PUBLISHED DATE: 2025-08-24 22:50:33

COVID-19: Preparing Banks for Business Beyond the Curve

PUBLICIS SAPIENT FINANCIAL SERVICES
SPECIAL REPORT — APRIL 2020

Much has already been written about the unprecedented impact of COVID-19 on the global economy and the millions of businesses forced into stasis by lockdown. While these effects are still very much current and, of course, challenging, we must start to plan for life on the other side of the curve.

As necessary as it has been to help customers and the public adjust to the crisis, it is equally important to focus on our approach once restrictions are lifted and we enter the ‘new normal’. Readiness for the next stage in what will undoubtedly be a long and uncertain period is crucial to helping businesses and workers drive the rebound that is so desperately needed.

The following report reviews some of the challenges banks face and defines a risk-based approach for addressing these, while realigning and setting up for longer-term success through the lens of digital transformation.

Contents

Banks on the Front Line of Recovery

Prior to the emergence of COVID-19, and in the 10 years since the last financial crisis, incumbent banks have been focusing on customer leadership, revenue growth, operational efficiency, and automation. With the economic impact of the crisis now in full effect, banks are well-placed to be a pivotal component of government intervention schemes, with the financial stability of customers being the primary concern.

UK Mortgage Market Share (2018)

80% of all mortgages are held with the 6 largest institutions.

UK SME Market Share (2019)

Large banks are dominant in SME lending; this will continue as many smaller institutions are not eligible to distribute government-backed SME loans.

Banks Face Four Categories of Key Risks

Key Risk Categories:

Banks will need to confront and mitigate each of these risks to form an effective response to COVID-19.

Reputational Risks (Impact: High to Low):

Income Risks (Impact: High to Low):

Operational Risks (Impact: High to Low):

Capital Risks (Impact: High to Low):

Customers at the Center of the Response

All solutions must start with the customer. Considering the severe impact COVID-19 is having on livelihoods and the sharp rise in unemployment, looking after the acute needs of their customers is paramount for banks.

This crisis will be the ultimate test as to whether banks can do the right thing. They’ll have to move from shorter-term metrics driving customer decision-making to a focus on customer lifetime value.

Banks will need to revisit their communications, policies, business rules, and operational processes to ensure they are fit for a very different economic, sociological, and reputational era. On the point of reputation, customers will be looking to banks to cut them some slack. Following standard rules and policies won’t suffice for a population that remembers very clearly the bail-outs of 10 years ago. Flexibility and regular, relevant engagement are therefore key elements of the response.

Examples of Highly Impacted Segments:

Empowering customers to digitally serve themselves through the crisis can provide both stability and longer-term growth.

Range of Potential Initiatives

RESPOND

READJUST

GROW

Key Questions

This crisis will be the ultimate test as to whether banks can do the right thing for customers.

The Role of Digital Transformation

The availability of new digital capabilities means that banks can fundamentally change their response from previous crises.

Enhanced Data and Analytics to Optimize Decision Making

What happened in 2008:

What is different now:

Digital Channels Are Prevalent and Replacing Physical Interactions

Strategic acuity, operational efficiency and resilience, and optimized decision-making have always been key drivers for banks. Digital transformation serves as the catalyst to enable banks to act and implement changes faster than ever before.

In terms of strategy, the right decisions will take into account short, medium, and long-term customer needs and challenges.

Key Challenges in Each Timeframe and Overarching Strategic Decisions

PILLARRESPOND (NOW)READJUST (3 – 12 MONTHS)GROW (12+ MONTHS)
Help customersHigher volumes of customer financial distress; customer services inaccessible due to isolationRepayments start for customers who have taken on more debt during the crisis; customer dissatisfaction at companies that ineffectively support themCustomer attitudes to their finances and livelihoods change; digital expectations increase as companies enhance their capabilities
Optimise decision makingNet interest income decreases due to lower spreads; need to scenario plan and demonstrate stability to investorsHigher levels of NPLs and customer arrears to be managed; greater scrutiny of balance sheet resilienceConsumer credit needs are unmet as a tightening of credit policies leave customers underserved; Tier 1 Capital requirements increase
Maintain operational resilienceComplex customer servicing cases increase; staff utilisation drops with remote working and illnessCost pressures force new efficiency requirements and reprioritisation of resourcesMore customers will have more complex financial needs after the crisis; operational efficiencies made during the crisis enable savings opportunities post-crisis

Overarching Strategic Decisions

Maintaining operational resilience is crucial. Changing traditional ways of working to enable the successful deployment of technology will be required to secure this.

