Consumer and small business spending are a huge and growing contributor to U.S. economic growth – nearly 70% in the third quarter of 2019, according to the Federal Reserve Bank of St. Louis. And banks and issuers are a linchpin connector between their hundreds of millions of clients and the economy which has been grinding along at a fraction of its normal pace. Clearly, banks of all sizes will play a critical role in the post-pandemic recovery well beyond processing and distributing government- backed loans to businesses.
At Profit Insight we have been working hard with our clients and speaking with leadership during these last several weeks and one of the revelations has been how our business vocabulary has been turned upside down.
Phrases such as 'activation rates', 'account growth', 'purchase volume' and 'net interest income' have largely been supplanted by, 'work from home', 'waivers', 'deferred payments' and 'hardship'. Meanwhile, observers both in the media and inside financial institutions try to describe what they are seeing with terms like 'unprecedented' and 'existential' which would have been unthinkable only a few months ago.
So, what are large financial institutions doing to navigate? How have they changed what was business as usual into a mobilization to support their clients and business? Where do these efforts stand?
While we've seen varying timelines, most banks have moved to address the crisis with the same essential priorities:
- Stabilize the environment by ensuring the safety of human and financial resources.
- Secure the physical and emotional safety of associates.
- Demonstrate calm and measured leadership to maintain morale.
- Convert from centralized open workspaces to enabling remote work environments for most staff.
- Maintain or enhance data quality and integrity to support management decisions and business activity.
- Buy time and ensure core functions continue.
- Preserve key capabilities / services offering.
- Develop and expand financial models and insights used to react and address the needs of businesses & customers.
- Prepare for the long haul as the "end" of the crisis may not be soon.
- Support and project the brand by being visible and consistent in messaging and actions.
- Take actions to ensure strong momentum as the crisis wanes.
- Determine the foundational steps to drive a rapid return to financial and operational health.
- Continuously assess the market with ability to adjust models until a new "normal" is reached.
- Find opportunities to strengthen the business and create opportunities to improve performance.
Navigate the Priorities
What we are seeing in the market today is quite different than what we observed prior to the crisis.
Banking leaders are concerned because - while they and their teams have risen to the challenge so far – no one knows what will come next or how long this will last. The usual management approaches have been overridden by the need to act quickly and with less information than the norm. Many organizations are well into the second - or Process - phase and most are thinking about what the banking and payment landscape will look like a few quarters forward and determining the steps to ensure they can successfully navigate the new normal.