The financial sector is an integral part of the economy. It provides support to individuals and businesses, allowing them to participate fully in markets. The financial industry is crucial to the economy, and if that fails, its failure ripples towards all sectors of society.
Take the Global Financial Crisis of 2008 that caused a global recession. More than a decade later, we are faced with yet another economic challenge; this time not caused by a housing bubble, but something even deadlier ー a virus that has spanned the entire globe, COVID-19.
Immediate Responses of the Financial Industry
Because of the measures introduced to slow the spread of the virus, banks are faced with difficulty in providing support to customers. As such, it has been of utmost importance for many banks to shift to online services quickly, while still being able to maintain efficient customer support. Banks must make possible and encourage online transactions by improving their online banking platforms ー providing tutorials for their online services and increasing their capabilities ー making it easy and accessible for anyone to transact remotely. It has been a top priority for many banks to improve their online services, and make the necessary adjustments not only with customers but also with the workflow of their employees. Even more crucial, they must ensure that these systems are sustainable. There is no end in sight for this pandemic, with social distancing measures here to stay, so they must make sure that these adjustments will work in the long-run.
With the numerous changes affecting every sector of society, it is now more important than ever for every sector to introduce change into their systems and assess their impact on society as a whole. The changes hit the financial sector quite strongly, but there is a need for business to go on as usual, given that banks provide an essential service to individuals and businesses. This pandemic, and the “new normal” it is introducing, requires increased customer support from the financial sector’s end and, most importantly, innovation and change towards more technologically-reliant methods of banking.
Looking Towards the Future
Even after the world has seen the worst of the pandemic, it will take years for society to return to any form of normalcy. While crises are difficult, it is also an opportunity for those who choose to take it. In the financial industry, it creates an opportunity for collaboration between traditional banking firms and more technologically-advanced firms, such as fintech startups. Fintechs are more well-placed to deal with the crisis at hand, as they already heavily rely on technological innovation. However, due to decreased economic activity and stock market crashes, investments will be geared towards safer avenues; thus, investments in startups may slow. On the other hand, traditional banks are not as well-equipped to deal with this change and can take cues from fintech on how to innovate their technology to provide smooth online services. There is a need for fintech to collaborate with traditional banks to secure funding, and traditional banks to look towards fintech for help with technological innovation. Already, there have been several collaborations between banks and more technologically-advanced firms before the pandemic began. Moving forward, banks should use this opportunity to collaborate even further with tech startups in an effort to create banking ecosystems that will ultimately make the banking experience more user-friendly and accessible.
What now?
This pandemic has shown that banks do play an integral part in the economy, and are doing their part in helping boost it. However, this could also prove to have negative effects on them in the long-run ー by introducing low-interest rates, it could be a struggle to bring the rates back to usual once the economy stabilizes. It is too soon to predict the future of our economy, and no one knows for sure how long it will take to bounce back. Government stimulus programs, low lending rates, and softened payment terms have proven to be beneficial, but looked at from a long-term perspective, if the economy continues to decline, the blow still goes to the banks who face defaulters and losses. Banks must then be able to balance being supportive and lenient with businesses, while still maintaining their security by cutting off those who they know will be unable to pay back. This may cause a public backlash, and turn around the increasingly positive view on the industry. In England, many banks, such as HSBC, have already suspended their dividends, which right away caused steep drops in their share prices.
With the future still unclear, the survival of banks ー and the world ー still ultimately boils down to how well governments are able to handle the pandemic. No matter how much industries prepare for the worst, the stimulus packages introduced by governments will not last forever, and the root problem still goes back to the public health crisis at hand. Moving forward, this pandemic serves as a critical juncture where many changes have been introduced. History has shown that during critical junctures like this, the winners and losers truly depend on who is able to innovate. Those who are able to adapt quickly will come out on top and survive, while those unwilling to adapt will lose steam and credibility quickly.
危机 ー the Chinese characters meaning crisis. It is made up of two characters: the first symbolizing danger, the second for opportunity. While crises pose imminent threats and are often difficult to overcome, there is always a silver lining to it. Those who are quick to take advantage of the changes brought about by crises are the first to reap its benefits, seizing an opportunity to expand, innovate, and foster habits for success that are built to last.
