Article | April 7, 2020
The CARES Act recently passed by Congress funded financial assistance for small businesses experiencing economic hardships caused by the COVID-19 pandemic. Two Small Business Administration (SBA) loan programs established or expanded by the act are of particular interest to family physicians: the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP).
Article | February 24, 2020
It’s a fact: to succeed in business, sometimes you need to borrow money to keep cash flow steady. But what do you do if you have bad credit? What business financing options do you have? Not to worry. Even if your business and personal credit scores are too low to qualify you for traditional business financing, you still may qualify for a secured business loan with the right lender, also called a collateral business loan.
Article | June 4, 2021
Digital transformation can mean different things to each financial institution (FI). For some, it’s a push to modernise legacy systems and acquire fresh talent. For others, a journey to adopt an organisational strategy that unites departments and teams. No matter the motive, nearly all FIs want the same result—to drive efficiency, revenue and cost savings. For many forward-thinking FIs, artificial intelligence (AI) is a key part of this process.
At first, implementing AI can feel like an arbitrary effort that requires too many stakeholders, too much technology, and too big a transformation. Yet, as AI in banking matures, it brings the potential for higher-complexity solutions that generate positive ROI across business segments. A recent financial services study showed that 85 percent of respondents had successfully implemented AI within their organisation. [i]An additional 64 percent plan to use AI across a wide variety of use cases including process automation, risk management, and new revenue generation.
These studies prove that AI is not only becoming more mainstream, but is necessary to help FIs achieve their business goals, strengthen customer relationships, and remain competitive. To demystifying AI and reap its benefits, FIs must embrace a multi-functional strategy that sparks innovation and encourages collaboration. The three use cases below show how AI can be implemented to most immediately impact a financial services organisation.
Elevating employees, not replacing them
AI has historically created fears of job loss and obsolescence. However, within financial services, AI is well equipped to automate manual and repetitive tasks - such as rekeying data - rather than autonomously make critical financial decisions on behalf the organisation. Due to the complexity of the decisions, degree of regulation, and importance of qualitative factors these tasks are – and for the foreseeable future will be – better managed by employees.
A key use case of AI for automation is the utilisation of optical character recognition to streamline the process of spreading financials when underwriting commercial loans. Previously, credit analysts would have to invest hours painstakingly transferring borrower financial data into various systems, reducing time for holistic credit analysis and increasing loan underwriting times. However, by employing AI-driven solutions in combination with powerful workflow automation, banks have been able to significantly increase efficiency in lending processes, reducing processing and cycle times by more than 50 percent and seeing a 10 percent increase in front-office capacity to focus on true value-add analysis and customer relationships. [ii]
Additionally, AI has the ability to empower bankers, not only by eliminating manual tasks, but also by being able to equip them with powerful insights around relationship profitability and credit risk. By refining sophisticated, machine-learning based models, banks can more accurately predict and leverage metrics such as probability of default and loss given default within risk-based pricing models to provide competitive lending rates to borrowers, while still maintaining healthy profitability at the relationship and portfolio level.
Reshaping customer engagement
The acceleration of digital banking due to the COVID-19 pandemic and the rise of customer-centric titans have put significant pressure on financial institutions to modernise and reshape their approach to digital banking to appease rising customer expectations.
Customers not only expect a frictionless and seamless onboarding process, but for their bank to act as an ever-present financial advisor, offering personalised insights on spending habits, money management and financial decisions. AI-powered virtual assistants and chatbots offer new levels of accessibility to common questions by utilising natural language processing to find past transactions, access credit scores, and view balances. However, institutions can take a further step of both anticipating customer needs and offering targeted product suggestions based on propensity scoring models. Proactively offering recommendations can be helpful to customers due to the complexity of different financial products and enables banks to simultaneously satisfy customers while unlocking new revenue opportunities.
FIs can leverage AI to operate as a dedicated advisor, offer a differentiated customer experience, and reduce customer churn. However, equally important to the underlying predictive models is having a single, end-to-end platform to drive direct actionability by delivering insights to the right banker at the right time.
Boosting back-end efficiency
In addition to empowering employees to focus on true value-added activities, AI offers enhanced methods to improve operational efficiency and risk management. Analysis of IDC data shows that AI technologies can improve the cost efficiency of financial institutions by over 25 percent across IT operations[iii].
