfill each of their needs. Free Press reported that the focus of digital transformation is to integrate human interaction into the digital experience, observe customer behavior at each service touchpoint, and give differentiated responses. The Financial Brand collected several statistics on Bank of America in 2021. The number of effective digital users reached 2 million, an increase of 15% over 2020; chatbots served 24 million users in the fourth quarter, and completed $123 million in transactions, a record high; 86% of deposits were made through digital channels or ATMs; 16 million customers used Zelle (a transaction app developed by banks) to transfer money; 70% of households used digital platforms to receive their financial services; 49% of sales were completed digitally, an annual increase of 46%; the number of digital appointments over the year reached 764,000, an annual increase of 20%; and more than 6 million customers set financial goals and built life plans using the mobile app. Since the onset of the pandemic, the pace of digitalization has not slowed down. According to a survey released by the US credit rating agency FICO in May, 56% of banks and 69% of credit unions are still undergoing digital transformation. The substance of the transformation includes introduction of new technologies, construction of cloud platforms, big data and analysis tools, app improvement, and reengineering of processes, or direct cooperation with fintech companies to complete these tasks. Bank of America’s chatbot, for instance, is named Erica. Its increasingly extensive functions and transaction processing capabilities have increased the scope of services available. The number of transactions in 2021 was four times that in 2020. Erica has also gradually honed its ability to respond in more natural, human-like conversations to help customers complete their to-do lists. Personalized services, not just generic banks This growth in digital services has actually increased customer loyalty. According to research by PYMNTS, mobile app users log into their accounts more often than web users. 47% of app customers make transactions at least once a week, and 12% every day. They make slightly more transactions than web users, and both user types are stickier than customers who go to branches. These are the kind of customers whom financial institutions need to manage carefully, because they also prioritize financial services and products at their banks. A survey by FICO this year showed that the proportion of Generation Z, Millennials and Generation X who use digital banks as their main correspondent bank doubled from 2020 to 12%. In particular, only a quarter of Gen Z has contact with major banks. What consumers want most from their financial institutions right now are a personalized experience and planning for the future, such as recommendations on savings and investment. Many major banks are developing services to compete with fintechs, including ATM cards with overdraft limits of less than $200, apps to control savings and investment ratios to create more efficient investment portfolios, buy-now-pay-later services, financial services in cooperation with specific merchants, and open banking, linking customers’ accounts with other apps. Higher standards for digitalization A survey by Vodafone Business in the UK found that financial industry employees expect a more digitized workplace in the future. They will demand a more flexible workplace, higher degree of freedom and autonomy, and ability to adjust working hours. The corporate side has also found that an ability to provide the latest technology to support remote work can help retain employees. A PwC survey on remote work found that before the pandemic, very few in the financial industry worked from home; now, a whopping 69% of US financial institutions expect at least three-eighths of their workforce to work at home at least one day a week. 61% of treasurers also plan to convert certain positions into permanent remote work only. The pandemic has caused financial institutions to realize that working from home has improved work efficiency. 70% of institutions believe that the work-from-home model has worked very well; meanwhile, it has also produced benefits for employees. Most employees hope to continue working from home at least one day a week even after the pandemic ends, and this is also the source of increased software and hardware requirements. To create the working environment of the future, financial institutions will need to upgrade their equipment and systems. Online services have almost completely replaced brick-and-mortar branches The Digital-First platform surveyed Americans during the pandemic and found that 86% of consumers are very satisfied with their current banks. However, nearly 30% are constantly paying attention to new financial services. Providers including neobanks and fintech companies are looking to improve customers’ financial well-being through better services. More and more consumers are using mobile apps to pay, manage and strengthen their finances. Digital-First also found that following the pandemic, mobile phones have almost completely replaced physical bank branches. However, unless the digital transformation of financial institutions is rapid, customers will simply switch banks in order to find one that can provide fast, flexible, and convenient services. After the pandemic, digitalization of financial institutions will continue. People have become accustomed to digital financial services. Apps will also push major banks to keep adding new functions. In addition to financial services, the transformation of the US financial industry also includes digital reengineering and organization process management. After previous upgrade plans were quickly implemented during the pandemic, customers have also kept pace with digitalization and adapted to the new service model. Now, walking into a bank branch in the US, it is not like before, with tellers at every counter, and a lobby full of customers waiting in line. Only one or two counters are open anymore, helping customers handle services that cannot be completed online. An appointment-based model is used for other loan and wealth management issues. Most business has been moved online and to telephone customer service, making remote services and face-to-face contact more efficient. This service model was implemented during the pandemic, yet even since it has subsided, there is no turning back. In the future, further fintech development will make true digitalization a must-have for financial institutions. The author of this article is a special researcher at TABF.