Banks around the world have responded quickly to the current crisis to keep economies moving in the right direction. In this episode of Industry Insights by SAP, Josephine Monberg hosts Dr. Betty Moon, North America Financial Services Industry Executive Advisor at SAP. Dr. Betty Moon describes the impact of Covid-19 on the banking industry and how technology will continue to transform banking going forward.
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Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg and I am your host. You are now listening to the COVID 19 special edition of our show. Welcome to our podcast. Hi all listeners and welcome to this episode of our podcast. We’ve done these special episodes where we focus on how COVID 19 is impacting various industries and today we are taking a closer look at the banking industry and to do this, I am so honored that I have with me and her whole virtual studio, Dr. Betty Moon. So Betty, thank you so much for being with us today.
Thank you Josephine. It’s wonderful to be with here with you today.
And Betty, just before we get started about talking about the banking industry, tell me you are an executive advisor at SAP. So what does an executive advisor do?
Well, I provide SAP with guidance and advice about banking, capital markets and insurance and the issues that these industries are facing today. And at the same time I also help financial service executives understand more about how technology can be put to use to help them solve some of their biggest and greatest challenges.
Hmm. I’m sure that’s a very critical role right now. And just for our listeners to know, where are you working from today? Apart from obviously being at home?
Yes. I’m at my home in Lake on Lake Norman, which is in North Carolina, just North of Charlotte.
Very nice. So we’re far apart. I am in Denmark right now in Copenhagen, but nice types that you’re global to work for such a global company where we can always reach each other. Absolutely. Okay, so let’s talk about the banking industry. How are bank the banks doing today?
Yes. Well, you know, firstly I was a banker for many years, so I know that like many of them, there are so many people everywhere across the globe that have been hurt by this virus. COVID is causing huge human costs that are beyond measure. And my heart goes out to all of those people. But from a purely financial perspective, the banks were in pretty good shape as we entered this crisis, even though the economies were already showing some signs of slowing down even before COVID 19 so, you know, many banks are coming off of several years of back-to-back growth and they’re much better positioned today than they were during the last global financial crisis. And, and as this crisis has mounted, it’s been really impressive to me to see how quickly they’ve responded.
Hmm. Yeah, that is very impressive. And what have they done so far to react to this crisis?
Well, you know, three things immediately come to my mind. First, the world’s central banks have responded very quickly and proactively to calm these markets down right in the United States. For example, the federal reserve made its first emergency moves since the 2008 recession. They pushed race to the lowest levels that I’ve seen in my lifetime. And in Asia we’ve seen the bank of Japan and the people’s bank of China discussing, you know, increasing their asset purchases to inject some additional liquidity in the market. Um, and then in the UK and Europe, we’ve seen the bank of England and the European central bank announced similar measures to keep help keep the economies moving. Second, um, day to day operations in the banks have really been impacted as, as the banks have moved their employees into working from home arrangements. Actually early in March, one of the largest banks that we at SAP work with began testing working at home with about 10% of their staff.
Um, others really resisted that. Banks aren’t used to working from home and so they instead announced branch closings and reduced hours. And you know, some bankers have just never been comfortable with the remote work model for lots of important reasons, regulatory concerns, security, privacy. But, but now they’ve been forced into it and rather than transitioning to the new model over time, they had to do it within just days and weeks. So that was a tremendous task that fell onto them. And then I guess, I guess a third thing that the banks are facing is that even before this crisis, they were concerned about the consumer’s household debt everywhere. It’s been hitting record levels in so many countries. And it’s, I think it’s something like $14 trillion in just the United States alone in credit card, you know, um, all kinds of of debt. So we expect that this problem is only gonna get worse if people aren’t working and people are starting to go back to work now, but it’s still going to have a toll, have taken a toll. Um, some banks, like those in Canada initially announced a plan to implement debt relief and they were fast with that and they, they did a six month deferral on mortgage payments. In Hong Kong, Banks waived all late payments and interest charges on credit cards and retail loans. So basically banks everywhere, all across the globe are looking to make really sensible decisions and also to do the right thing for their customers and their teams.
Hmm. So fascinating. So interesting what you say around essentially how COVID 19 is accelerating digital transformation and it, Oh, I would say enforcing like working from home and working remote, all these things that we would typically think would never happen or it takes so much longer. Um, and you mentioned also that many have closed branches, so what impact is this having on them and their customers?
Yeah, it’s a, it’s a serious issue, right? Because closing a branch has real implications for financial institutions. It’s one of the last physical touchpoints an institution can have with their customers and many people, you know, many people over the years have come to embrace online and mobile banking. But the fact is that some people still do enjoy going to a branch. Consumers want choices. And it’s not just generational, right? It’s not just that senior citizens want to use branches and young people don’t. We’ve seen studies that indicate young people about 66% of millennials, for example, they still want to go into a branch. So they still feel the value of that face to face human contact when they’re talking about their money. And think about it, even BC, before COVID bank customers were already demanding a lot more from their banks.
