Banks must up their game to fight tough competition from new digital challengers

In order to maintain stability and remain relevant, banks have gone digital to serve their customers.

Today the banking sector is witnessing unexpected and dramatic changes. Amidst the social distancing measures implemented by the governments worldwide there is an urgent need for traditional banks to up their game to overcome tough competition from new digital challengers. Traditional banks must now adopt a digital-first business model in order to avoid turbulence as they had to shut-down branches over an extended period of time.

In order to maintain stability and remain relevant, banks have gone digital to serve their customers. These measures have helped them undertake ability to address their customers’ needs from an economy point of view. For example in other parts of the world like in Singapore, where SGD4 billion in loans are being distributed to SMEs to help them overcome economic shocks to their business, banks are digitising their loan application processes to ensure funds can be disbursed to customers in as little as a week. In Australia, banks have also announced credit-easing measures for small businesses that extend repayments for six months, as the government prepares to expand its stimulus package to weather the economic storm.

While there is a heavy focus on how banks are doing their part to help customers ride through this difficult time, banks themselves also require support to cushion the impact they are facing.

Incomparable challenges faced by banking

The current level of uncertainty is definitely a first-time experience for the finance industry. Earlier banking CFOs relied on preliminary estimates and approximate figures when it comes to risk management. However, this type of analysis is no longer sufficient in today’s economy of uncertainties. Banks are making deeper organisational and operational changes to face these challenges, to help keep pace with customers’ needs and stay ahead of the recovery curve.

Another aspect is that CFOs who wanted to drive digital experience in the sector are often slowed down by their self-groomed architecture and legacy processes that are costly and tough to maintain. The reality for most major banking players is the fact that they cannot transform their shifted remote-working functions overnight, simply because of how their systems have been set up.

First thought should be to believe that processes are secure and stable. One needs to accept that the current traditional decentralized operating model between finance and risk functions does not offer the transparency, effectiveness, and cost-efficiency needed to function. Instead, the processes require extra costs and time, hampering banks’ ability to manage operations seamlessly.

Banks now understand the urgency to digitize their finance operations as this is the only – and fastest – way to manage risk, improve controls and enhance insights to create more resilient and adaptable businesses. The use of cloud technologies is now a must-have on banks’ technology roadmaps and in business continuity plans.

Digitising operational processes

Moving core business systems to a centralised cloud platform has proven to be highly valuable today as it enables bank employees to work remotely – a sure change in operational management can be foreseen that was once impossible with the decentralised approaches and disconnected systems. This represents a shift in CFO’s mindsets because banks are now starting to rearchitect their core finance processes and explore remote capabilities that benefit its business and ultimately customers.

Banking giant HSBC overhauled its first cloud play to increase control, reduce costs, improve transparency around the cost base so businesses understand their drivers and can make better commercial decisions. The new cloud solution replaced bank’s historically built systems and customised technology – a situation that had meant keeping its systems current was incredibly expensive and just difficult to do.

Keeping in check finance and risk functions

The current levels of uncertainty have caused the banks to turn to scenario planning and strategic modelling. To assess a wide array of possible outcomes, forecast revenues and liquidity, and make frequently short- and medium-term forecasts.

Technologies like Artificial Intelligence (AI) and Machine Learning (ML) that are embedded into cloud applications play an important role when it comes to delivering accurate measures and risk controls. This will give bankers the opportunity to accelerate their capabilities to drive strategic insights for better decisions making, drive innovation and gain a competitive advantage.

Upholding resilience in the new normal

The world is not immune to future events. The banks are banking on deeper changes to emerge stronger from the economic downturn in the coming months. Be it operational or functional changes, digitisation is a necessity for businesses to mitigate its impact and build resilience as the economy starts to recover.

• Guruprasad Gaonkar is JAPAC SaaS Leader – Enterprise Resource Planning & Digital Supply Chain at Oracle. Views expressed are the author’s own.