Social distancing has already made a huge impact on the banking industry. Customers who used to contact their banks through brick-and-mortar outlets needed to change their habits. At the same time, banks were forced to adjust quickly by moving their businesses online.
During this webinar, our experts talked about how the crisis affects bank customer behavior, how technology helps banks cope with the new situation, and if there’s any opportunity in the forced digitalization.
What follows is an abridged and edited version of the webinar’s transcript.
Olena Gryniuk, SME Banking Club: I’m very glad to be joined today by
- Piotr Filipiak, Business Solutions Consultant at Comarch
- Adam Walendziewski, Global SME and Digital Platform Center Director at ING Bank Śląski
- Marek Chlebicki, Head of Group IT Strategy & Solutions at Raiffeisen Bank International
How is the crisis affecting customer behavior in the financial sector? Which percentage of your customers switched to the digital channels?
[Adam Walendziewski, ING] The customer behavior changed a lot during the last month. But at ING Bank Śląski, we are in quite a good position, judging by the services we offer to our customers, because our digital transformation journey started 10 years ago.
Before the epidemic came, a lot of our customers were digital, and a lot of our processes, products were served nearly 100 percent digitally.
Today, the basic bank management functions like transfers or statements - this is 100 percent digital. But if we take a look, for example, at a new letter of credit, new guarantee, even loans, the number of digital services before the epidemic was really, really high. Around 60 or even 90 percent.
And right now we see that more and more customers are willing to use those capabilities. So they had these capabilities before the epidemic came out, but they didn't use them, because they didn't think that they will need that, or they preferred to use the standard human-to-human channel. And we see right now that customers really appreciate what we offer them, and what they can do from their homes, without going to branches and meeting a real person.
[Marek Chlebicki, Raiffeisen] Obviously, this pandemic situation has, I would say, sped up a lot of developments, a lot of discussions and also, as we used to rely on the traditional channels in the past, now we need to add a kind of digital flavor to them in the form of digital advisory. I think, this is at least my hypothesis, that a lot of new behaviors which are driven by this pandemic situation will actually stay with us long term, maybe forever.
Do you see any difference in the customer behavior in different countries where you have network banks?
[Adam Walendziewski] We operate on 13 markets. But this particular situation, I would say, this is global. This is very much influencing each and every market where we are, and also each and every bank. I think this is also bringing an opportunity to really standardize certain solutions, no matter on which market we face the challenge.
What are the opportunities and areas of potential growth for the banks that you see right now?
[Piotr Filipiak, Comarch] The crisis has already hit branches massively, and the good thing is that customers found out that they don't need to go to a branch anymore because most services are available online. So on the one hand, it's an advantage for banks because branches generate huge costs. But on the other hand, branches were responsible for selling or cross-selling loans and acquiring new customers. But regarding the potential to grow, in my opinion, banks will be forced to look for new income sources. Experts are forecasting lower financial results in 2020. And from the first data from March, it seems that banks had a significant drop, up to 50 percent in the value of new loans. In some cases, finding new business will be crucial for survival. And one of possible answers is e-commerce, because it seems that e-commerce is massively growing through the pandemic. And people are spending their money in e-shops instead of shopping malls. And e-shops have a significant increase in the number of new customers. And the banks still have a space to grow there because they can offer financing to the buyers or propose payment services to sellers.
The question is: how can banks accelerate their cooperation with IT vendors? And where do you see a space for disruptive technologies that will help banks now?
[Piotr Filipiak] Right. Firstly, all of us needed to become digital nearly overnight, and it applied both to banks and to IT vendors. So nowadays it's very important for vendors to maintain projects with banks 100 percent remotely without any presence on site, but keeping the same efficiency.
And regarding the IT technology and disruptive IT technology, sometimes it's faster to deploy a new functionality developed in-house by the bank or just under an existing module from the third party vendor. And this is why an open solution has an advantage. Adding or removing modules from the platform should be as easy as downloading the app from the appstore or installing a new software on the computer. And we shouldn't forget about call centers because they are also under huge pressure. More clients than usual tried to reach the bank on the phone.
