As the global pandemic approaches a second wave, the digitalisation of payments and finance has continued to accelerate, subsequently meaning that the issue of financial inclusion continues to be key.
Simon Jones, Chief Customer Officer, ClearBank spoke to Payment Expert about the crucial role of banks in helping consumers and businesses through the pandemic.
PaymentExpert: What moral duties should banks have in order to help the global economy get back on its feet while fighting the pandemic?
Simon Jones: Banks have a critical duty as economies try to recover from the pandemic. First, do no harm. Banks should make sure they are not perpetuating any further damage. Technologies exist and are widely utilised that promote contactless financial engagements. This should be an immediate focus for all financial institutions which still rely on physical means to provide their services. Cheques, cash and branch networks should be urgently reconsidered in the immediate term.
Thereafter, banks and financial services can and should be a vehicle for good during the pandemic, and in the post-pandemic world. A bank’s primary function is the re-allocation of capital between those who have excess and those who need it. Banks need to make sure they are rapidly making capital available to those who have been impacted by the pandemic.
Access to financial services needs to be enhanced to ensure the marginalised and unaware do not suffer more than they are currently. It is vital that the payment systems that support economic activity continue to innovate and support diverse customer segments.
PE: Should we be demanding more from our banking system to support people and businesses?
SJ: We should be demanding more from our banking system to support people and businesses today. The Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) illustrated how quickly innovative firms could organise and roll out new products when under pressure to do so. However, the vast majority of banks were still too slow to process applications and release funds. In a crisis environment, we need banks to assess, approve and make capital available quicker to fight the cash flow risks faced by affected businesses.
The banking systems need to improve speed and transparency, helping to reduce friction in payments. Banks need to accelerate innovation to support increased e-commerce and new customer segments. Application programming interfaces (APIs) have already dramatically reshaped the user experience in a variety of platforms and industry sectors. Payment APIs in particular have seen widespread use across the consumer and corporate landscape, making it easy to send money, accept a credit card, or get a loan for a big purchase.
PE: Has a lack of transformation over a sustained period inhibited the ability of banks to provide support?
SJ: Entrenched processes founded on decades-old bureaucratic structures is the reason why older banks cannot compete with digitally advanced banks today. Customers should not be punished as a result of the banking provider they choose, but the legacy high-street firms were simply unable to compete with the digital challengers during the pandemic and a large disparity in service levels resulted.
Simple factors like online self-service capabilities and call centre wait-times illustrated this gap. Customers who had remained loyal over the years to a bank that had not invested adequately in technology modernisation suffered as a result of that loyalty.
PE: What technologies and examples of change can help the underserved and wider economy?
SJ: Digital real-time services should be available to every banking customer in 2020. There really is no excuse. Banks that force customers to physically go to a branch for any reason are not only guilty of falling behind the times but of perpetuating risk, especially given the recent pandemic. With the technology available today, there is no reason a customer should have to step out of their house to perform any financial process.
At the same time, banks have no excuse for forcing their employees to go into offices. If employees have to go into the office to work, it is indicative of an outdated process, system or organisational structure. It’s a simple test to see which banks are adequately prepared for the future – look for the banks that are operating fully remotely with no business interruption.
Credit union members are typically the most vulnerable in society. We’ve heard cases in the past of a mother needing a loan to get her children on the bus to school, but the money didn’t arrive in time (an hour after application) so they missed the bus and day at school. ClearBank has proven through Partners and Hoot that money arrives in members’ accounts in seconds. This can genuinely be life-changing for members – inclusivity and access to cash should never be overlooked. Credit union members are often the worst victims of payday lenders, given their speed to issue loans. Credit unions using our platform removes that exploitation by increasing the speed of delivery of payments.