MoneyLive Report Forecasts a ‘Permacrisis’ in the Next Three Years: Invest in IT Now or Risk Failure
By W.B. King
Citing geopolitical instability and pandemic aftershocks, such as workforce disruption, inflation and rising interest rates, a recent MoneyLive research report finds that financial institutions (FIs) are at a fork in the road: invest in technology to remain competitive or hunker down and limit spending.
“It’s clear that the watchword for business and IT leaders across banking and lending in 2023 is volatility,” the report stated. “Economic and geopolitical stressors, as well as disruptive innovations like generative AI (artificial intelligence), are forcing executives to do some strategic soul searching on how to respond.”
Undertaken in partnership with Smart Communications and Salesforce, the July 2023 MoneyLive report polled 430 senior executives in banking and lending from around the globe. Billed as a resource for the banking world, MoneyLive, headquartered in the London, with an office in Chicago, aims to bring together FI decision makers, while promoting innovative ideas.
The majority of respondents said they foresee a continuing crisis over the next three years categorized by: forced change to business plans (90%), margin pressure (65%), crisis-driven surges inbound customer contact volume (81%) and skills shortages (72%).
If or when a “permacrisis” transpires, respondents said the following five pillars will be of “major importance”: agility to adapt quickly to changing business plans (96%); responsiveness to customers’ individual crisis situations (91%); increased effectiveness of existing staff (83%); customer experience best practice (82%); and lower fixed costs to ensure financial resilience (79%).
While the financial services industry has faced unprecedented challenges in recent years, with an questionable future still ahead, 88% of bankers and lenders believe that helping customers through these uncertain times presents a significant opportunity to rebuild trust. Additionally, 92% said for a bank or lender to put digital and customer experience (CX) investment on hold during a crisis is to plan to fail when the recovery comes.
User Experience Put to the Test
Respondents were queried on skill shortages and self-service automation and personalized, automated outbound communication designed to pre-empt inbound calls to lift the “burden on human agents,” thus protecting the CX. Only a minority of organizations (38%) said the initiative was “perceived as extremely important.” When asked about pre-empting inbound contact with “proactive, personalized and automated outbound communication,” only 34% said it was “extremely important.” The highest response rate (56%, extremely important) was supporting self-service customers requesting a seamless transfer from a digital offering to a human agent without having to repeat information.
“Giving staff the best digital tools to aid both their productivity and adaptability, and target their efforts where they can make the biggest difference, will underpin CX success in an age of skills shortages,” the report offered. “However, only a minority of banks and lenders are applying best practice across the organization.”
When asked how important it was to provide staff with the best digital tools to serve customers and maintain CX quality in the face of skills shortages, 56% responded “extremely important.”
Regarding the issue of offering “hyper-personalized financial management services” over the next three years, only 28% said it was “extremely likely” that AI initiatives would be budgeted, with 52% responded “more likely than not.”
Preparing for Whatever the Future Brings
The new CX benchmark, the report found, is determining how advanced automation will inform customer contact methodologies. Concerning low code/no code development to accelerate the creation of automated processes, 29% said it was “extremely important” with 46% saying it was “of significant importance.” When asked about automation that can be rapidly scaled during “surges in customer contact without increasing fixed costs,” 42% said it was “extremely important” with 48% saying it was “of significant importance.”
“Cloud computing and cloud-based microservices with APIs (application programming interfaces) also judged to be of great importance to success in the era of uncertainty,” the report noted. “But while most say their organization intends to put the majority of systems in the cloud, we found current reality significantly lags ambition.”
When bankers and lenders were questioned about how important cloud-based systems are to reduce IT running costs and improve scalability, data connectivity and processing power, 42% said “extremely important” and 45% said “of significant importance.”
“Twenty-seven percent of bankers say their organization intends the majority of its applications to be in the cloud in two years’ time,” the report continued. “However, only 4% report having already crossed that 50% threshold, suggesting progress is slow even among cloud advocates.”
The noted discrepancy could be based in what the report called a “drop-off in fintech funding and laying off of staff by large IT companies [which has] has opened up an important opportunity for banks and lenders to recruit digital talent.” To this end, 81% of respondents agreed. And when asked if adoption of leading technologies attracts the “brightest digital talent,” 86% said yes. Seventy-three percent said that best-in-class cloud-based operating systems allow for rapid innovation.
“Based on our research, committing to invest during an apparent ‘permacrisis’ and targeting that investment towards digital solutions that deliver operational agility and improve CX will prime banks and lenders for digitally fueled growth, whatever the future may bring,” the report concluded.