How COVID-19 challenges financial institutions to become digital masters

COVID-19 has presented the payments industry with many major challenges. Since the last six months, it is more necessary than ever for payment firms to rapidly prioritize technology transformation in order to become digital masters and stay competitive. Financial institutions are being pushed rapidly into transformation, according to the World Payments Report 2020 by Capgemini.

During a virtual session during Sibos 2020, Brian Caplen, Editor for The Banker, chairs a panel discussion together with three guests. Mark Buitenhek, Head Transaction Services, Commercial Banking for ING represents the banking scene. From the European Payments Council, the industry that focuses on harmonization of electronic payments in the single Euro payments area, Director General, Etienne Goosse joins the discussion. Christophe Vergne is Cards & Payments Practice Leader for Capgemini Financial Services. In the discussion, they examine together the challenges that COVID-19 brings to the payment industry.

How well prepared do you think the payments industry was to handle something like this, did the industry cope well with the pandemic?

Vergne: “I think that nobody was really prepared for this pandemic. However, talking about payments, the good thing was that payment services were mainly already digital and automated. We have not experienced any disruption of service across the globe on that. Some institutions within banking have realized they were still relying somewhat on paper-based processing. They had to design backup solutions and backup processes in the blink of an eye.”

Buitenhek: “Of course, we saw the working from home mode increase rapidly. The first measures in the payments industry were for ensuring our business continuity. Maintaining employee and customer safety, was our main goal. We started to monitor the availability and the usage of the ATMs so that cash would remain accessible. Besides that, requests from supermarkets came in for the need to come up with solutions for not touching anything while paying. Take for example increasing the maximum amount for contactless card payments to 50 euros. It’s remarkable that this has been done within a week when normally, this would probably take months.”

Capgemini’s World Payments Report 2020 reveals that payment firms had to deal with increased risks across business regulations and operations. In fact, 87 percent of executives says they face a high likelihood of cyber vulnerabilities. Are you more concerned about cyber-attacks and other kinds of risks?

Buitenhek: “As the world becomes more digital, the sequel is that online risks increase. Cyber criminals really stayed up to date and rebranded their common phishing and smishing tactics to a current theme. They now talk about how you need to refreshen your debit card because of COVID-19 and how you must send it to the bank. So, the methods have not actually changed. We talked about agility in the beginning and that we think we’re pretty agile. I can tell you: criminals are agile as well. This forces us to set up a special COVID-19 task force to monitor transactions and protect consumers against fraud even more than before.”

To what extent do you think this pandemic has pushed technology transformation, what is your perception of how the digital revolution is developing in banking and where do we stand on that?

Goosse: “I don’t think COVID-19 has changed the push for innovations. I think what has been pushed is the use of innovative means of payments and channels, whether it’s contactless or via wearables. You could say COVID-19 is exploring the use of innovations. The only thing is, harmonizing across Europe sometimes is still seen as a challenge. We shouldn’t forget that we live in a global world and that there are global standards. The European Payments Initiative is an example of what could lead to operating in the same direction.”

Buitenhek: “The European Payments Initiative is an initiative that was scheduled long before anyone had ever heard of COVID-19. We see EPI as an opportunity to make the European payments landscape less fragmented. If successful, this will enable consumers to do peer to peer payments with any other European consumer – which is not the case yet. The landscape is still very fragmented, with for example iDeal being very successful in the Netherlands whereas Girocard and Bizum are most used in Germany and Spain. The goal of EPI is enabling Europeans to easily pay anywhere in Europe.

It’s clear that COVID-19 is speeding up the planned road maps, specifically for digitalization. With the majority of our clients now completely contacting us digitally, these type of customer journeys need to be really outstanding and scaled up. The major change I think has been that our client behaviour has changed. Banks are being challenged to transform in terms of innovation because consumers expect the highest standards of technology and become more comfortable with doing everything digitally.”

Vergne: “It is a fact that banks are forced to accelerate their transformation. Reinventing their offerings in the digital mode is critical for success. Not really a shock that almost 80 percent of the banks said their top priority was to become digital masters.”