Change remains a constant in the financial services industry. Even so, the Covid-19 pandemic has accelerated some of the transformative forces that were already well underway in the East Africa region.
Many banks and insurance companies had to implement certain policies, tools and ways of working almost overnight - exposing vulnerabilities and testing their resilience at the same time.
It remains to be seen what the ‘new normal’ will look like for the financial services industry. Nonetheless, the beginning of a new year is an opportunity to take stock and refocus. The following four areas are worth considering in early 2021 and beyond.
Cybersecurity
As cyber-attacks increase and regulators take closer notice, the pressure to act mounts. At the same time, the current environment has propelled more and more transactions into the digital sphere.
Methods of exploiting certain vulnerabilities to conduct fraud are already well known to most banks, particularly those involving mobile banking transactions. Additionally, banks and other financial institutions should anticipate the possibility of cybercriminals targeting larger and different types of transactions, going forward.
A number of institutions in this region had to adapt rapidly to the Covid-19 environment and implement solutions that may have certain vulnerabilities. Now, their Boards and management teams are having to go back and reflect on their cybersecurity strategies from a tools and technology perspective and also from a skills development and experience perspective.
Financial services institutions need to invest continuously in their people and expose them to different environments so that they can stay abreast of the latest trends.
Loyalty
Many financial institutions are finding it harder and harder to attract and retain talented employees and to earn the loyalty of customers. With so much competition for the best in the industry, employees and customers can afford to choose carefully.
Employees increasingly seek career opportunities powered by technology and a supportive corporate culture; similarly, customers seek a financial services experience that is technology-enabled, relatable and convenient.
The Covid-19 pandemic has created an environment where remote working and digital services are preferable and safer, but relationships still matter. Investing in employees as well as customer relationships will be key to success in 2021 and beyond.
Digital
Every financial institution has a digital strategy and has made some kind of investment in it. Positioning the brand from a social media perspective, running digital advertising campaigns, deploying bots to assist with customer service, launching apps and other similar strategies all serve to digitise the business, but the real game-changer is integrating these strategies effectively and deriving insights from the data that they generate.
Data analytics can make sense of unstructured information to identify trends and allow the financial institution to shift its outreach and retention strategies (and risk management) in response.
Other digital tools like blockchain technologies, artificial intelligence and robotic process automation may require a medium-term view. Financial institutions should now focus on understanding where these technologies are headed and what value they can provide. We can expect the costs associated with these tools to come down over time, and for the tools themselves to evolve.
Some digital tools can be rolled out quite quickly, whereas others may take more time. Financial institutions need to have a holistic view of their operations, their strategy and the value of different digital tools and look for ways to innovate and adapt over time.
Governance
To fully deliver the oversight required in this rapidly changing environment, Directors who sit on financial institution Boards now need to engage more frequently; the quarterly regime certainly will not work.
Boards must oversee and steer complex strategies that encompass cybersecurity and risk management, customer outreach and internal succession plans, as well as various digital investments - and much else besides.
Directors must have the experience, focus and expertise to challenge management when necessary and to ask tough questions, and to represent the interests of shareholders and other stakeholders. They must also invest the time in continuous professional development to remain relevant and well-informed, over and above certain fiduciary requirements.
Integrating four focus areas in 2021 and beyond
There is a great deal of overlap between these four focus areas. Cybersecurity influences an organisation’s digital strategy, and its digital strategy can expose the organisation to certain cybersecurity vulnerabilities.
A digital strategy takes into account the evolving needs and preferences of customers, but can also influence employee retention if the strategy facilitates flexible ways of working or new skills development.
Underpinning an organisation’s entire operation is good governance. Clear communication and expectations can shape a positive, productive relationship between the Board, stakeholders, management and employees. Taken together, these four areas are worth focusing on in 2021 and beyond.
The writer is Partner and Financial Services Industry Leader, PwC Rwanda.