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Financial services providers have had to adjust their corporate priorities towards implementing new technology to meet a shift in consumer behaviors as the COVID crisis rumbles on worldwide, according to new data from Salesforce.

Salesforce Research surveyed nearly 2,800 global leaders in insurance, retail banking and wealth management across North America, Latin America, Europe, and Asia Pacific over two time periods – half of respondents during November 12 through December 12 2019 and the other half August 21 through September 21 2020.

According to the findings in the resulting report – Trends in Financial Services (registration required) – 68% of financial services institutions (FSI) customers say that the COVID-19 crisis has elevated their expectations of their providers digital capabilities.

But those capabilities were not necessarily on offer, particularly in the early stages of the pandemic. A second Salesforce-sponsored study – The COVID-19 Effects on the Financial Services Industry – found back in August that 20% of financial services professionals were unprepared to deal with the demand from government schemes, such as the US Paycheck Protection Program, while website and app outages occurred during the disbursement of 80 million stimulus checks.

The report observes:

The global pandemic forced in-person interactions online, seemingly overnight — and many FSIs have struggled to keep up with the pace of change. An analysis of our 2019 and 2020 data shows the customer experience suffered in response.

What this has translated into is a shift in priorities among financial services firms in favor of an emphasis on implementing new technology. The top three tech priorities among providers on a growth path are now virtualization/cloud services (79% of respondents), personalization (77%) and automation (76%). The report notes:

Though barely a year separates our 2019 and 2020 surveys of FSIs, their business priorities shifted considerably. A number one business objective prior to the pandemic, customer experience initiatives have fallen to fifth place, as calls for new technologies to support surging digital demands take precedence. This digital surge – spanning online loan applications to customer service via chat – coincides with a rising appetite for automated processes.

A number of actions have been taken to digitize operations in order to mitigate against further disruptions as the crisis continues. These include digitizing back-office operations (52%), digitizing front-office operations (48%), automated processes (47%), digitizing middle-office operations (43%), implementing a virtual call center (42%), introducing a hybrid work from home model (41%) and cloud migration (38%).

In practice

That’s the theory then; what about the practice? There were some useful insights into the shifts that the pandemic has triggered to be had this week from the Citi Financial Technology Virtual Conference, where Visa and Mastercard shared some of their experiences and insights.

Vasant Prabhu , Visa Vice Chairman and CFO, talked about the wider acceleration of the shift to e-commerce and online transactions, seen most obviously across the retail sector, which has had implications for financial services providers:

The shift has been underway for a while, but only 15% of consumer payments were actually e-commerce coming into 2020 and there’s no question there’s been an acceleration in that. You can see that from the numbers that we’ve reported. You’ve seen some massive growth in our e-commerce side of the business growing significantly faster than it was pre-pandemic in an economy that clearly is not growing as fast almost anywhere in the world. So one thing that’s happened is the massive shift to e-commerce and we’re seeing that in all categories, categories that historically were not heavy on e-commerce like food and drug, for example.

This is likely to be here to stay even when lockdowns and social distancing practices are relaxed, he predicted:

Something we’ve been watching very closely is what happens to this when face-to-face commence is possible again. As economies have opened up in the past few months, we’ve seen e-commerce stay very strong even as face-to-face commerce is possible, which means that the habits that people have formed in the past few months are sticking. We’ve seen significantly more people activate their cards online and we’re seeing more transactions for cards online, which means that the whole move of people away from face-to-face commerce to e-commerce has definitely seen a step change and it’s sticking.

All of this benefits providers like Visa, he added, providing opportunities to sell value-added services:

Certainly fraud and authentication are all important things in cyber-security that are far more important online than they are face-to-face, products like Visa Advanced Authorization and Visa Risk Manager….The whole shift to e-commerce comes with a lot of benefits. Face-to-face, people now don’t want to use cash. Cash is dirty. So we’ve seen a substantial move away from cash to digital forms of payment. Tap to Pay is clearly helping it. Tap to Pay is now two thirds of transactions outside the US, over 40% on a global basis. Many markets have seen massive increases in Tap to Pay.

The COVID crisis has sparked greater willingness among customers to embrace change, argued Craig Vosburg, President, North America, Mastercard:

One of the things in my experience that’s hardest to change in payments and introducing new things in payments, is changing consumer behavior. Consumer behaviors tend to be fairly sticky, particularly when the things that they’re doing already work reasonably well. What we’ve seen over the course of these last few months since the pandemic struck is a fairly dramatic change and a rapid change in consumer behavior that I think will have lasting impact on some structural issues in the payments industry. And that’s true for both consumers and businesses, frankly.

There’s a simple reason for this, he suggested:

It stems from a desire, frankly, just to avoid touching things. So there’s an aversion to cash that we see. There is an increased adoption of contactless forms of payment that have accelerated well beyond what we would have anticipated a year ago. And there’s an ongoing acceleration in digital and e-commerce.

And as with his counterpart at Visa, Vosburg sees the shifts in consumer attitudes as being long term:

The things that we hear from consumers and businesses, through the various surveys we conduct and that we see others conducting, suggest that these kinds of changes and attitudes will be pretty durable, Large-scale numbers – 70% of consumers – are saying they expect to continue or even increase their level of digital and e-commerce shopping, more than 60% of consumers saying they expect to use less cash, two-thirds of business saying they’re actively encouraging their customers to pay in ways other than through cash and check.

These are pretty substantial shifts. Will all of that stick? Maybe, maybe not, but I think some meaningful portion of it will stick. And with that, as more payments behavior becomes digitized and electronified, it enables these different kinds of experiences that are richer, more value-adding to consumers and businesses because of the nature of digital versus a physical transaction.

My take

A lot of this resonates with my own experience. I can’t remember the last time I handled hard cash, for example, or set foot inside a bank branch, while online shopping is now a daily experience. My own financial services providers have weathered the crisis well from my perspective with one exception, whose inability to respond to a transactional problem was like dealing with a pompous bank manager from the 1970s in terms of CX. (No names I’m afraid as it’s subject to an investigation at the moment!). Will things revert to the old practices once the pandemic is in the past? Sadly, we’ve got plenty of time to ponder that one I suspect, but I imagine the answer is no, in the same way that online grocery shopping is now a mainstream practice. In this day and age, every silver lining is worth grabbing.