In the early days of the coronavirus shutdown, one of my favorite neighborhood restaurants proudly displayed signs indicating that they were open for takeout and delivery service. Defying hard times, they were determined to serve their customers and keep their business going. Since then, they’ve recovered and reopened with a new outdoor seating area, improved online ordering and contactless payment. Business is steady, and the owner is optimistic. They used a moment of crisis to respond, recover and set the stage to thrive.
Many financial institutions have followed a similar path in their initial responses to the crisis. Now they’re thinking about how technology can help them accelerate innovation, improve the customer experience and grow revenue and market share. David Linthicum, Deloitte’s chief cloud strategy officer, stated that COVID-19 could be a catalyst that drives enterprises onto a better-planned IT path — and likely at a reduced cost.
Before the crisis, many financial institutions were considering, or in some cases starting, multi-year technology initiatives to modernize or replace legacy systems that were cost prohibitive, lethargic and aged. Mid-market regional banks in particular often have unused data center capacity and core banking systems that are not configured in an agile manner for rapid adjustments to features and functionality needed to address market forces. Contact center agents are typically always on site, with limited thinking into disaster recovery or continuity plans.
Tech Upgrades Go Far Beyond Efficiency
When the COVID-19 shutdown arrived, banks and credit unions recognized an opportunity to accelerate meaningful portions of the planned upgrades to set the foundation to thrive. In a contact center, for example, a bank with 500 on-site agents could transition to a cloud-based model in a matter of days. In addition, teams in finance, human resources and other corporate functions could shift to virtual desktops that are secure and compliant to provide business continuity.
We expect that financial institutions, on average, should expect to lower operating expenses by about 20% on average from such steps. Even more important for banks and credit unions, however, is using the cloud to rethink some of their business models and rapidly innovate to bring new products and services to the market faster.
With greater economic uncertainty it might not seem the appropriate time for financial institutions to think about modernization and business growth, but for some it is exactly what’s on their mind. Now that they have stabilized their businesses, these institutions are starting to think about how they can serve customers and emerge even stronger.
In fact, many mid-size financial institutions have embraced technology’s potential as a revenue driver instead of simply a way to reduce costs and improve operating efficiency. Technology upgrades — particularly cloud-based applications — can unlock new revenue sources that enable banks and credit unions to leap-frog their competitors. That’s the lesson many high-performing organizations are drawing from the crisis.
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6 Practical Cloud Applications for Banks and Credit Unions
Deloitte Consulting identified six promising areas where banks can use cloud-enabled approaches to build new capabilities that can potentially drive revenue growth across the business.
1. Marketing activities become much more focused and productive. Banks and credit unions can target high-propensity-to-buy customers using cloud-based analytics that give deep insights into customer preferences.
2. Transform customer contact centers. The use of artificial intelligence, automated interactions and connected data, all based on a cloud platform, will provide customers with a highly personalized and efficient experience.
3. Identify and launch new products and alliance ecosystems. One bank brought together a hyper-scale cloud provider and fintechs to give financial planners more data to be more deliberate in the questions they ask their clients.
4. Develop new channels to open new routes to revenue. An example being increased speed and agility to meet customer needs, as well as to meet bank regulatory requirements, using predictive analytics based on account behavior to recommend next-best offers and next-best actions
5. Enhanced risk management. Banks and credit unions can use cloud-based data to generate insights into potential fraud and correlate data from multiple and disparate sources to limit risk, a vital enhancement during a stressed economy.
6. Further enable team members to work effectively from remote locations. This application has been apparent during the pandemic. But with more time now to enhance the arrangements, financial institutions can look to cloud-based systems to allow the workforce to stay connected and productive in a more efficient and secure network.
A Cost-Neutral Approach to Modernization
Some banks and credit unions may choose to achieve these transformations in a cost-neutral manner, which can be attractive when expenses are under pressure. In this approach, financial institutions can modernize their infrastructure now and realize the cost savings over a period of time by having their vendor fund the initial stage — or multiple phases — of the transformation’s cost. The institution can gain the benefits of increased productivity, easier collaboration between teams and greater security and stability in its technology.
Each financial institution is at a different stage in the process of responding to the new environment brought on by COVID-19. But having responded to the initial challenges, they can begin to look at ways to reduce costs while developing new capabilities to thrive in the future.