Banks are being squeezed and challenged like never before and the ongoing impact of the pandemic will add further complexity, according to the latest Bishopsgate Financial Change Perspective 2021 report, launched today.
Based on the views of industry leaders at the forefront of change, including COOs, CIOs, and Heads of Change from over 25 prominent financial institutions in the UK, the report found that much of 2021 will focus on dealing with the fallout of the COVID-19 pandemic.
With the prospect of a double recession looming – the Change Perspective 2021 report reveals the most pressing issues facing banking and the broader financial services sector.
The global pandemic has been a wake-up call for the banking industry, exposing gaps in digital service provision and cost structures. As one participant put it: “Nothing prepared our sector for the unprecedented events of 2020.”
COVID-19 proved a powerful catalyst for change. Banking’s digital transformation accelerated beyond everyone’s imaginations, as radical new ways of working remotely and serving customers facing dire circumstances were launched at pace. Mobile app transaction processing rocketed. Cash and cheque usage dropped dramatically, replaced by high volumes of electronic and card payments. Business lending, to keep the economy afloat, was off the scale.
The report highlights key areas that need a radical shake up in 2021.
Technology and innovation
Due to 2020’s unprecedented disruption wrought by COVID-19, many digital transformation projects in banking were fast-tracked to counter sudden operational restrictions and meet urgent client needs.
As one global bank’s MD put it: “The toothpaste is out of the tube on digital now.”
The report also points out that fraud, cybercrime and money laundering have risen and will require increasing resources to counter.
Fallout from COVID and Brexit
The pandemic has tested operational resilience across all industries, with thousands of companies taking out emergency government support loans, rapidly administered by banks. The Change Perspective 2021 report notes that, for this reason, debt recovery will be a significant activity for banks this year, putting specialist debt recovery professionals in high demand.
Meanwhile, the Brexit trade deal, agreed in late December, has left the UK financial services sector without its pre-Brexit level of access to EU markets. Our panel of experts flagged that the industry was well prepared for Brexit, but it will continue to influence the industry, particularly regarding the knock-on effects to clients and the reduction of banking tech talent available in the UK.
Remote working and employee wellbeing
Participants in the report spoke passionately about their people and how resilience must remain front of mind in 2021. The pandemic led to mass adoption of remote working overnight, and today financial institutions are planning to reduce office space and allow more extensive remote and home working.
A swathe of major financial firms – Lloyds Bank, HSBC and Standard Chartered – are now considering making the switch to working from home permanent for some staff and adopting a hybrid model for others. The report explores what impact this will have on data security and mental health, employee creativity and the work-life balance.
Other issues addressed in the report include the worrying increased threat of cybercrimes and a host of incoming regulatory changes from LIBOR phase-out to the new EU Disclosure Regulation (ESG) effective from 10 March this year.
The industry experts agreed that climate change would rise up the board-level agenda in 2021. The UN Climate Change Conference is taking place in Glasgow in November, under the UK’s presidency. Soon regulators will be introducing mandatory climate impact reporting for financial firms to get to grips with.
Commenting on the report, Mike Hampson, Founder and CEO of Bishopsgate Financial says: “The global pandemic has been a wake-up call for the banking industry. But we’ve also learnt that high-speed change is possible and seen the power of operating with a loyal, resilient workforce.”
“The Change Perspective 2021 presents practical suggestions on how to navigate the rocky road ahead. As we navigate potentially the worst recession in 300 years, change is essential for survival and building a resilient future.
Hampson concludes: “Our goal with this report is to help our clients and the industry ride out the challenges of the coming year and beyond. Banking excelled at crisis management in 2020. Now it’s all about building on the changes made, managing costs and nurturing critical skills in the sector.”