As the novel coronavirus pandemic continues to spread around the globe, it has been disrupting supply chains, economies, and industries. Financial situations in countries impacted by the pandemic have to move quickly to safeguard their employees, transform their operations, and continue to serve customers in new ways. This article is focused on what could be expected from the financial services industry after this crisis:
Interest Rates will be Lower than Ever
A lot of central banks around the globe have decreased interest rates to support their local economies. This cut in interest rates will speed up the compression of net interest margin, affecting a major revenue stream for the banking industry.
Borrowing May not be as Easy as Before
Because of a lack of funds available on the market, credit will be tightened. This means that borrowers will find it hard to get financing. This could also happen as lenders may not be willing to lend or because of the increasing cost of borrowing that individuals and businesses may not be able to afford.
Economies Will Reinforce the Significance of Operational Resiliency
With the increasing risk of further pandemics as well as geopolitical and societal tensions, operational resilience will become vital. This is also true because of the intensity of cyberattacks and other uncertainties that continue to target the financial services industry.
Moreover, regulators may have to be very vigilant, levying serious fines on banks that have to take a break in service, affecting customers. Every financial institution will recognize the importance of investing in preparation, expecting failure, and investing in recovery to succeed in the industry.
There Will Be an Increase in Credit Defaults
In recent years, banks enjoyed record low non-performing-loan (NPL) performance. Given the economic disruption that resulted from business closures and stay-at-home requirements, asset-quality deterioration is possible. Depending on the scale of federal assistance programs, the industry may see a serious increase in defaults which could be higher than defaults during the 2007-2009 global financial crisis.
Firms will Turn to Extreme Digitization on Cloud
Financial institutions will improve the customer experience through extreme digitization. They will integrate each aspect of their business into a single platform and tooling. Digitization I the industry includes middle-and back-office operations and support functions where transformation and automation of processes are embraced. Extreme digitization is established on an openly hybrid cloud platform that allows financial institutions to securely develop, operate, and manage applications and workloads consistently across the cloud.