Though the COVID-19 pandemic is finally beginning to come under control, its impact on the financial industry was heavy, and won’t be fading away any time soon.
After a year of rolling with the punches and finding creative answers to impossible questions, bank presidents are hard at work figuring out how exactly they’ll rebound from the industry-wide ROE declines, keep up with the changing landscape, and get the company softball team back in competitive shape after a year of self-isolation.
It’s certainly a tough set of challenges. And a tough set of challenges requires you to ask even tougher questions, most of which don’t necessarily have one “right” answer.
Here’s a list of the most prevalent questions for finance presidents and CEOs, in ascending order from tough to toughest.
7. How Do We Reimagine Risk Control?
Assessing risk is one of the cruxes of the finance industry, and the second global crisis in as many decades has shed a blinding spotlight on the subject.
While the economic impact of the COVID-19 pandemic on the financial industry hasn’t been quite as severe as the Global Financial Crisis of 2008, financial institutions still suffered significant credit losses throughout their loan portfolios, and those losses will persist while global economic recovery stalls.
Turns out, most models didn’t account for the possibility of the deadliest pandemic in 100 years.
After a year of riding the waves of market volatility and pulling emergency forbearance plans out of thin air, banks will have to determine whether they need to thoroughly re-examine risk control.
6. How Can We Adapt to Meet Evolving Consumer Demands?
This is a wider-ranging subject than most questions, which is part of what makes it so difficult to answer.
Customers are not only smarter than ever, but they’ve also figured out what they’re worth. As such, the concept of client loyalty is fading. Get ready to treat every customer like some kind of high-maintenance spouse, or be prepared to lose them.
Millennials are shifting towards digital banking, but Gen Xers and Baby Boomers have big expectations for customer service and in-person banking. You may even want to consider remodeling your branch to accommodate consumer-oriented concepts like more privacy with relationship managers, and more open space in your vestibules.
5. How Can We Meet Consumer Expectations to Address Social Issues?
Now more than ever, people vote with their wallets.
One side effect of consumers being more informed than ever is that they know full well which companies support the social issues they value the highest—and which ones don’t.
For instance, today’s financial institutions face pressure to help correct racial and gender wealth inequality by forming policies and redirecting capital to that end. The same goes for issues like climate change and minimum wage.
4. How Do We Simultaneously Remain Compliant & Profitable?
The regulation of the finance industry is becoming stricter and more complicated every year in order to combat things like cybercrime and money laundering.
It’s great news for society on the whole, but also a pesky little pickaxe that chips away at your bottom line. The increasing burden of compliance can create a major strain on banks.
That’s nothing compared to the burden of not being compliant, though. In fact, penalties totaling over $10 billion were issued to global financial institutions in 2020 alone.
Here’s a hint: invest in compliance management software, if you haven’t already.
3. How Can We Restore the Comfort of In-Person Banking?Long after the pandemic is over, the shell shock of the danger it presented will still linger, and social distancing habits could be as hard to quit as nail-biting or arguing on social media. It’s anybody’s guess as to when we’ll return to a true “normal”.
Bank construction and remodeling will need to be done with this in mind. And some of the COVID safeguards you put in place may need to stick around long after society achieves herd immunity.
2. How Should We Alter Our Business Model as FinTech Continues to Grow?
Despite the pandemic, FinTech investments remained steady in 2020. And according to FT Partners, the industry’s M&A volume actually grew to record levels.
With companies like Venmo, Kabbage, and Square disrupting traditional banking more than ever, banks face pressure to either develop services that can compete with these technologies, or shift their focus towards a different way of functioning.
For instance, ATMs are projected to go extinct by 2041, meaning a major stream of revenue is set to dry up like that sharpie you forgot to put the cap back on.
20 years may sound like a long time, but the pivoting decisions bank presidents make now in response to FinTech growth could define whether their business can survive the coming decades at all.
1. What is the Role of Our Physical Location in an Increasingly Digitized World?
This question looms large and has bank presidents everywhere racking their brains.
Banking is shifting digital, and the evidence is everywhere. Consider that, according to Bank of America’s 2020 Q3 report, the finance giant’s mobile check deposits increased 117% last year.
The digitization of finance means a big change in how banks use their branches. They need fewer tellers for simple transactions, and more customer service reps for complex services.
So banks are creating more space for private offices, and they’re okay with that eating into the lobby area and teller booths.
The trickiest part is deciding whether the company can achieve this through repurposing the current architecture, whether they ought to remodel, or whether they need to build a new branch outright. The answer will of course differ based on a variety of factors, but one thing is clear: the space needs to match the evolving needs of the business.
If you’re considering a remodel or a new build, contact HTG Architecture for an expert opinion. We bring an unrivaled level of expertise to financial building design, and we’ll offer the kind of advice you can depend on.