Global concerns have grown since the outbreak of coronavirus, rattling investors, and equity markets worldwide. However, this flight to debt has caused 10-year US Treasury rates to drop to record lows, signaling that investors are very concerned about future growth in the economy. Given the impact of the pandemic on financial services, we see three main themes emerging:
1. Challenges safeguarding the workforce and maintaining productivity
The reaction for the workforces within financial services is to have non-client-facing staff work from alternate sites or home. For now, client-facing roles have not reduced hours, but with many malls shortening hours, retailers closing, temporary bank branch closures are also occurring. The biggest impediment to effective pandemic management has been the financial services industry's inability to see beyond digital to a full end to end digitization. Digital has meant, to date, an exceptional client experience on their device of choice (smartphone, tablet, computer), even though the back end processing is mostly/all manual. Investments in digitization and true end-to-end straight-through processing would empower non-client-facing staff to work from anywhere. At some point, the landlords and local tax authorities will get nervous as the demand for commercial real estate might collapse, sending vacancy rates higher.
2. Hardening infrastructure
Infrastructure to support large numbers of staff to work remotely while safeguarding customer data is a challenge. Whether that is simple network bandwidth or more complex issues like protecting endpoints and acquiring physical hardware, it's clear there is more work to do. The lack of bandwidth not only impacts the number of resources that connect remotely but also how they connect. Being able to leverage video conferencing and other collaborative technologies productively are significantly constrained. The lack of digitization capabilities for back end staff again exposes these issues (e.g., exception-based, no paper, digital signature) and limits the way these resources can be productive.
3. Truly acting as advocates for the customers
Proactively reaching out to customers in all lines of business to ensure their financial needs are being met and addressed. Who would not want their financial advisor to call them proactively and go over options? Who would not want their local bank to call them and offer assistance, especially those who are at risk? Who would not want if out of the country to be contacted and reassured the bank will provide financial assistance to get them home? Who would not want their insurance company to contact them to explain the policy and corporate position proactively? There's a golden opportunity for financial services to help on the world's stage actively. After all, in the days of self-isolation, Instagram, Snapchat, etc. this would go viral in minutes!
The effect that coronavirus has had on financial markets to date looks similar to other economic downturns that we've seen throughout history. However, the full impacts of COVID-19 are unknown, as it remains unclear whether we have seen a peak in diagnosed cases, these themes are a sample of some of the issues that are impacting the financial services industry during the outbreak.