Therefore, consultants should use software which helps them to be really efficient, like video chats. And at the same time, banks shouldn't forget about security. Authentication of a new customer in times of pandemic can be the biggest challenge because many banks were using couriers for signing contracts with new clients. And now this process is unavailable due to the Covid situation. And the answer is fully digital onboarding, including your customer. It can be the most anticipated product on the market right now. And in this case, time to market really matters.
What is the average time frame that you can implement some solutions with banks? Could you give some examples?
[Piotr Filipiak] There is no answer to that. No answer because it depends on the project. One project may require customizations or integration, and the other one may not. But we have a recent case study from one of our clients. And it is that within two weeks we have deployed features which help companies get anti-crisis government subsidies, and this is a good example of a fast time to market in times of crisis.
What percentage of your bank's employees is working remotely right now? And how do you think this solution of remote work will remain when the quarantine finishes?
[Adam Walendziewski] Right now, nearly 100 percent of people from our central office are working from their homes, only part of the people responsible for IT infrastructure, for managing IT infrastructure, they basically need to be sometimes in their offices. And around 60 percent of people from branches are working remotely as well.
They've got rotation as well and all the security mechanisms that are ensuring their safety and our customers’ safety. But the majority of our employees are working currently from home. I would say it is challenging right now. Mostly from the perspective of collaboration between people working closely together and on a daily basis.
But more and more people will be trying to work from home or will be pushed to work from home, even due to the cost saving aspect. Let's be honest, this is also some additional point to cover because we as an institution, we are saving costs regarding office space, water, utilities, etc. So I think more and more people, will be working from home. Before the epidemic I read some analyses that it was around 5 percent of people in Poland that are working from home. So I think around 20-50 percent will be constantly working from home these days and we must find the way to be as effective as possible in this new situation.
[Marek Chlebicki] In our organization, a vast majority of employees is also working remotely. And this new situation proved that the remote work is nothing to worry about. I mean, the productivity, the engagement, the collaboration are really good. There are several things which always work best when you can meet with someone physically. But with the tools we have for remote collaboration, I think it's not that much of an issue as this would have been a couple of years ago.
Now when a massive number of people working from home can prove that such work can be equally efficient, then there is no argument not to continue on a much broader scale.
What does the situation look like at Comarch and what are the solutions that Comarch can provide banks with to make their remote work productive?
[Piotr Filipiak] So, first of all, we also needed to switch to Home Office. And since our company is more than 6,000 people strong, and we have offices across the world, it was really tough, but we did it. And an interesting fact is that we have used only our own software to make it happen.
Before Covid, every bank had a VPN for its employees,. But that network wasn't ready to maintain 90 percent of employees working through the VPN at the same time. So the biggest challenge was to provide VPNs for banks and ourselves that would sustain such a number of employees.
And regarding the landscape after Covid, it's possible that offices won't look the same way after it, and probably more people will work from home as it saves time and costs. So from the perspective of an IT vendor, it's crucial to deliver secure tools like VPNs or video chats that support employees and customers and guarantee efficiency of their work.
Are any of the banks focusing on purely digital products? Are banks considering more than the adoption of open banking?
[Adam Walendziewski] There are, of course, banks or parabanks that are focusing only on the digital capabilities. For example Revolut can be considered a bank, because they have a banking license. And I see that there are many banks specifically in Poland, for example, that are focusing on digital right now, not only for retail customers but for semi-mid corps as well.
About open banking: so PSD2 is here, and to be honest, I don't know still how this epidemic can be connected with open banking. But I'm sure that open banking, regardless of this epidemic, will be a thing - maybe not now, maybe not in one year, but in a few years for sure. It needs a good case, basically.
Do you think banks could benefit from partnering with digital challenger banks and fintechs such as Revolut to deliver digital capabilities to customers?
[Marek Chlebicki] The topic of collaboration between banks and fintechs is kind of an evergreen. And again, I would put it even more broadly, because we can speak about fintech, about challenger banks but also about any kind of technology vendors which are there to help us build a value proposition for our clients. So I believe whatever is fitting into the value proposition of ours as a banking group, and in particular network banks, which can be used for the benefit of the clients is very much appreciated wherever it is coming from.