We’ve all been spoiled by Amazon. You know, we want what we want when we want it. We want to order something at 2:00 AM in our, in our pajamas, on our fuzzy slippers. And, and that is how people have been, um, have come to understand how to purchase. And, and so they expect that from financial institutions to, you know, digital account openings. When you open up a new account at a bank, most of them used to, all of them in the past had to be done in a branch, right. But now, you know, digital account openings have been on the rise for years and in branch account openings have been steadily declining. Um, JD power published a report back in January that I read and it said about a third of all new brand new retail bank accounts were opened through bank websites or mobile apps.
That’s up from only, um, you know, 22% the year before. That’s a 9% jump in just one year. So it’s a big trend. But even with that trend, many banks and credit unions too, where we’re lagging far behind what consumers were asking for. A recent consumer poll that I also saw showed that the vast majority of people who’ve tried to open online banking accounts, open their banking accounts, open their relationship with a new bank completely online, weren’t successful, and over 70% of them had to actually go into a branch to complete all or part of the process. So in today’s environment, that virtual customer experience that used to be talked about as a nice to have or an option for the banks to offer today, it’s not optional anymore. It’s absolutely necessary because COVID has sent us all to our homes to sequester.
No, I was just going to say I, I was talking to a bank executive last weekend and he said that they really want it to become a true real time bank where they can fully onboard a brand new customer in only five minutes completely online. But to do that, you have to be really fast. Right? And technology is the key to making that happen. It’s all about speed and accuracy and processing data really, really quickly. But the stakes are really high for banks because it’s a really competitive business. And fact is, if you don’t do this well, consumers are quite willing to walk away from their financial institutions. If the banks don’t, don’t deliver what they want, experience that they want, they’re going to find a different bank.
And that’s just reality.
It’s reality. And if you’re not happy with a company, Josie, what do you do? What do you do if you’re not, what do you do? I go, I find another company. You find another company and you tell your friends, right? And today it’s not just telling your neighbor or telling your, you know, your family member, you’re actually tweeting to the whole world about how this bank or this organization didn’t take care of you the way that you wanted it to. So I think in this crisis, a bankers have to give their customers the very best experiences they can if they hope to keep them. And look, Josie, I don’t know about you, but I tend to remember when people have been there for me when I’ve gone through some rough times in my life. I think bankers are really smart people.
I was a banker for a long, long time and and bankers understand that their clients need a lot of help today and those clients are going to have a long memory about who was there to help them, who wasn’t there to help them and when this crisis is over, I think that the banks who take really good care of their customers right now are going to be the ones that are remembered and the ones that are successful.
Yeah, so is that really the key? It’s finding the balance between providing a great digital experience right now, but then also planning ahead for how you can create a great physical experience once we’re able to have those again. Is that, what are your main tips on how banks keep customers right now?
Yeah, that’s a really important question. Josie. Banks have to keep their fingers on the pulse of the customer. Maybe it’s something as simple as a short text or a series of emails on a regular basis. That alone could go a long way in building trust. And while constant communication in the past was very difficult, right? Banks didn’t have the systems to do that and it was high manpower to do that. Today, banks can use new technologies and make this very simple and convenient.
Hmm. And what about the, we’ve talked about the employees or sorry, we’ve talked about the customers. What, um, how are our bank employees doing? Because they’re obviously very impacted by this crisis. Like you said, they suddenly have to work remote, which is not part of the banking culture per say. So how are they doing?
Yeah, it’s hard for all of us. Right? I heard the other day someone said that, you know, we’re all, we’re all safe at home. I don’t like to say stuck at home. We’re all safe at home right now. And things are starting to open up and the extroverts in the world are so excited, things are starting to open up again because they can’t wait to get out and see people besides just the, their family members. But the introverts in the world are also really excited for things to open up again too, cause they want to get the extroverts out of the house.
I’ve never thought about that. Um, distinguishing of the two, uh, before, um, yeah.
But on and off over the years, you know, some of the banks did have worked from home policies. I worked for a big bank for a very long time and many, uh, and they sometimes would let us work from home and then they changed their mind and then they pulled us back all into the offices again. And then, you know, it was, it was a very difficult thing for bankers. They, a lot of them never got comfortable with it. And, and in this case, remote work wasn’t a well considered thought out strategic choice for banks. It was a rapid response to a deadly situation to protect their employees and their customers, right? So it was all about speed. I, I spoke with the bank executive, um, about a week and a half ago and he said he would never have guessed that he’d be managing this huge organization from his little home office, right? Or that he’d have to be able to successfully move over 90% of his employees out of their corporate offices and branches and into their homes to work in just 10 days. He did it in 10 days and he’s not alone. So because of how all of this has so quickly unfolded, you’re dealing with an incredible amount of change in the system.