As a part of fraud detection, institutions can leverage AI to oversee thousands of transactions and efficiently flag anomalies that are indicative of fraud. Historically, transaction monitoring has struggled with false positives, through which genuine transactions are incorrectly flagged. However, through machine learning, actual, fraudulent transactions can be compared to false positives, which can then be fed into the model, improving accuracy over time as the system incorporates learned, differentiating factors.
Finally, the COVID-19 pandemic has caused institutions to revaluate how they assess credit risk and problem loan management. Lenders have had to segment their portfolio by geography and industry to differentiate sectors which were more severely affected by the pandemic versus those that were less challenged. Additionally, there is now a greater emphasis on utilising real-time and transactional data in addition to other data sources to truly understand business performance and borrower resilience. As the uncertain pandemic recovery continues, leveraging AI-powered predictive models in combination with delinquency tracking, credit migration modelling, and other tools will continue to be critical to align actual portfolio risk with the risk appetite of the institution.
As AI adoption continues to mature, FIs should avoid sporadically focusing on isolated use cases. Instead, organisations should strive to align strategy, organisational culture, and digital infrastructure under a united AI strategy. This will help enable them to capitalise on revenue growth, operating efficiency and cost savings, from the front to the back office, and across all lines of business.
Article | April 4, 2020
Banks have an Essential Role to Play as Systemic Stabilizers.
COVID 19 has created disruptive economic fallout within human society across all religions/races/geographies/countries/continents. The path ahead is hence a dangerous one, driven by epidemiological uncertainty.
While this situation is occurring for the first time in human history, this has also been an eye-opener to have a more comprehensive look at the way we operate. The footfalls of branch banking have decreased to a large extent, and banks have urged customers to use digital channels.
Table of Contents
• COVID 19- An Accelerant to Digital Transformation
• How to Increase Digital Banking Adoption
- Start with a comprehensive plan
- Keep employees morale up to get back on solid ground
- Leverage digital and traditional channels
- Enable Seamless Customer Experience
COVID 19- An Accelerant to Digital Transformation
The coronavirus (COVID-19) outbreak is indirectly promoting digital transformation, as many service providers, including banks, have significantly decreased or even closed their offline services, asking their customers to adopt the digital banking for any assistance. This trend is resulting in speeding up digital transformation. But, the question here is, are customers ready for this drastic change?
Yes, slowly yet firmly, Banks are witnessing customers picking up services that have distinguished digital capabilities. The mechanics of customer interaction has quickly shifted from physical handshakes to virtual communication over personal & extensive digital channels.
Learn more: https://capital.report/blogs/6-digital-banking-best-practices-during-the-covid-19-outbreak/8287
Consultant McKinsey & Co, in an article titled Leadership in the time of coronavirus: COVID-19 response and implications for the banks, reports that Banks have already taken a series of actions in reaction to the spread of COVID-19. Common steps we’ve seen include establishing a central task force, curtailing travel, suspending large-scale gatherings, segregating teams, making arrangements for teleworking, and refreshing external-vendor-interaction policies. It also highlights some of the fundamental changes banking organizations are going to need to make in the way they do business.
Workplace dynamics and talent management, already evolving in a digitizing world, maybe durably changed after an extended period of remote working,” it says. “Likewise, customer routines and expectations may also shift further in meaningful proportions, both in terms of digital adaptation and the expectation for proactive communication and care.
How to Increase Digital Banking Adoption
Digital is not a destination but it's a journey with more and more innovations and discoveries happening across multiple industries. But with COVID 19, it is a forced change for human society to adapt to a digital and contactless mechanism for business transactions between individuals or companies across the border (B2B, B2C, B2G, G2G, etc). The countries which are adopting this methodology are more likely to succeed in the new digital paradigm post-Covid 19.
Below are some simple steps you can use to increase customer engagement with digital banking:
Start with a comprehensive plan
To increase awareness of your digital banking platform, it is always essential, to begin with, a first cut action plan. In the current crisis, there are immediate actions banks can take to help retail and small business customers, support the use of digital channels so that customers can bank from home.
In the United States, many banks struggle to increase digital adoption among their customers; for example, nearly half of banking customers either never use their mobile app or do so infrequently.
