The COVID-19 pandemic: six digital trends in the financial centre

It is all over the news: if the COVID-19 pandemic has given rise to one positive outcome, it is the acceleration of the digitalisation of the economy. During the crisis, certain digital business models gained significant ground, and companies with digitally oriented processes transitioned to crisis management mode easier, faster and more securely.

Stress test passed thanks to digitalisation

This also applies to Swiss banks. The public sometimes perceives them as sluggish, slow and not very innovative. However, during the lockdown, they proved that they can react swiftly and flexibly to unforeseen developments. No one had a finalised lockdown plan at the ready. But banks in Switzerland were able to quickly switch internal structures and processes into crisis management mode and to guarantee the continuation of their services to customers at the usual level of quality at all times.

Without digital processes, it would have been impossible for banks, whose employees were largely operating in home office mode, to set up a system from scratch within just a few days that allowed processing of up to 12,000 daily loan applications from SMEs. Improvements to the application process, including the introduction of software robots for the automated processing of loan applications, were made on a daily basis.

Irreversible trends will result in a new normal

Such examples not only illustrate the banks’ capacity for innovation, but also serve as an eye-opener in terms of the possibilities that digitalisation offers. There is no doubt that the crisis will result in a new normal for the financial sector in this regard. Hence, the Swiss Bankers Association has outlined six irreversible digital trends that will shape the financial centre in the future in a discussion paper published today.

Efficiency and security not at odds

While efficiency and opportunities for new business models have been the main drivers of strategic digitalisation-related decisions in the past, crisis resilience has been brought to the fore by the COVID-19 pandemic experience. This is likely to have a major impact on future risk assessments of digitalisation projects. For example, the demonstrated operational reliability of cloud solutions, which was put to the test under the high, extraordinary COVID-19-induced strain, is likely to be considered in related strategic decision-making.

The potential that lies in digitalisation need not, therefore, come at the expense of security. On the contrary, it is the compatibility of these objectives that underpins the irreversibility of the trend towards digitalisation.

Smart working solutions

The robust functioning of their systems enabled banks to switch to extensive home office operations practically overnight. As of 16 March 2020, around 80% of bank employees worked from home.

And even after the relaxation of the COVID-19-related measures, large segments of the workforce continue to work from home. Without having been able to ensure continued customer trust and to fulfil the needs of employees at all times, it is highly probable that home office mode would still be practised to a much lesser extent today.

Customer buy-in

Having a personal point of contact is very important for many customers, especially in times of crisis. The fact that customers increasingly made contact via digital channels illustrates their acceptance thereof. Their need for a high level of trust can be met on digital channels of communication too. Thanks to the positive response, many banks have recognised the opportunities for increased customer service via digital channels.

The use of digital services, which became inevitable due to the COVID-19-induced circumstances, also proved positive. For example, the demand for digital means of payment has strongly increased. Customers’ experiences in other areas were also very positive. It is therefore an obvious conclusion that demand for digital financial services will continue growing.

Framework conditions must be improved

If the Swiss financial centre is to continue this path successfully, investments in infrastructure must be accelerated. Secure and stable data connections must be designed to handle a sharp increase in data traffic and an even higher frequency of cyberattacks. A first-class power grid is another indispensable prerequisite for an innovative and flexible economy.

In addition to this, formal requirements which are not digitally compatible should be strictly avoided. A wider use of digital signatures (e.g. through the qualified electronic signature (QES)) and a state-recognised electronic identity (e-ID) is also needed in the digital economy. It is also necessary, however, that all stakeholders are familiar with these new factors.

Digital first

“Digital first” is increasingly the strategy needed to address changing customer needs and the intensifying competition. However, this is not only a matter that concerns the private sector. Based on the insights gained in the wake of this pandemic, government agencies will have to further increase their efforts to achieve end-to-end e-capability too.