And we are all dealing with emotions and fear and anxiety. And you know, I’ve had days when I just been so, so sad. I, I went on a diet for the news. I couldn’t watch the news for a few days because I just, it was just really bothering me in a very personal way to see the implication of this disease on so many people. And I worked in a bank branch, as I mentioned for many years early in my career, I actually worked in a branch and I know that bankers take their responsibilities for their communities and their customers really seriously. So if their communities are hurting, they’re all feeling that too. And everyone’s dealing with this stress and different ways. Uh, you know, I think, I think we’re trying to figure out how to do this work from home, but at the same time it’s not a normal work from home environment.
It’s, you know, you’ve got your kids on your lap trying to balance your zoom calls. You’re worrying about how are you going to get groceries. You know, in the United States for right now there’s, there’s people who are finding it difficult to find toilet paper and you know, chicken to cook for their families. Plus the moms are trying to educate their little kids at the same time at the kitchen table, they didn’t set up formal offices. They didn’t know they were going to do this. So I’ve worked from home for a very long time and this is my office. And so this was not that much of a change for me, but for many people it’s been really difficult. And if you want to have happy customers as a bank, you have to have happy employees. So if we don’t have a choice right now and you know they that and they had to figure it out quickly, it requires a lot of other things besides just the equipment that they were sending their their staff home with.
It’s more than just laptops, it’s more than monitors and zoom calls it, this whole thing has required new skills and training and processes and, and the tools to learn through these digital platforms are here. Leaders simply need to embrace them. And, and I think that’s the big key here is, if we want our employee experience to be good and it matters a lot because employees expect the same technology at work that they do in their, in their everyday life, buying things at Amazon. This has a lot of implications, not only for us as people, as individuals, but as employees and also for our companies. And companies have to figure this out because there may not be any going back.
Yeah. So now you just said any, going back, let’s talk about now moving forward because I mean the pandemics obviously still evolving, but if we look ahead, are there any positive things that might come out of this crisis?
Yeah. You know, it’s hard to think about a silver lining from something so horrible, but, but here’s the thing. This isn’t our, it’s not humanity’s first pandemic, right. And it probably unfortunately won’t be the last one. But what we have today that we didn’t have in the past is we have the benefit of technology. And you know, last month Gartner did a survey of over, I think it was like around 300 CFOs. 74% of them expect that some of their employees who were forced to work at home during this whole crisis are going to continue working remotely after this all ends. And there’s lots of reasons for that. Um, convenience, improved productivity, cost savings are among them. And I and another executive I talked to in the banks, he said that he was very confident that all of his employees are going to go back into the offices and back into the branches.
They’re all going to be fine, but others are saying, let’s think about this for a minute. Maybe there’s a cost benefit here to keeping some people add home to work. You know, maybe they like it, um, and maybe they don’t, but, but there are tools that, that we offer at SAP and some that we’re actually offering to our customers at no cost right now so that they can try them out. That can help executives make those decisions. For example, we have one tool that could help them understand exactly how their employees are feeling about returning to the office. Are they nervous about going back? Are they, are they going to feel safe or are they going to resist it? Are they going to say, no, I don’t want to go back. If you have employees that travel for a living, do you know if they’re going to be comfortable getting back on a plane?
I, before this all happened, Josie, I was on a plane every week. So you know, what’s it going to take for a leader to expect their employees to get back in the office. So executives need to be asking those questions to their employees now and using that data to help them respond and communicate with their teams so that they can make the very best decisions for their organizations and for their people. But you know, whatever happens. I, I think, I do think that when we come out on the other side of this, we’re going to all be, be changed a little bit. I’m, I’m optimistic that we’re going to have learned that there are new ways of doing things, new ways of working, new ways of communicating that might make us all more productive and maybe even a little bit happier. Um, you know, bankers have been trying to move for forward towards this digital customer experience for years and some have made terrific progress and it shows in the customer experiences and the employee experiences that they’ve created. But we can also see more clearly now than we ever have before. That there are some banks and credit unions that have been lagging way behind. And maybe when we’re on the other side of this thing, maybe more financial institutions will be able to develop stronger ties with their customers because they’ve been listening to them in new ways, um, and hearing what they really care about and need from their banks and technology can help them do all of this right now.
Hmm. Yeah. That’s, it’s so interesting what you just said because I do these interviews with a lot of different industry leaders at SAP, and one of the things that everyone always talks about is using data and insight to be better prepared for whatever comes next. But I haven’t heard the, you know, talking about, well, what’s going to actually change fundamentally with the employees that work at our or at our company. We have to prepare for that new normal because that’s so important to factor in. And I think that’s actually something that goes, that is the case for every single industry. Um, so that was such a very, very interesting, uh, insight that you just brought there. So thank you for that. And just in general, Betty, you are such an inspiring guest and it was so interesting to hear more about how the banking industry is being impacted by COVID 19, how it’s fundamentally I think changing, um, and um, just to get your insights in general. So Betty, thank you so much for being on the show.
Thank you. Josie was a pleasure being with you today.