What is the future of financial services?
In contrast to the global financial crisis (GFC), COVID-19 triggered initial impacts in the real economy and will increasingly manifest itself in a second stage throughout the financial sector. The lockdowns and social-distancing measures imposed by governments around the globe to flatten the infection curves have caused significant damage to many industries, all of which are served by financial institutions. Compared to all previous crises—including the GFC, the oil-price shocks of the 1970s or even the Great Depression of the 1930s—COVID-19 will likely have the most substantial impact on the global economy, with a one-year reduction in worldwide GDP of more than 6%. Financial services firms need to consider 7 macro trends to properly plan for the future.
Macro trends that matter and their impact in a post–COVID-19 world
As we shift our attention to the future, it is important to note that although COVID-19 presents significant challenges, other fundamental factors such as geopolitical tensions and evolving regulatory regimes will shape financial institutions significantly in the mid- to long-term. We don’t have all of the answers, but there is a set of macro trends that financial institution leadership teams need to understand in order to properly plan for their future:
A new way to think about the future of your business
As you think about the future, it may be helpful to have a structured way to think about your organisation, operating platform and overall business. At PwC, as part of our Future of Industries project, we determined the four key categories and areas of focus to consider as you prepare for tomorrow.
Repair the damage
The damage from COVID-19 to the real economy—and, by extension, the financial system—is only beginning to manifest itself in various ways. This damage will require deliberative activities to repair financial institution balance sheets and reputations.
The following repair activities should be top priorities for financial institutions across the board:
Rethink the organisation
Many of the questions about organisational structures and talent that existed before COVID-19—the efficacy of remote working and the productivity of agile teams—have been answered. These and related tools and approaches are now being deployed, and are succeeding, on a massive global scale.
Rethinking the organisation requires a focus on the following priorities:
Reconfigure the business and operating platform
Along with the repair and rethink activities, many financial services institutions will need to reconfigure the business and operating platform, in some cases making profound changes in order to succeed in the future. To be sure, the post-GFC changes were also profound, as the industry grappled with increased regulatory costs by selling businesses, reducing workforces, increasing offshoring and taking many other important actions. The COVID-19 crisis is only accelerating trends well underway in each sector and underscores how much work remains to be done.
There are myriad reconfigure activities, but for purposes of brevity, we will highlight the critical areas:
Report the results
As various stakeholders demand more transparency and accountability from financial institutions, the focus will increasingly turn to complete and accurate reporting in a range of areas, including financial performance, ESG, regulatory compliance and the like. In addition, it will be critical not to miss perhaps the most important attribute of any successful financial institution in the future: being able to articulate its unique culture, story and value to society.
Download the pdf here.