We’re living in uncertain times. The rapid spread of Coronavirus (COVID-19) has forced the world to make unprecedented changes and whilst we don’t yet know the full extent of the change, it’s pretty clear that we won’t be going back to the way things were before. This new reality has forced everyone from governments and large corporations to individual citizens to quickly adapt. Whilst the root cause of this change is not welcome, many of these quick adaptations will bolster infrastructure and result in many businesses becoming more resilient with better technology and processes to support the needs of their customers.
I wanted to explore how the Coronavirus has changed consumer behaviour and what businesses across a variety of industries are doing to adjust. I will further attempt to extrapolate these trends to the Financial Services industry and see what we can learn from our neighbours in other industries.
During a fireside chat at the Entrepreneur First offices, I recall Garry Tan (former YC partner) saying something along the lines of “any office you see filled with printers and filing cabinets, is going to be replaced by automation”. This has stuck with me ever since. We’re continually hearing the terms “big data”, “machine learning” and “artificial intelligence” overused at every conference in pretty much every industry. What we’re really talking about is pattern recognition:- computers are very good at taking repetitive tasks, learning from them and performing them at large scale. That could be anything from reading a piece of paper and typing the information into a database entry form to screening mammograms for signs of breast cancer.
With the Coronavirus forcing us to work remotely, the automation of key processes has become more important than ever. Whilst many underwriting decisions previously relied on physical paperwork, lenders are now switching to online applications that can be assessed digitally.
We’re forever hearing new startups taking on incumbents and pointing at their legacy technology as the chink in their armour. With a sudden influx of demand being placed on these legacy systems as a result of Coronavirus, the need for new systems and technology is rapidly moving from “nice to have” to “need to have”. Take the UK government’s Coronavirus Business Interruption Loan Scheme (CBILS), for example. When first announced, Rishi Sunak talked of business owners “walking into a branch to make an application”, but in just a few days the UK was in nationwide lockdown. This, in turn, led to jammed phone lines as the 40 lenders accredited to provide the loans struggled to meet the unprecedented demand, with some even dropping out of the scheme entirely. Meanwhile, Fintech lenders like OakNorth, iwoca, Capital On Tap and others who’ve all developed automated lending processes were twiddling their thumbs, not able to participate in the scheme.
This disparity and pressure to change was perfectly summed up by this tweet from David Brear, CEO of 11:FS:
"Covid19 is a pretty terrible situation but change always happens faster when an external pressure is there... Fintech has been that pressure for banks for the last decade with the odd large chunk of regulation thrown in to boot also with Open Banking and PSDII…"
David Brear, CEO
The good news is that businesses will change and things will look significantly different for consumers as a result of this change in demand. Many lenders who’ve significantly reduced the number of new customers they are accepting or, in some cases, closed their doors entirely will be using this time to equip themselves for this demand for faster decision making and greater automation. We can summon food, shopping, cleaning, laundry, even massages from our sofas, and financial services should be no different. There’s no reason for us to rely on form-filling, paperwork and call centres anymore. Gavin Powell of Fintech Wales put this perfectly:
"We will trust technology more after this, and see a willingness to embrace and accelerate its use in products and services that we create, sell or use. Open banking will see new customers coming on board that would have previously still had a preference for physically located banks with cash and safes. Wealth investment and management opportunities will grow as a result of the hammering that most of our pensions and investments will have taken."
Gavin Powell, General Secretary
Fintech of Wales
I hope you are keeping safe and well during these uncertain times.