According to McKinsey& Company, In the United States, the most satisfied customers use digital multiple times per week, the second-most satisfied customers do not use digital at all. The least satisfied banking customers are those who use digital tools infrequently, less than once per month. This is because customers go through a learning curve as they adopt digital tools, and most banks under-support their customers in the adoption journey. In the current environment, banks should redouble their efforts to smooth customers’ transition to digital. Here’s how:
• Easy-to-find and clear communication
• segment-specific campaigns
• remote coaching and advice,
• And unified experiences across each journey, such as written and video explanations for how to accomplish specific digital tasks, along with ways to try them out.
Banking services that involve branch interaction, digital tools can still play an important role by providing information on adjusted hours, essential services, reduced staff numbers, heightened safety precautions, social-distancing measures, and digitally-enabled queuing.
Keep employees morale up to get back on solid ground
One of the first things that can go for a toss in such challenging times is the morale of employees. It is natural for employees to feel frustrated. The uncertainty of the company's future, the fear of recession, and uncertainty around jobs can damage motivation, productivity, and can create a lot of fear among employees.
This entails bank managers to set precise directions for remote teams that are pursuing common goals. Bank managers should also take this opportunity to delegate and empower their employees for decision making. Both intrinsic and extrinsic motivation through rewards, clear spans of control, and meaningful appreciation can go a long way in supporting employee morale.
A vital portion of the employees is working from home facing operational challenges, such as internet-bandwidth issues, network connectivity, technology glitches, and childcare priorities. Following practices could help these banks perform a more effective distributed-work environment:
According to McKinsey &Company, following practices could help these banks perform a more effective distributed-work environment:
• Enable technology setup and infrastructure for remote work.
• Supporting remote-work technology and infrastructure
• Assisting employees with home-office setup
• Ensuring adequate VPN bandwidth
• Providing remote application access
• Adopting a suite of digital tools that facilitate effective communication, and decision making, such as videoconferencing, file sharing, real-time communication, coediting, and task management, and
• Ensuring that agents have the necessary tools and resources to handle calls from home while maintaining customer-data-confidentiality standards.
With all these features, it is also critical to ensure that agents are well-equipped with the necessary tools and resources to handle calls from home while maintaining customer-data-confidentiality standards.
Leverage digital and traditional channels
The more frequently a person sees a message, and in more places, the more likely they are to engage and take action. Banks need to maximize awareness by promoting their message across channels. Promote it in their branch and online, on ATM screens and in the call center.
Banks can also find ways to cross-promote digital banking. For example, during the new account opening process, it should encourage consumers to enroll in online banking. Or, if a bank or credit union is doing a credit card promotion, they can use it as an opportunity to cross-promote its mobile app.
Enable Seamless Customer Experience
For banks, spending on customer experience was essential before the current crisis, both from a “good business” perspective and a “good bank” perspective. Now, these aspects are even more relevant. It is highly important for banks to make their genuine concern for their customers clear and to make customer interactions with the bank as easy as possible.
COVID-19 has brought customers already under health and financial stress. They will need ready access to bank products and services. It is now more important, then, to reach customers through digital channels, stay connected through innovative communication channels, meet the needs of vulnerable populations, and stabilize critical infrastructure.
• Banks should encourage more customers to use remote channels and digital products whenever possible.
• Enhancing current digital offerings, identifying key functionalities, that can be improved quickly
• Speeding up the procedure to increase limits on online transactions and simplifying password reset.
• Keeping clients involved via SMS, mobile apps, and digital media
• Minimize disagreeable surprises to customers (such as potential branch lockdowns)
• Encourage fraud-prevention measures, clarify the availability of solutions on digital channels, and
• Define preventive measures to ensure the health and safety of clients and employees in branches.
According to McKinsey & Company, some financial institutions will need to address such technology gaps in order to offer a seamless digital customer experience. This will require planning ahead by scaling infrastructure capacity and network bandwidth, stress testing and scenario planning, managing near-term patches, and identifying urgent weaknesses in architecture.
Learn more: https://capital.report/blogs/9-best-fintech-apps-to-use-while-at-home-during-the-coronavirus-lockdown/8273
All in All
Coronavirus difficulties provide an opportunity for new businesses to thrive based on a new digital reality – completely digital and contactless. Digitalization has found a new meaning and it is going to reach newer areas. The world is thinking about implementing ways to lessen the disruption caused to humanity. This is the perfect time to focus on digital transformation by realizing the necessities accelerating it.