“Clearing cheques has always been a headache, well not anymore!

1. Simply walk into the payee bank

2. Present the crossed cheque at the counter

3. Provide your account details & get the funds transferred

Clearing time reduced from 48 hours to less than 3 minutes.

Surreal? No, done. State Bank’s PSD Circular No. 04 of 2020 on Facilitation regarding Paper-based Clearing Operations in the wake of COVID-19.”

The above was a message circulating in the social media world only last week. The change was inevitable. An idea whose time had come, COVID-19 seems to be fast forwarding it.

A little sad however, is that it took a pandemic to materialise. Fascinating though, how everyone, from the government to state institutions are doing their bit, with bold and unprecedented programmes to bolster the economic situation of our country as well as our workers and business, especially small businesses.

Prior to the corona pandemic, retail banks were facing different challenges; threats from digital FinTechs, changing consumer behaviour, high customer churn and a depressed economy. Today, everything is in flux.

The cheque clearing example is just one of the many small steps by the banking sector but represents a giant leap on account of consumer convenience, brought about in the banking processes over the past few weeks.

72 years in the making, no financial institute had prepared itself to the reality of a pandemic occurring where it would need its people to work from home. How easy it was for the phone banking officer to request the customer to visit their parent branch for another biometric verification when the customer would annoyingly ring them to seek help on activating their mobile application. Why should have they changed that process? How could they? Did the regulator allow them? Were the managers brave enough to challenge the status quo? Was the consumer ready to accept new modes of banking?

Observing businesses which are doing the best during these times are the ones which are and have been the most transparent. A local food business invested into an infrared thermometer. It monitored the temperature of all its staff members including the delivery staff and documented it on a daily chart. At day’s end, they published their chart on their social media feeds. An airline posted a video on how they disinfected the aircraft before the flight, which built enough trust amongst their customers that it is now flying to three destinations in the world amidst low demand and travel bans.

What happens to the banks when customers change their behaviour so rapidly that the old way of servicing is no longer relevant?

As consumers shelter at home, they are rapidly accelerating the adoption of digital technologies, whether be it video-conferences, peer-to-peer payments or online banking. Only yesterday did we help a 60-year-old aunt of ours download her bank’s mobile application allowing her to transfer funds for a charitable cause.

Here is a summary of forces obliging legacy banks to reposition themselves, amidst rapidly changing behaviour – to stay relevant in post corona virus world:

Mobile banking will accelerate; banks will have more customers downloading their mobile applications. Citizens of this country will financially include themselves to survive. Banks will have more data than ever. The cost of switching will decrease as well. Therefore, the customer who believes that a bank that delivers trust and security in digital transactions and processes will be winning.

Digital banking, finally, is the next normal: this increasing comfort with digital technologies and decreased reliance on physical branches will accelerate the transformation of the banking landscape, giving a head start to the banks with stronger digital capabilities. In China and Italy, for example, four weeks after the coronavirus spread, the estimated increase in customers’ digital engagement is 10 to 20 percent higher. If these customers have a positive experience, it could shift behaviour for the longer term.

Innovation is non-negotiable; in normal circumstances, before a bank was to make a strategic choice for a transformation shift, it would spend time in understanding the target customer segments, involve the customer facing staff, go through layers of management, and finally start small to test and learn. However, fortunately or unfortunately COVID-19 is leading the digital transformation pace of our institutions. Not giving much thinking time to leaders. The banks of today need to self-disrupt (fast) as part of the next normal, before a new player gets the mind share and volume share of their customers.

The key strategic choices; go digital from within? Retain the rights to patents and development, lift the entire institution. The challenge of course, would be dealing legacy mindsets and a lack of innovation culture.

Can we collaborate with FinTechs? This enhances the customer experience and connect while leveraging their talent. However, this strategy may bring about a sudden issue of regulatory compliance and risk of weak collaboration.

Acquiring a FinTech? A simple straight forward method to increase the go-to market speed and capitalising on a readymade platform. Integrating technology and getting the right valuation would be tricky.

Investing or incubating a FinTech? Though whatever you develop, you own the innovation but do you have the time to dedicate a team and work on monetising the investment?

Our advice on strategy: (a) this is a time for banks to establish industry’s Banking Transformation Advisory Group – perhaps under the ambit of Pakistan Banks Association, (b) Fix the culture, (c) Drive sustainable change, (d) Identify their top talent and retain them, (e) Work with the regulators relentlessly.

Our advice on execution: (a) Engage with customers; develop content, conduct webinars on financial literacy, government measures, wealth-planning, fraud-prevention and create special offers on credit availability, flexible payments and terms and conditions, (b) Technology reinforcement; issue virtual cards, digital applications, expand e-commerce, decentralise call centres, execute remote services, reorganise network and provide employees with the right equipment, (c) Uplift digitally; incentivise staff and customers to opt for digital migration, reallocate budgets to digital marketing, recalibrate capacity across channels while re-skilling existing workforce.

Reminded are we of the famous saying attributed to the legendary Charles Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.”

The writers are retail banking futurists. They tweet @IshaqShahzad and @91Qasim.

Digital banking, finally, is the next normal.