Redesigning the Future of Finance

Joost Goudsmit: Who are the likely winners post COVID-19 in the Financial Services sector?

Dina Akimova (Russia): It’s clear the world isn’t going to simultaneously come out of this in one unified fashion and the lingering effects of this could very well run deep into 2021. The Initial winners are likely to be those financial institutions that were early adopters and heavier investors in their digital channels and technology over the past few years. They have been able to swiftly and relatively seamlessly transition their customers into alternative channels and help navigate them through the worst of these challenging times. Some other likely post-COVID-19 winners will include contactless payments and mobile money companies as customers use less cash.

Companies built around savings and investments have been doing well in 2020 and this trend is likely to continue as people look to take greater control of their finances in the future. Consumer and SME lending platforms as mainstream banks take less risk and lend less at this level, whilst smaller and less well established fintech’s could end up being the winners as the market clears out post-COVID-19 and could attract further investment thereafter.

Kanu Rajguru (U.A.E.): We’ve also seen the usual flight-to-quality and flight-to-safety. Companies with the best market reputations and stronger brands, as well as higher levels of service quality, have benefited from the migration of customers seeking to minimize their risks and losses (capital preservation) as well and take advantage of the opportunities in the market (capital appreciation).

In addition, financial institutions that placed customer-centricity and personalization at the heart of their strategies are now reaping the benefits. Optimizing their customer experience and value propositions without completely removing the human interaction elements within the customer journey is the key.

From a talent perspective: With COVID-19 merely further accelerating the inevitable push towards digitization and use of technology within the industry, banks and FI’s will morph even quicker into quasi technology companies. In order to continually innovate, introduce new solutions, and rewire from the inside out, institutions that can attract the best designers, engineers, and technologists, especially from outside of the sector, are going to have a competitive advantage. Firms will also need to effectively communicate and demonstrate their employee value propositions in order to have a better chance of prizing away talent from the tech and other alternative sectors.

Dina Akimova (Russia): I'd add that with digital technology no longer a nice-to-have but a must-have, banks and FI’s will need to ensure that their boards and senior management teams are “fit for purpose” as many organizations migrate away from the traditional modes of working and reconfigure their business and operating models towards online digital channels, automation, data analytics, AI, etc. This will require restructuring boards and management teams by appointing more technologically minded individuals with different skills set and knowledge to inject a new kind of thinking in order to fast-track their transformation and change management strategies. Those that can start implementing this now (and we are currently seeing more restructuring taking place at this level) will have a better chance of coming out in front once the pandemic is behind us.

Kanu Rajguru (U.A.E.): As for long-term vision, with many institutions facing reduced profitability and lower share prices it would be easier for boards and senior management teams to focus squarely on shareholder value and improving returns (RoE) in the shorter term. However, the importance of investing in the business and supporting its recovery and growth post-pandemic is going to be critical now more than ever to attain longer-term growth and success. Those institutions where the board and management teams can successfully strike the right balance between the shorter-term needs of institutional investors whilst continually investing in the longer-term growth plans are more likely to succeed in the post-COVID-19 era.

The first half of 2020 has seen record levels of investment in ESG (Environmental, Social, and Governance) and more and more investors will place greater importance on where they invest their money and is it being done so responsibly in the future. Those institutions that can offer the best solutions around impact investing, socially responsible investing (SRI), and values-based investing will ultimately benefit greatly in the future. Furthermore, this pandemic has served as a large-scale stress test in the resilience of corporations across the globe and those with higher governance scores have performed better so far in 2020 that their peers and this trend will very likely to continue post-COVID-19.