A new report published today from open banking platform Tink suggests that COVID-19 has irreversibly increased the shift to digital financial services.
As a result of the pandemic, financial institutions have been forced to adapt to more digital ways of serving their customers, while people across all age groups have had to become familiar with using more digital services. This has led to the digitalisation of financial services being fast-tracked – and 41% of European financial executives believe the effects of the COVID-19 pandemic on the financial services industry will be permanent.
Open banking gets a boost
Even in light of the digital transformation efforts that have been set in motion over the past few years, 65% of financial executives across Europe still believe that banks need to increase their speed of innovation. This digitalisations shift has resulted in an increased appetite for financial institutions to leverage technology and find solutions to new challenges as a result of Covid-19. In fact, more than two-thirds (68%) of European financial executives say their interest in open banking has increased during the pandemic.
The report also shows that the pandemic has focused European financial institutions on three key business priorities. Three-quarters (74%) of executives see an increased need to enhance their digital services – to streamline onboarding and manage more customers digitally. While 70% are also focused on the customer experience – to differentiate themselves from competitors and boost customer engagement in an increasingly digital world. For 68% of financial executives, there is an increased focus on restoring profitability, through automating and streamlining business processes.
Lasting long-term impact or short-term blip?
However, despite the big shifts the financial services industry has witnessed during the pandemic, 59% of financial executives still see the transition to digital as a short-term blip and expect things to return to normal. Similarly, only two-thirds (67%) of respondents think that Covid has increased business risk, despite clear signs of looming economic danger on the horizon – with households under increasing financial distress, non-performing loans set to rise and businesses at risk of bankruptcy when governmental support runs out. This suggests that some European financial institutions are at risk of sleepwalking into a future of unforeseen challenges that may have a severe impact on their customers, unless they recognise the significant and lasting impact that Covid has had on the financial industry.
Daniel Kjellén, co-founder and CEO, Tink, said: “The pandemic has forced many executives to remedy the lack of personal interaction with customers by focusing on delivering digital services. But this has also provided a way of creating more value for the customer, while increasing insights to identify or even predict potential risks and new demands. Financial institutions have seen that open banking technology presents opportunities to increase the speed of innovation, introduce new commercial streams and revenue opportunities, while enabling operational efficiencies that will benefit their business long term.
“But there are also many executives who are expecting things to go back to normal, who will need a plan on how to respond and where to focus their digitalisation efforts as the transformation of financial services continues to pick up pace. We have set out to help empower the pioneers of financial services – the banks that are looking at technology not as a cost, but as an opportunity to improve many of the things they do today. How they operate internally, how they deliver their products, and how they will serve their customers in a post-pandemic world.”
The UK: Leading the way in the digital shift
Out of all the financial executives surveyed in Europe, those in the UK were the most ardent believers that the digital financial shift will be permanent (56% Vs the European average of 41%). It’s therefore unsurprising, but encouraging, to see that 75% of UK respondents feel that the pandemic has increased the need to enhance digital services. And with 88% saying they believe that the pandemic has increased the focus on customer experience (compared to the European average of 70%), it’s likely that innovation within financial services will be high on their agendas as we move forward.
Rafa Plantier, Head of UK and Ireland at Tink, commented: “The UK leads the way in believing the digital shift in financial services is here to stay. In fact, the UK is ahead of the curve on interest in open banking increasing during the pandemic, allowing them to improve digital services, level-up the customer experience and bring greater profitability to their organisations. This reflects the UK’s position as a leading hub for fintech innovation and as pioneers of the open banking movement.”