What opportunities will Covid-19 create in the financial services market?
Posting date: 18 June 2020
As businesses ease back into operation and we begin to understand what the ‘new normal’ might look like for our professional and personal lives, we’re starting to see a clearer picture of the impact of Covid-19 on industries across the world. And while the myriad challenges and negative repercussions have been well documented, there are glimmers of hope and areas of real opportunity being presented by the pandemic, particularly within the financial services and professional services industries. The global lockdown and corresponding home working conditions have shown many in financial and professional services that more is possible, particularly when technology is utilised. Here are some of the opportunities that Covid-19 is creating in the financial services market.
Technology takes centre stage
Ireland’s financial services industry has an opportunity to take a lead when it comes to technological innovation and adaptation. The sudden nature of Covid-19's impact left some firms in crisis, exposing their reluctance to adopt digital processes through their inability to operate remotely. The switch to remote working and mass closure of branches and contact centres has highlighted the flaws in holding on to paper-based processes – and indeed those that must be undertaken in one central hub – with many firms scrambling to implement new technologies, not to mention training staff on them.
While the transition from physical to digital was not always smooth for some organisations in Ireland, as with other markets, this presents a clear opportunity for the market to become digital by design. According to a Deloitte survey of the financial services industry, technological investment is one of the top three areas for improvement in the coming months. This will likely see more spent on cloud technology, an evolution of data centres and new tools introduced to improve customer interactions.
Similarly, 11:FS predicts that digital partnerships will accelerate as a result of Covid-19, with firms looking to cut operational costs by turning to partners who can provide non-core services efficiently and affordably. Aite Group echoes this sentiment, suggesting that financial services firms have increased their reliance on remote-based activities to help fill the void of being away from the office. Data centres, communications providers, data providers and outsourced trading desks all stand to benefit at a time when many organisations are looking to fill business gaps.
Digital transactions have boomed during lockdown, with the online payments and e-commerce industries largely seeing positive results from the pandemic, feeding into their strategic planning for the future. With an increased share of digital transactions in the payment mix, financial institutions that specialise in this space may see increased profit. Contactless payment devices, digital wallets and online payments have been essential for many over the past few months, suggesting we may be one step closer to becoming a cashless society.
Re-thinking client interactions
Digital communications have been the only option for most people within financial and professional services during the lockdown period, and we can expect to see this continue even when we return to the office.
Within wealth management, we will likely see more firms take advantage of modern communication technologies as well as client management and reporting systems. Pressure on the wealth management market has intensified due to the economic impacts of Covid-19, but financial advisors, investors and firms that embrace digital management and communication tools will likely fare better in keeping their clients engaged than those who have lagged behind in digital adoption. Reliance on social platforms and video calls may continue long after we return to work in earnest, and we can expect to see more robust client portals and goals-based wealth management processes as this market continues to evolve.
Shoring up contingency plans
When Covid-19 hit, many financial and professional services firms relied on existing crisis management and business continuity plans, many of which proved to be not entirely fit for purpose. Deloitte’s survey shows that around 40% of firms used modified plans and one-third created entirely new strategies to cope with Covid-19. Most resilience plans did not include pandemic-specific action, while 50% didn’t factor in shelter-in-place. This suggests a clear opportunity for organisations to learn from their responses and create new contingency plans for the future.
Using data wisely
Data analytics is booming across the entire financial services industry, but the collection and examination of data will be particularly important within insurance over the coming months and years. Current events will play into the financial strength of health insurance plans far into the future, meaning now is the time for insurance firms to put data and analytics tools in place. This may see the Irish market more fully embrace insuretech as organisations look to track patient and illness information, as well as the impact of claims and reimbursements to providers.
How Hanover can help you
Whether you’re in banking, wealth management, asset management, insurance or another area of financial services, Covid-19 is likely to have impacted your business in many different ways. At Hanover, our extensive international networks and deep market intelligence can support your strategic planning and help to identify the key resources you need to capitalise upon the opportunities Covid-19 is going to present. Contact us here to find out more.