Written by </em></strong>Jan Bellens, EY Global Banking & Capital Markets Sector Leader and Matt Cox, EY Americas Corporate, Commercial, and SME (CCSB) Banking Consulting Leader</p> Adopting new technologies is more crucial than ever to creating long-term stakeholder value and fulfilling social responsibilities. </strong></p> The financial services industry is undergoing a profound transformation, rooted in data and powered by emerging technologies. The COVID-19 pandemic and its fallout provide an opportunity to accelerate the customer-centric strategies and efficient business models that will define success, while also leading today’s economic recovery in ways that reflect a sincere sense of social responsibility. </p> The time and cumulative costs required to develop a technology from idea to strategic adoption has compressed rapidly in recent years, and the changes inspired by the pandemic will reduce it even more. </p> To generate long-term growth and value in this environment, financial institutions (FIs) must embrace a “building-back-better” approach to planning that identifies a variety of potential futures and works backward to create a sense of shared strategic purpose and buy-in among stakeholders. </p> That means harnessing large volumes of real-time data to better understand customers’ needs and using those insights to forge deeper emotional connections. At the same time, FIs must improve financial performance by elevating enterprise efficiency and resiliency and effectively managing risk, while supporting the economic recovery.</p> Emerging technologies are key to achieving these data-driven objectives. Moving forward, cloud-by-design architectures and connected platform ecosystems will be strategic necessities for managing data volumes and costs, strengthening security and improving the employee experience. </p> Reimagining how to achieve long-term growth and increase stakeholder value, while also supporting the economic recovery in a socially responsible manner, will require FIs to concentrate their efforts in five areas: </p> Adapting to changing customer preferences and needs</li> Elevating enterprise efficiency and resilience</li> Driving differential business performance</li> Redefining the sustainable workplace</li> Managing risk effectively through the cycle</li></ul> Accelerating digital enterprise transformation is not without challenges. But in the current economic environment, the path to growth and long-term value creation lies in making critical decisions.</p> Improve customer experiences</strong></p> The world has shifted dramatically for most customers and FIs must respond. Corporate, commercial and small-business leaders who have experienced faster, more-personalised interactions as consumers expect the same from their commercial relationships. </p> More than ever, clients expect FIs to provide them with knowledge, connections and other value-added services to help them grow seamlessly through various lifecycle stages. </p> Meeting the challenge requires a holistic approach rooted in trust and advice. FIs must harness data to proactively identify needs and provide digital access to a wider array of products and services. They also must adapt operating models to eliminate segmenting customers by size or revenues. </p> The need to shift from product-driven engagement to customer experiences is more urgent than ever. </p> Elevate enterprise efficiency and resilience</strong></p> The recent stress highlights the need to boost investment in digital technologies that can enable more flexible operating models and reduce the dependence on manual processes and legacy systems. It also creates greater momentum to redesign approaches to worker locations and third-party relationships and create more resilient contingency solutions. </p> Going forward, FIs must rethink strategies and operating models with an eye for efficiency and new “what-ifs,” devise KPIs to support the vision and make hard investment choices. Improving efficiency has always been central to delivering value. </p> Differentiate business performance</strong></p> As FIs seek new sources of growth and value creation, they must re-evaluate business models and metrics, and invest in emerging technologies to create more differentiated and sustainable value propositions.</p> For many, these investments have been slow to take root. Consider that the typical FI today devotes 20%–40% of its budget to transformative technologies, while the rest goes to maintaining less efficient legacy systems.</p> The lasting effects of the pandemic mandate that FIs redirect more capital to transformation. Depending on the institution, that might mean using M&A to bolster scale, distribution capabilities or digital technology portfolios or prioritizing investments in digital and cloud-based applications to enable more effective data use. Institutions must also look to spur organic growth by creating more agile earnings models. To improve performance, FIs must accelerate their strategic transformations. </p> Reimagine the work experience</strong></p> The wholesale shift to remote work has gone better than anyone expected, inspiring changes in where and how people work.</p> Going forward, institutions must reimagine their facilities, with an eye for both safety and sustainability. Look for workspaces to leverage everything from nanocenters and worker badging to contact tracing. They also must envision operating models that give workers the flexibility to select the workplaces that enable them to effectively fulfil their roles.</p> New ways of working will likely upend the entire talent lifecycle, from recruiting through performance management and career pathing. Matching practices with the desires and aspirations of today’s workforce will become a competitive differentiator. </p> Manage risk effectively through the cycle</strong></p> COVID-19 has exposed FIs to a variety of new operational and credit risks that must be managed with refined risk appetites, controls, processes and models.</p> The risks of government stimulus and lending programmes must be managed carefully, with an eye for compliance through the full lifecycle of the pandemic. </p> As customers’ financial stress evolves, FIs should tailor early warning indicators to the unique economic impacts of the pandemic across sectors, regions and stimulus effects. They also must develop decision tools and processes to accommodate more compassionate collections practices.</p> Finally, enhancing operational resiliency will require paying greater attention to non-financial risk triggers and frameworks. Managing emerging risks will become more important than ever. </p> Building-back-better thinking </strong></p> FIs have a social responsibility to support economic recovery efforts and their customers. They also must protect and enhance their brands by managing capital with agility in uncertain times. The way they interact with stakeholders is changing and demands a new, more dynamic approach to developing strategies and business models.</p> The path to recovery and growth lies in accelerating digital enterprise transformation. It’s a shift powered by the cloud, new connected ecosystems and building enterprises at scale. But, just as importantly, it must be insight-driven, innovative and built on trust. At this pivotal time, FI leaders must step up to embrace the opportunity.</p>