[Adam Walendziewski] So the first thing that we can benefit as a bank from challenger banks or fintech companies, of course, is we can learn from them a lot about how to bring the good UI and UX for our customers.
These smaller companies, fintechs, they are good in specific function delivery like video verification that was mentioned by Piotr. For example, we collaborate with Twisto. So this is a company from the Czech Republic that helps us in e-commerce services. So they basically offer “buy now, pay later”. Kind of a loan, basically.
And both sides can benefit from that. We bring customers to Twisto. And we can benefit from Twisto because this is a specific service dedicated to customers that we as a bank didn't accomodate earlier.
Should IT companies and banks teach customers to use digital channels?
[Piotr Filipiak] I would like to start with open banking, if I may. So open banking actually can be a good case in the Covid times. Because let's imagine that we have a client who has accounts in three banks, and now all of the branches are closed. So thanks to the open banking, the client is able to aggregate all the accounts, but they will aggregate the accounts in the most technologically advanced bank from all of those three. So this bank will win because the client will be logging in to see all of their accounts through this bank. And this bank can be able to upsell something or cross-sell something to this customer. So this can be a very important case during the pandemic. And regarding financial literacy, I think that we should educate people as a financial industry. We should educate customers because the client who is aware of all the risks, like running out of cash, will be more aware of when to look for a loan or other financing products.
[Adam Walendziewski] Yeah. Like I said, we started the digitization journey a long time ago. And right now, after the epidemic came out, we started a new campaign. It is called ING Business More Than You Think. A campaign where we are giving more and more information to our customers regarding ING business capabilities. So we are pushing our customers to discover functions that are there, functions that they can use from ING business channel, and then the other channels that we have in our bank. Basically they can do nearly everything through online banking.
At the beginning of the crisis, in many countries ATMs were cashed out. Is the replacement of ATMs with digital currency possible?
[Marek Chlebicki] We need to consider, like, what was the motivation of this behavior? And I think having that cash in hand is a kind of a synonym of security, that no matter what, I'm secure because I have my savings, let's say, somehow with me. Obviously, the banking sector needs to provide the security. I don't know if we can all fully respond to that with cashless payments, but nevertheless, I think it would be quite interesting to understand what was behind it. Was that the sense of insecurity with the banking sector or were there some other drivers behind?
[Adam Walendziewski] Most of the ATMs weren’t running out of the money. So maybe on the most crowded places, this kind of stuff. And hey, maybe cash is not so good when we have this epidemic situation, when we need to exchange, when we need to limit touching objects…So maybe let's start to use cards, maybe let’s start to use touchless payments. So we as a bank, in Poland, promote cashless payments, card payments, we’ve promoted digital money exchange for many years. And I think this epidemic situation helped the digitization processes.
Maybe one short summary from each of you to close the meeting. So, what is the prediction? Is everything moving online now?
[Adam Walendziewski] I think that a few months ago, a few years ago I wouldn’t say someone looking for new car is going to buy the car from an e-shop of a specific car company. But right now this is possible. So I think more and more features, more and more products will go online. This is a matter of tools, this is a matter of customer behavior and security of course. But yeah, this is the future.
[Marek Chlebicki] And the question is: will be the old normal or the new normal. And my bet is that this will be the new normal, which we need to somehow a bit, you know, re-imagine in terms of the possibilities and what we will do.
So we tried to build a hypothesis on what this new normal will be in terms of client behavior, in terms of new requirements towards banking. And how this translates into specific solutions and value which will be delivering to our clients. Like I said, with new digital capabilities being built, in the end there has to be a value for the customer. So it's not only about adding new channels or features, but actually to make a good value proposition out of it, something which will actually be useful for the clients.
We first need to understand what the clients will need from us and how we can respond. But I think we will surprise ourselves with a lot of digital solutions.
[Piotr Filipiak] The landscape after the crisis will be definitely different for banks. I think that they will be less physical and more digital for sure, and many branches after the crisis will stay closed, only the strategic ones will survive. Since the epidemic will last longer than it was previously expected, customers will have more time to completely change their habits and maybe to switch to digital channels in a 100 percent. And that's why the user experience of banking applications will play a significant role on the market. And mobile or desktop channels will be the first touchpoints with banks.