Tech-based decision-making: The Covid-19 catalyst
Our reliance on technology, both personally and professionally, was already at an all-time high pre-pandemic. However, when Covid-19 hit, the demand for digitisation surged even more. The global crisis that has resulted in social-distancing, travel bans and isolation becoming the norm, has pushed many financial institutions to adapt at a much faster rate than ever before.
Now, the question remains on whether Covid-19 has changed business models for good. As our series on Digitising Private Markets comes to a close, we focus on how the decision-making process of financial firms has evolved over the course of 2020.
Obstructing digital adaptation
Over the years, the relationship between technology and financial services has become increasingly intertwined. The potential benefits that technology and digitisation can bring to the economic landscape have accelerated significantly in the last 20 years, resulting in the birth of new, digital-first financial institutions that place tech at the core of their business model. Additionally, the majority of traditional firms have adopted technology to strengthen their own client offering and have become ‘digital adopters’, combining digital and in-person service delivery to cater to all types of customer.
Nonetheless, the potential that technology has to deliver greater access to financial services is only partially fulfilled. Too often, long-winded procurement processes and slow-moving, complex internal chains of command often prevent financial firms from unlocking digital tools’ full capacity. A Deloitte survey revealed that while collaboration with fintechs is increasing, financial firms’ organisational processes remain among the most common internal hurdles that prevent true digital innovation.
With such cumbersome processes in place, it is interesting to note that the events of 2020 forced many businesses to move out of their comfort zone and adapt at a pace which they would have previously said was impossible to achieve.
The Covid-19 catalyst
When the full extent of the Covid-19 pandemic became apparent in early 2020, financial services that relied on face-to-face meetings and more traditional client engagement were hugely disrupted. Financial institutions had a clear decision to make in respect of technology adoption; act fast or risk being cut off from clients.
Almost overnight, firms had to abandon slow-moving and complex digitisation approval processes. Within days, organisations were operating remotely and signing off on the use of video conferencing software, e-signature tools and other platforms. The pandemic pushed them into a corner when it came to digital adoption, and they needed to respond immediately.
David Rasson, European Innovation Lead for ING, said that Covid quickly highlighted any problems they had with their operational processes but also demonstrated the speed with which they were able “to respond to change and implement digital solutions when traditional barriers are removed”. And they weren’t alone. The vast majority of firms surveyed for Delio’s report revealed that Covid-19 had pushed forward their adoption of technology (86%) and accelerated their decision-making on technology projects (71%).
As such, it is fair to say that 2020 has instigated the most rapid change that the world of finance has ever experienced. Not only have financial firms experienced the need for digitisation first-hand, but they have also shown that decisions on digital tools can be made and implemented in a much shorter time frame.
Will new digital-first business models emerge?
The question we now have to ask ourselves is whether the learnings from Covid-19 will set a new normal? Will this shift to more rapid adoption and implementation of digital tools be maintained? Will this mean a re-evaluation of existing business models?
One thing is sure; the pandemic has changed the way financial firms engage with clients. Cancelled in-person meetings and networking events highlighted that financial firms could no longer solely rely on traditional client engagement strategies. But, can a digital-first approach replace their existing relationship management strategy? We found that the answer was no, not entirely. While some companies are already moving towards a business model that incorporates greater digital tools, others prefer a human-technology hybrid model where technology and human-led activity work together hand-in-hand. When it comes to adopting true digital-first business models, opinions remain polarised. Technology is likely to steer the way in which financial firms engage with their clients; however, truly digital-only client services are perhaps a step too far for all but the most modern of institutions.
There is little doubt that the events of 2020 have changed how the financial world will operate in the years to come. Firms’ reliance on digital tools to communicate, share information and engage their clients has been thrust to the front of their business model. While the need for in-person interaction between client and adviser will remain hugely important, particularly for wealthy customers, technology is no longer seen as a poor substitute.
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