By Wayne Johnson, CEO, Encompass Corporation
As the UK appears to enter the peak period in its battle against the Covid-19 pandemic, the British public remains optimistic that better days do lie ahead. The effect of social restrictions appear to be reflected in the gradually improving daily statistics, and many onlookers are optimistic about the possibility that isolation measures may be eased before the end of Summer.
However, there can be no denying that the impact of the outbreak on British businesses and the wider economy will be long-term and painful, with many CEOs and investors already predicting a global economic recession much worse than 2008.
This crisis, though, must be viewed under a different lens to the previous global recession, which was characterised by a banking ‘casino culture’, whereby financial institutions used loans and derivatives to their own benefit, collecting the profits and landing taxpayers with the bill
Even today, many consumers worldwide do not trust the banking sector as a result of its actions in the mid-2000s. There is also still a lapse of trust between businesses and banks, with many organisations still feeling that financial services firms do not always have their best interests at heart.
However, the Coronavirus crisis has changed everything: hitting start-ups, small traders, shopkeepers and global enterprises. Thousands of businesses now have no choice but to seek emergency loans and government finance schemes, thus needing assistance from banks more than ever.
Fortunately, financial institutions, on the most part, have seemingly respected the urgency and devastation caused by the Coronavirus crisis, and many of the major providers have already introduced important measures to help struggling consumers. The Bank of England, for example, has already cut interest rates on their loans to 0.1%, and are working with HM Treasury to support large businesses by offering cash for their corporate debt. Elsewhere, many major consumer banks are offering mortgage, credit card and overdraft payment holidays for up to three months.
Assisting both individuals and businesses with personal finance, loans, overdrafts and any existing debt, it’s clear that a majority of the major banks have made their stance on Covid-19 clear – they are here to help.
For business owners, redacted finance fine print and pledges from the Treasury to underwrite 80% of loans if not paid back, means that a lifesaving loan could be a genuine option to them for the first time. The banks, on the other hand, surely understand that keeping businesses afloat with the help of deep pockets and generous investment, could be crucial to the speed of the UK’s economic recovery when this is all over.
Both logistically and technically, many banks are struggling to cope with the onslaught of demand for financial services.
Many consumers have faced slow application processes, long customer onboarding, and seemingly non-existent customer service, due to the fact that many financial institutions are simply not equipped to manage the quantity of inbound requests from a remote environment – with many teams running a limited team of experts and professionals due to the social impact of Coronavirus.
In today’s landscape, instant access to the financial support that businesses have heard about in the media is essential. Statistics from recent research that we published found that 38% of UK businesses have deliberately abandoned an application for banking services due to ‘slow due diligence processes’. Furthermore, nearly one third of businesses said they now trust challenger banking brands and fintech providers – known for their slick and fast digital onboarding – more than traditional banks.
In order to deal with this demand, it’s essential that financial institutions invest in relevant regulatory technology, which is designed to complete otherwise labour intensive and time consuming tasks. This might include Know Your Customer (KYC) due-diligence checks, or customer onboarding.
With the right technology in place to focus on these tasks, professionals can maximise their time efficiency and apply their expertise to where it is most needed.
In the worst case scenarios, banks and lenders without the correct RegTech and automation in place are relaxing background KYC checks to ensure inefficient processes can cope with demand. This has given rise to an abundance of compliance and risk issues, and actually means many banking services may not be adequately conforming to the law. Opportunistic criminals are well aware of these current pressures on financial service providers, giving rise to increased financial crime, such as money-laundering.
With the support of the government, the major banks’ new assistive policies have proven that they can be relied on during this incredibly difficult time – however, the lack of necessary IT infrastructure and logistical shortcomings, means many businesses are still being let down, at a time when they need financial assistance the most.
By introducing the right automation technology to improve the customer experience, the financial services sector can find its feet again, rebuild working, trusted relationships, and support British businesses at a time when they and the economy are in critical need of it.