What the financial sector has learnt from the COVID-19 crisis, and how it’ll change the industry

Will we ever forget the spring of 2020? I don’t think so. The obvious reason being the COVID-19 crisis and the impact it has had on all our lives. Personally, however, I’ll remember this period for so much more than the virus.

I’ll remember it for all the businesses that have thought on their feet, made the right judgement calls and managed to navigate through uncertainty by almost instantly adapting their business to the new normal. I’ll remember it for people’s ability to do things they never thought possible, and I’ll remember it for how it seems to be part of our human nature to move closer together when it really matters – figuratively speaking of course.

Since early March when the Danish Prime Minister decided to put the country into lockdown, I’ve spent countless of hours talking to executives from the financial sector. During our conversations, we’ve tried to grasp the impact of the COVID-19 crisis. How has it affected the businesses, and how will it affect businesses in the financial sector going forward?

Rationalising my conversations with the executives and how the financial sector has responded to COVID-19, I’ve noticed three characteristics:

1. The financial sector has been good at improvising on the fly, but the lack of proper resilience planning has been surprising
   
   One of the most remarkable things that I’ve realised is how well businesses in the financial sector have managed to navigate through the crisis without a proper response plan in place.
   
   The ambiguity of how fast the virus spreads, how harmful the virus is and the uncertainty of how long the crisis will be have left many industries, not only the financial sector, unsure of what kind of response to apply. It seems, however, that especially in the financial sector, a pandemic hasn’t been part of the resilience planning. Similar findings can be found across the Atlantic.
   
   According to a recent survey from Deloitte examining the US financial services industry, 59 percent of the respondents indicated that their resilience planning did not include pandemic-specific actions. Only 16 percent felt that their response plans worked well. To me, this was rather surprising and indicates a need for businesses to be more holistic and extreme in their resilience planning and testing going forward.
   
   Luckily, it seems like we’ve been more frightened than hurt this time. Businesses in the financial sector have impressively managed to navigate through the crisis rather smoothly by putting out fires as they’ve emerged and using institutional memory from past crises, gut feeling and plain hard work to steer clear of obstacles caused by the COVID-19 crisis.
   
   
2. The financial sector has been more agile than what it believed possible itself
   
   An old motivational saying goes: You never really know yourself until you see yourself under pressure. The crisis has shown us that this saying seems to be true for most businesses in the financial sector. Being under pressure and being forced to act seem to have eradicated the financial sector’s inability to transform and reinvent itself.
   
   As if by magic, financial sector businesses have switched from face-to-face meetings to video meetings without compromising client satisfaction or expectations. In just a few days, a bank managed to build a new trading floor 1:1 of their existing layout at another geographical location to avoid trading disturbances. Some have managed to automate and digitalise processes that before the crisis were perceived to need human intervention. Others have been forced to be more flexible in terms of having the workforce on-site or not, thus paving the way for a more flexible future workforce.
   
   After all, business as usual in the financial sector has radically changed during the COVID-19 crisis. I think that it has helped a lot of businesses realise that you can do way more than what you think you’re capable of. Hopefully, this realisation will fuel an entrepreneurial and transformative renaissance in the financial sector.
   
   
3. The financial sector has taken a quantum leap on its digital transformation journey
   
   The financial sector has experienced a minor digital revolution during the COVID-19 crisis. Previous concerns about how customers would perceive digital counselling instead of face-to-face interaction were erased overnight; not because of the concerns disappearing, but because it was needed in order to survive. Seeing that you’ve been able to run your business digitally has given some food for thought to an industry that has been under an increasing cost pressure for a long time.
   
   From my perspective, there’s no doubt that the COVID-19 crisis will speed up the digital transformation of the financial sector. Results from the aforementioned Deloitte survey support this. Most of the respondents identified digitalisation of client interactions as their top priority in the aftermath of COVID-19. Investing in technology updates was identified as the second most important priority.
   
   The COVID-19 crisis has underlined how crucial the digital aspects of businesses have become and will be in the future. Businesses that already have digital solutions, processes and tools in place have managed the crisis more effortless than businesses yet to embark on their digital transformation journey. For these businesses, there is no doubt that the COVID-19 crisis has made it clear how important it is to accelerate their transformation journey if they want to survive in the long run.

What does the future hold?
Looking ahead, the million-dollar question is what kind of new normal the financial sector is looking into. Obviously that’s hard to predict, but based on the above observations, it’ll most likely be more digital and require businesses in the financial sector to be more agile as well as more extreme and holistic in their future resilience plans.

Besides that, it’ll be interesting to follow what kind of new normal the financial sector is waking up to. How will the future white-collar workplace look like, for instance? Will we see a shift towards a more flexible workforce? Will that affect the number and type of tasks being insourced and outsourced? How heavily will companies invest in digital technologies, and how will all this eventually affect future control set-ups? Finally, how will all of this affect the customer experience and the array of products and services available?

The questions that have arisen from the COVID-19 crisis are plenty. For now, the answers are few. But one thing we’ve already learned is that the financial sector has shown to be resistant to external disruption, and we’ll most likely see an even stronger financial sector on the other side of COVID-19.