Technology lies at the heart of the ethical banking revolution

Sudden and massive loss of life, loss of financial income, loss of personal freedom. The pandemic has impacted many lives. It has also impacted many more as business are shut down, staff lose their jobs, their income, and their livelihoods.

We have a collective opportunity to lift our communities out of this dire situation. Over ten years on from the global financial crisis, banks must show that they have learnt lessons and will ’do the right thing’ to serve their customers ethically, appropriately and in the interests of all stakeholders.  And believe it or not, banks are perfectly positioned with the tools at their fingertips to do just that.

We have a collective opportunity to lift our communities out of this dire situation

“Doing the right thing” is increasingly becoming a priority for banks. The survival of the economy and the banking sector are tightly intertwined. A bank’s obligation is to deliver returns to shareholders through sustainable growth, and to achieve, this they must support their customers by offering relevant and timely support and services.

As government lifelines are phased-out at the beginning of next year, many small and medium-sized enterprises (SMEs) will be looking to the banking system for support. Small businesses that have been damaged by the pandemic, now find themselves on the brink of extinction and need a glimmer of hope. They require essential assistance to survive. There have been some great examples of banks supporting their customers during the COVID-19 pandemic, offering multiple mortgage holidays, removing overdraft fees, keeping branches open and even providing helplines to provide expert help. But more can and must be done.

Banks have the expertise to help the next generation of SMEs rebuild after the pandemic, by removing operational headaches from owners and letting them focus on running and growing their businesses. Ultimately, what is required is for banks to step up to promote and encourage financial well-being for their customers be they individuals or businesses. The banks that are having the most impact are often those deploying innovative technology as an enabler to bring their intentions, decisions and actions to life and make customer-centred, purpose-driven, ethical and sustainable business models a reality.

Yet, there is clear evidence of the historic underinvestment in technological transformation by banks. These decisions have significantly disadvantaged banks’ ability to provide the relevant support at required speed. Just look at the difference between some established banks running heavyweight legacy systems and the more nimble, agile challengers with the latest banking platforms. Many banks have very quickly pivoted to people’s needs largely because their cloud and Software-as-a-Service (SaaS) based technology has enabled them to develop and deploy new services in a fraction of the time it takes the larger incumbents.

A case in point is Virginia-based Atlantic Union Bank. When the coronavirus hit, supporting small business clients was the bank’s top priority. And through the US government’s Paycheck Protection Program (PPP), they had the chance to make a real difference. It was some task – with stringent requirements, soaring demand and huge application volumes. But through a new digital loan portal which deployed the latest technology, Atlantic Union Bank stepped up. The bank approved 6,500 applications – totalling $1.4 billion small business funds – in just 13 days. When the programme wrapped up, they had helped around 200,000 SME employees. All banks can benefit from this type of model if they invest in the right technology.

Banking is all about managing your costs and risk whilst driving growth and value for customers, and ultimately shareholders. This has typically been a difficult balance to strike as investing in growth has meant reaching broader markets, which in turn has required additional investment in technology platforms to achieve scale whilst maintaining human personalisation

However, the traditional banking model is being revolutionised because SaaS and cloud technologies can help banks create hyper-efficient cost structures and in turn pass that value on to their customers. For example, Flowe, Italy’s newest challenger bank, has created a hyper-efficient cost structure to be more eco-friendly and deliver more value to its customers through ethical financial services with an emphasis on financial inclusion. By leveraging the right technology, it was able to come to market in just in five months and onboarded 15,000 customers in its first week.

Another example of a bank deploying the latest technology to provide ethical banking is Varo in the US, a fintech and now fully licensed national bank on a mission to improve the financial health and wellbeing of the everyday American consumer. With its industry-first “No-Fee Overdraft” it estimates is has saved customers more than $100 million in overdraft fees during the past year.

But no conversation about how new technologies could make a tangible difference would be complete without mentioning artificial intelligence. AI will allow banks to personalise services to a group of one, giving them a true understanding of individual or cluster challenges, thereby supporting them to make tailored recommendations. As a result, banks will be able to move away from the broad persona-based treatment of customers and tailor their support to the individual, be they a 24-year-old graduate in their first job or a 39-year-old home owner in upper management. All to ultimately support and empower the underserved and wider economy.

Change is afoot and it’s a change in culture both in banks but also its society’s expectations of banks. The pandemic has acted as a catalyst for putting the humanity back in banking. Given the year that many businesses and consumers have had to face, banks must do their part to help both consumers and business not only survive but thrive in this new normal. Those banks doing just that are without fail placing the latest technology at the heart of their offering.