By Thiago G.O. Amaral,
The global impact of the novel coronavirus has been profound. Beyond the obvious and tragic public health implications, the pandemic and resulting shutdowns have prompted transformative changes in how we live, work, socialize, and spend our time and our money.
In the banking sector, COVID considerations and concerns have been no less impactful, accelerating existing trends and impacting everything from the way people bank and the way they manage their finances, to the choices that banks are making about partners, priorities and payment systems.
From customer expectations and experiences, to the very structure and operational details of banks and other financial institutions, the digital evolution of banking in a post-pandemic environment is already well underway.
There is a growing willingness for larger financial institutions to connect with smaller banks—that would not otherwise have the financial resources—to create win-win partnerships to reach new markets and better connect with a broader customer base. The extent to which this is taking place is heavily dependent on the regulatory climate and the strategic and operational details of how these arrangements are structured is consequently country-specific. A tricky regulatory landscape makes this less common in U.S. markets.
But in South America, for example, in places like Colombia and Chile, the government is actively supporting and even facilitating these banking partnerships. As a result, banks and consumers in many smaller markets are gaining access to a newly sophisticated and diverse range of financial instruments and banking tools. At a time when economic stresses are being felt across the globe, institutional and individual flexibility is at a premium.
A tech boom
Perhaps nowhere is the desire for more flexibility more evident than in the proliferation of new technologies, including payment systems and innovative point-of-service conveniences. At a time when health and safety concerns are prompting so many consumers to look for and take advantage of ways to minimize interaction and engagement, the tech infrastructure to allow for digital wallets and a wide and growing range of touchless payment technologies is understandably in high demand.
More consumers than ever are able to take advantage of QR codes, apps like Venmo, digital currencies, payment systems like Apple Pay, and tech-driven conveniences ranging from digital receipts to the ability to deposit checks and access funds through smart phones and other mobile devices. Digital currencies are now regularly used to pay for everything from cups of coffee to home loans. And those payments are no longer exchanged exclusively as part of commercial transactions between consumers and banks and businesses, but for personal payments between individuals.
In some parts of the world, we are seeing a vigorous push to invest in and deploy smart ATMs that take banking flexibility to another level. In places like Germany, touchless ATMs are on the rise, and ATMs are now available that can process loan applications and offer a range of other financial transactions that would have been unthinkable just a few short years ago.
In Brazil, customers can make not only make currency withdrawals, but also deposits at some ATMs, and can even print physical bank cards right at the ATM terminal. Needless to say, utilizing these multifunctional high-tech ATMs is an appealing proposition at a time when the prospect of going into a brick-and-mortar bank can feel like more than just an inconvenience, but a health risk.
Partners and possibilities
Whether because of technical limitations or the lack of sufficient institutional resources, the tech innovations and solutions outlined above are not always available to some banks and businesses. Which is why we are increasingly seeing retail brands and businesses acquiring or partnering with tech companies and established financial institutions to create an entire ecosystem that enables them to not only provide consumers with new conveniences, but keep those consumers within their proprietary network or constellation of financial services.
These tech-finance partnerships are particularly useful in creating the digital accounts and virtual wallets that a small bank in rural Iowa or a small business would not otherwise have been able to offer. These solutions—and the partnerships that make them possible—are attractive to retail companies that may not have a license to operate as a bank, but can still functionally make it possible for consumers to “bank” with them by creating their own systems, solutions, and even payment tools like private debit cards and personal accounts.
If there is a common theme to all of these new banking tools and tactics it is ease of use and integrated functionality. Connectivity and user-friendly features are no longer an “extra,” but an expectation. Many of the traditional structural and technical obstacles between institutions and individuals are becoming less significant, or are even going away entirely. Newly holistic and accessible systems and solutions are coming online all the time.
The appeal of the streamlined convenience and potentially lucrative nature of robust in-house digital payment systems has led to a boom in new services and products designed to connect legacy systems to this new generation of emerging tools and expanding ecosystems. Tech providers specializing in loan processing and servicing, digital infrastructure, tech support, cybersecurity solutions and more are booming.
Some new technology and service platforms allow banks to offer customers not only digital accounts with virtual cards, but also connected physical credit cards, as well. In the best examples of this phenomenon, the result is a new level of integration and seamless top-to-bottom coordination: a synergistic technical and logistical ecosystem ideally suited to meet emerging digital banking challenges and opportunities at a time when expanding markets and new pandemic pressures are shifting consumer and institutional priorities.