Digitization Safeguards Financial Enterprises in Turbulent Times

The COVID-19 outbreak has had a huge impact on the financial sector. Facing an uncertain external environment, financial enterprises need to deepen digital transformation, and optimize their architectures, capabilities, and technologies.

The COVID-19 pandemic has had a huge impact on the financial industry: Governments around the world have lowered benchmark interest rates, reducing interest income levels as a result. Elsewhere, the pandemic has caused total business shutdown in many industries, leading to overdue payments and defaults, increasing the rate of non-performing loans, and degrading the quality of assets. Isolation and quarantine measures have caused financial institutions that rely on physical outlets to cease operations altogether, and some small- and medium-sized financial institutions face bankruptcy.

Meanwhile, financial companies with strong digital capabilities have quickly pivoted to providing online services, using online channels to carry out marketing and customer service activities. They have continued to provide various financial services, effectively limiting the negative impacts of the outbreak. In unforeseen circumstances, companies need to adapt just like this to protect themselves from an ever-changing external environment. Making the most of next-generation digital technologies and improving the digital level of enterprises is integral to improving coping mechanisms overall, helping them effectively adjust to changes outside their control.

Flexible and Open Service Architecture and Scenario-Based Orchestration

Alongside serious business challenges, fresh complications, and new policies to wrestle with, crises such as the pandemic can also present new opportunities for businesses. To minimize the negative impacts while seizing the opportunity to gain a head start on competitors, enterprises should respond quickly and launch new products and services. For example, during the pandemic, the Agricultural Bank of China — a leading Chinese commercial bank — quickly designed and released wealth management products related to prevention of the pandemic, rolled out online customer services, cooperated with medical institutions to provide remote consultation services, and collaborated with government departments to provide livelihood services. These measures enabled the bank to effectively adapt to the new environment and scenarios.

Traditional service architectures of financial enterprises have proved unable to adapt to changing service environments, complicating the roll-out of new products and services designed for new scenarios. In an ever-changing world, financial enterprises need a flexible and open service architecture, especially for service processes. While service processes need to be broken down to basic service actions, to form service capability modules, service architecture must support the quick combination and flexible orchestration of service capabilities, so that enterprises can quickly launch new scenario-specific products by orchestrating basic service capabilities. This way, enterprises will be able to make available products and services in new scenarios, ensuring smooth business operations in changing environments.

New-Generation IT Architecture Supports Rapid Service Changes

With the development of next-generation IT technologies, distributed, cloud-native, and microservice architectures are gradually replacing the traditional centralized architecture of financial enterprises. These next generation architectures help enterprises build flexible, agile, and efficient IT platforms. In a rapidly changing external environment that sees the emergence of new service scenarios, they enable enterprises to quickly adapt and launch new applications, products, and services.

During the pandemic, financial enterprises that have turned to next generation architecture have been able to quickly respond to the situation and develop financial services based on epidemic control requirements — affirming the value of next generation IT architecture. For example, the Industrial and Commercial Bank of China (ICBC) used cloud computing and distributed technologies to provide contactless financial services for customers around the clock. Based on an open and integrated ecosystem, the bank also launched an emergency material management system and a personnel health information registration management system, to support key units, companies, and communities such as epidemic prevention and control command centers, health commissions, and medical institutions at all levels.

Internal Collaborative Office Work and External Customer Marketing and Services

In recent months, remote working has become an important way for enterprises to continue to deliver services. To build all-online work capabilities, financial companies must take action. These are some courses of action to consider:

• Build Remote Working Capabilities for Employees on a Collaborative Office Platform

Financial enterprises should select a suitable collaborative office platform. The platform must support various communication modes between employees — including text, voice, video, and conferences — to meet daily work requirements. Because financial institutions handle large volumes of key information, information security is a priority in remote work, so a collaborative office platform with high security and reliability is needed to ensure the security of financial and operational data.

As well as communication and interaction between employees, remote working also requires remote handling of various service processes. For the financial sector, process requirements related to risk control and regulatory compliance are crucial. To achieve effective remote working, these service capabilities and processes need to be integrated with the collaborative office platform. The platform must be open and allow the seamless integration of service processes, so that employees can perform business activities such as risk control and complete the entire financial service process online.

• Develop Customer-Oriented Online Marketing and Service Capabilities

During the pandemic, most offline outlets are — or have been — closed, and online financial services have become the only option. Some elderly customers who had been hesitant to use digital services quickly had to learn how to transfer and remit money online, and how to pay for living expenses. They even started to shop online for groceries. That’s why some banks switched to online marketing and services, achieving quite impressive results. For example, a bank wealth management executive held a live promotion online, attracting many new customers to the bank.

Online marketing and service capabilities are becoming increasingly vital for financial companies. In China, with the development of Internet technologies, new online marketing and service models have emerged, from text messages and images, through audio and video, to live broadcasting, which is so popular today. Financial companies should analyze the advantages and disadvantages of various marketing and service channels so that they can select the ones to effectively integrate in order to develop an efficient digital marketing system.

Investing in Financial Technologies and Strengthening Big Data and AI Capabilities

Financial technology has ably demonstrated its value, providing uninterrupted services and online and offline linkage through product and service innovation, in turn ensuring the stable running and business continuity of financial institutions throughout the outbreak in China. This is the conclusion of Highlighting the Value of Financial Technology in Fighting COVID-19, a report released by Xinhua Finance along with other agencies.

When the pandemic ends, financial institutions should continue to invest in financial technologies, and further integrate technologies such as big data, Artificial Intelligence (AI), and the Internet of Things (IoT) with financial services, so that they are better prepared to cope with future crises. In terms of big data, financial institutions have high-quality data assets, unrivaled among all industries. Financial institutions should analyze the massive amounts of data they own to extract full value from it. The application of key AI technologies — machine learning, knowledge graph, natural language processing, and computer vision — in various nodes of financial service processes will play an important role in product innovation, process reengineering, and service upgrade, improving the capabilities of financial institutions in marketing, risk control, and customer service.

The COVID-19 pandemic is a unique occurrence that brings huge challenges, but also points to new directions for the development of the financial services industry. To safeguard themselves against the impact of the pandemic — and any future emergencies — financial institutions should continuously optimize their architecture, capabilities, and technology.