It has brought about radical changes that were unthinkable a mere six months ago – and many of these changes will remain in place long after social distancing measures are eased.
In the financial services sector, the global pandemic has further accelerated the need for technology.
Cut off from bricks and mortar premises, both businesses and consumers have suddenly been forced to manage their affairs remotely and online.
For consumers, what they require of financial technology – fintech – has evolved significantly since the UK-wide lockdown was introduced in mid-March.
Indeed, for many people, before the pandemic took hold their interaction with fintech largely involved using online and mobile banking platforms to check their accounts and transfer money.
Now, technology has become integral for those looking to take out financial products, open new accounts and receive financial advice; this is especially true in light of the number of people needing to access credit in this uncertain economy.
The sudden reliance on fintech poses many interesting questions, not least for intermediaries. For some financial services firms, this rapid shift has proven extremely challenging, particularly given the lack of forewarning.
Their data, systems and processes are completely reliant on legacy technologies and on-premise servers; as such, delivering new products or enhanced services to their customers at a time when employees cannot be in an office or branch has become more difficult.
The role of the intermediary is changing
The sudden reliance on fintech poses many interesting questions, not least for intermediaries.
As consumers and businesses adapt to the “new normal” of financial services being delivered digitally, intermediaries like brokers and advisers must similarly come to terms with how they can continue to add value.
Intermediaries are faced with this pressing question: what role must they now play to satisfy the needs of their clients and customers?
Let us take a mortgage broker as an example.
Typically, they would have received an enquiry from a prospective borrower and, having assessed his or her requirements, the broker would have sourced suitable products from various lenders – perhaps based on preferred relationships.
This crisis will change the modus operandi.
Lenders will need to move to take advantage of cloud native technologies, if they have not already done so, to be prepared for the next crisis.
This will allow for manual steps to be removed from complex applications, onboarding and completion processes that almost everyone has experienced when opening a bank account, taking out a credit card or getting a loan of some description.
Intermediaries are faced with this pressing question: what role must they now play to satisfy the needs of their clients and customers? In the case of mortgage brokerages, there will therefore naturally be a shift towards marketplace consolidation based on who can provide the most volume (to the lender) and transparency (to the borrower) – a story that has played out in other sectors.
A similar argument can be made for payments, for instance, where businesses or individuals need to make large, over-limit payments they would expect a fully digital service rather than needing to travel to a bank branch with ID or wait in extended call centre queues.
The “intermediary” here would be a bank, rather than brokers. The nature of financial services is that everyone, at some point can play an intermediary role.
So, what can be done, and is fintech going to be the difference?
How fintech can help
Most fintech firms are focussed on solving one problem well, no matter how big that problem is.
Identity verification, alternative credit scoring, AI assisted chatbots and recommendation algorithms, next generation core banking, transaction classification, and simplification of mortgage chains – these are all areas that have deep, niche challenges to solve.
None of these technologies in isolation solve an end-customer need, but it is fairly clear that they each form part of a value chain that is all about getting customers access to credit.
Companies that focus on utilising best in class providers in their value chain in order to build a truly exceptional service offering have a better chance of succeeding.
There are, for example, some credit marketplaces in the UK which already offer pre-approved loans that can be opened in just a few minutes with minimal clicks; this is all thanks to progressive technology choices from the lenders.
Established technology best practices have already been applied to support millions of banking customers, as well as for processing large datasets and enabling open interoperability between systems run by different companies.
Indeed, the most successful finance companies are those that have formed partnerships to create technology that can be used seamlessly between separate banking products and accounts.
This is the approach that any business will need to adopt as the "new normal" becomes just "normal".
After all, it is unlikely that the convenience of doing something on an app will get swapped back for a stroll across town or a long wait on the phone.
There has been talk of ‘a fintech revolution’ for over ten years now. Intermediaries must readily embrace this change; they must seek ways to utilise technologies themselves in the way they communicate with and present products to clients.
Failure to do so will result in them getting left behind as consumers begin to rely almost exclusively on digital solutions for financial services.
The fintech revolution is only just beginning
Ultimately, any individual or business involved in the financial services industry must already be alert to the benefits that technology can provide and the changes that have been happening for quite a few years now.
The matter is now far more pressing as there is a groundswell of new fintechs that are gaining scale – companies who do not readily embrace this change may find themselves cut adrift from their clients and competitors.
There has been talk of ‘a fintech revolution’ for over ten years now.
It promised open access to data, hassle-free banking experiences and a fairer deal for consumers.
In truth, what we had previously witnessed was really only a cautious adoption of technology (which has required considerable investment) as consumers, regulators and established banks became familiar with what it can enable.
This pandemic, which has caused the physical world to be replaced by a digital one, gives a true opportunity to realise those goals.
Ammar Akhtar is chief executive of Yobota
