Bank of the Future

How the COVID-19 Outbreak will Change Retail Banking as We Know It

 
June 18, 2020

The COVID-19 pandemic has caught organizations off guard and banks are no exception. To survive this unprecedented crisis, most financial services firms worldwide are working in a bare bones model to ensure business continuity. Understandably, digital banking has emerged as the most practical channel to counter the COVID-19 impact on retail banking and is going through a reality check.

Banks already struggling with various challenges such as decreasing profit margins, countering the threat from challenger banks, and ensuring regulatory compliance, are now faced with additional problems to tackle. Double whammy effects caused by both demand and supply shocks due to the COVID-induced lockdowns will impact the future of retail banking immensely. Expenses incurred toward pandemic response management will cause cost and revenue misalignment. Banks will also see a rise in NPA / NPL across the globe due to severe impacts on businesses' profitability and consumer sentiments.

Criminals and fraudsters are taking advantage of the vulnerability arising from mass confusion, uncertainty, and fear. Selling fake healthcare products, EMI moratorium fraud, phishing emails and SMS scams stealing personal information are further impacting financial institutions.

Challenger banks, unlike traditional banks, are built on a Digital Only philosophy and are therefore much more agile, adaptive and equipped to cope with supply fluctuations. This gives them a distinct edge over traditional banks. The current digital ecosystem is helping us cope with the pandemic better.  Customers’ reluctance to venture out of the safety of their homes in the current scenario is driving even digital laggards to switch to digital channels, which ironically is a positive sign as it has helped tackle the greatest barrier to adoption.

Let us discuss the key priorities that banks should focus on in order to reimagine banking during and after the COVID-19 crisis:

  • Fast-track digital innovation: Demand for digital banking has never been greater. For the next couple of years, this should be the topmost priority for banks. This outbreak will also cause behavioral shifts and changes in expectations, with consumers inclining toward digital and contactless interactions. Banks need to assess all of their products, services and processes to identify potential gaps in customer journey and possible elimination of physical interactions to further enhance digital capabilities. The digital adoption rate fueled by innovation and enhancements should be the key KPI to monitor. Banks should also increase collaboration with fintechs and bigtechs to scale their offerings and capabilities to meet growing customer expectations. Another key element to focus would be to humanize front-facing digital channels, especially for advisory, sales and complaint management. Smart banking solutions like video banking and virtual banking will prove very useful to provide the much-needed human touch.
  • Branch banking strategy: Footfalls in branches will continue to reduce, resulting in more branch closures. Banks need to rethink the overall channel strategy and reduce the reliance on the branch as a channel for revenue generation. Humanized digital channels will be the alternative to physical interactions. For the residual branches, the bank should also consider incorporating social distancing by design.
  • Reimagine customer service: Quality of customer service becomes more critical during any crisis as the paranoia increases call volumes at service desks. Having an elastic workforce will help manage such situations. Banks should adopt smart banking solutions like virtual call centers, chatbots, and intelligent email automation to create an elastic workforce that can be ramped up or down per business demand. Banks will also need to ramp up their analytics capabilities to serve customers proactively and reduce or eliminate customers’ need to call the bank.
  • Rethink operating model: Still, banking operation is heavily reliant on manual interventions. Banks must perform end-to-end customer journey mapping to identify opportunities for simplification and automation. Location diversification and low-cost operating model are other areas to focus on lowering operating expenses and eliminating geography risk. Banks should also have work-from-home ready workforce and infrastructure to manage eventualities such as the COVID-19 pandemic. A periodical full-scale emergency testing of entire operations and digital solutions load testing should be done to ensure continuity of business. Banks should also develop policies, procedures, and controls to monitor and manage remote working staff.


Fintechs and bigtechs are eating away the market share that was enjoyed by traditional banks earlier. COVID-19 outbreak and its impact on consumer behavior will further accelerate this shift, hindering the future of retail banking. Traditional banks are being challenged on several fronts to retain their customer base. They must leverage their key differentiator – Trust – and must get their strategies and priorities right. Invisible banking - contactless and frictionless - but with a digital human touch, is the new mantra to win and retain customers.

Ranjeet Kumar is a domain consultant with TCS’ Banking, Financial Services, and Insurance (BFSI) business unit. A CFA® charter holder from the CFA Institute, USA, he has more than 14 years of experience in consulting and operations across private, retail, and commercial banking. In his current role at TCS, Kumar anchors various digital transformation (front- and back-office), automation, benchmarking, and risk management projects for global financial services enterprises. He is adept at charting out transformation roadmaps and crafting cost optimization strategies for TCS’ clients the world over.