Range of Potential Initiatives

RESPOND

READJUST

GROW

Key Questions

Decision-making and approaches to many of the income, capital, and reputational risks can be optimized through the implementation of technical solutions, such as machine learning and AI.

Range of Potential Initiatives

RESPOND

READJUST

GROW

Key Questions

Digital transformation is the catalyst that enables banks to act and implement changes faster than ever before.

Clients Taking Action

We’re already seeing clients take positive steps along the lines covered in this report: emphasizing strategic thinking and operational efficiency, with a response framed around the customer.

  1. Prioritizing Customer Access
    Within a week of the crisis hitting the UK, one of our clients acted to fast track communication to front line NHS workers and vulnerable customers. Working closely with them, we analyzed transaction data and implemented a solution which enabled the bank to prioritize contact from those customers.
  2. Facilitating ‘Treasury-as-a-Service’
    Other clients, including smaller institutions and building societies, have been moving to more sophisticated systems for computation of their liquidity positions. This allows them to meet funding needs and regulatory requirements, but also take a long view to help customers get through the crisis.
    We’ve assisted by providing cloud-based ‘treasury-as-a-service’ solutions, either through partnerships with fintechs or leveraging the capabilities of our existing clients.
    • Access new sources of funds: Accessing new products, new markets, and new channels by going direct instead of through capital markets
    • Drive greater automation: Driving straight-through processing of payments and back office activities (including exceptions); simplifying the breadth or complexity of products to enable the use of standard processes
    • Change product mix: Adjusting the portfolio based on risk appetite and market conditions; enabling greater flexibility in pricing and product attributes (e.g., term)
  3. Fast Solutions for SMEs
    Almost half of the UK’s SMEs actively used credit prior to the COVID-19 crisis. With lockdown restrictions in place, this is expected to increase.
    Leveraging cloud-based solutions, we’re working with clients to transform their SME lending and bridge the financing gap for SMEs. Based on our experience creating the Anglo-Gulf Trade Bank – the world’s first end-to-end digital trade finance bank, developed in partnership with Microsoft – we’re working to implement key features such as:
    • Accelerated time to loan (cash) of less than a day (up to defined bank threshold)
    • Dramatically enhanced customer interactions – enabled through self-service as well as digitally-driven relationship manager interactions
    • Streamlined operational capabilities – allowing relationship managers to focus on the customer vs. their back-end systems
    • Data-driven with ML insights for immediate credit decisioning in the majority of cases, as well as the option for proactive ongoing advice and support

A Large but Challenging Market

SMEs are higher risk and harder to assess than individuals or large corporates.

Heavily Impacted by COVID-19

There is an immediate need for credit for many SMEs now.

Significant government intervention is changing the market structure. There is insufficient capacity to support these businesses, as shown by the increase in UK SME Relationship Manager capacity from 72% (BAU) to 100% during the crisis, but still only able to support 82% of the need.

Conclusion

At Publicis Sapient, our purpose is helping people thrive in ‘the brave pursuit of next’. It’s an ambition that, now more than ever, has distinct relevance for an uncertain, rapidly changing world. Taking a bold approach to what’s next is key to tackling this crisis.

To start, you not only need to understand the opportunities to address immediate pressures and implement them quickly, but also have a plan for linking them to bigger changes that will resonate for the medium to long term.

Publicis Sapient can help with both these challenges. Firstly, through the formulation of rapid tactical responses to current pressures. And second, through strategic development, operational shaping, and the technical and cultural know-how required to effect transformational change for the future.

We’ll expand further on how you can make the most of business beyond the curve and achieve customer and operational leadership with follow-up posts at our dedicated site:

www.publicissapient.com/financialservices

Get in Touch

Key contacts:

Report authors:

www.publicissapient.com/financialservices

PUBLICIS SAPIENT — APRIL 2020