The coronavirus outbreak has brought major changes to the way we work, where we shop, and how we choose to spend our free time. Disruption to society as a result of important safety measures and government regulations has upturned life as we know it.
When it comes to the financial sector, the adoption of digitalisation has become more essential than ever. Traditional financial institutions that rely heavily on face-to-face interaction have borne the burden of this pandemic with remote working becoming mandatory and only essential trips being permitted. Because face to face interactions have been slowed or even prohibited, the financial world has had to rely on end-to-end digital alternatives to stay competitive.
For all the disruption and uncertainty that coronavirus has brought to the economy, it has also accelerated the future of finance. In this article, I will explore how COVID19 has pushed open banking adoption and changed financial services in more ways than anyone could have expected.
A cashless future – now we see it
A study by the National Institute of Health found that the coronavirus can live on some surfaces for as long as three days; the thought of exchanging germs on Euro notes and UK Pennies was enough to put most people off hand-to-hand exchanges of physical money. As well with most European countries buckling down on regulations, and only allowing essential trips, many turned to online orders as a safe and efficient alternative; whether for groceries, pharmaceutical supplies or the purchase of a new bicycle, lockdown saw little to no exception to services that could not find a way of operating online and without the need for physical cash.
That said, there it is no surprise that across Europe, the shift to card payments has increased — even Germany, known for its love of cash, is on board with the revolution. A recent survey, taken by the German Payment System Initiative, revealed 57% of Germans use debit and credit cards now more than they did before the pandemic, and almost half have “significantly reduced” their use of cash
Older generations, who have traditionally rushed to cash-in-hand during the times of crisis, have also been found to be comfortable with cashless payments, with 66% of 55+ year-olds becoming more comfortable with cashless payments since the lockdown, according to Hitachi Capital (UK) PLC1.
Open banking will be front and centre stage
As well as moving away from cash, COVID-19 is likely to spur a widespread and systematic revamping of high-impact digital journeys in the financial sector. Paperwork will continue to fall away as open banking replaces much of the admin that previously dominated the industry. It’s been just over two years since the term Open Banking became a tangible reality in the UK; now without hand-to-hand transactions, COVID-19 has accelerated the phenomena, which is necessary to easily provide third-party financial service providers open access to consumer banking, transactions, and other data from financial institutions.
When it comes to accounting, in particular, more efficient processes and easier methods of making and tracking transactions, technology, and Open Banking will ultimately free up a whole lot of their time. By clearing up the calendar, the phenomena will make room for new kinds of work and enable accountants to spend more time on consultancy and value-added services, where previously there may have been perceived as a bonus service or from the client-side, a service at a much larger additional cost.
As well as consultancy, these technologies will have other, less direct impacts on the client-side – instead of needing a shoe box full of receipts, Open Banking and AI will reduce the need for paperwork and lead to more confident and self-managed clients. If a client is keeping accurate books themselves, then the accountant no longer has to do all the numerical admin, rather the value adds lies in analysing the numbers and providing useful advice such as “Is it time to put your prices up, as your profits are lower this year.”
A remote workforce, and the right tools to run it
COVID-19 has seen remote working becomes the new normal for many employees as businesses look to continue operating during the global pandemic. Findings from a poll run across the Verdict Network indicate that 46% of respondents would look for a mix of remote and office-based working once lockdown measures are eased, while 27% would work remotely full-time if given the choice.
Now, more than ever, people are away from the traditional office space and utilising technology to keep business running as usual. For accountants and others in the finance industry, this means the need for Open Banking and accessible financial files is no longer an added benefit, but an absolute essential.
Ultimately, AI and Open Banking are opening the gateway to a more efficient and effective financial sector. With the drive to become an increasingly cashless society, COVID19 has put the spotlight on digitalisation, encompassing the reality that businesses have to keep up by providing the best technological solutions and services if they are to keep their heads above water in a time of turmoil. Adaptable, digital solutions for the financial industry is thankfully at our fingertips, and players in the industry must remain vigilant and flexible if they are to succeed as we move through the pandemic and beyond.
Main image credits: PAPALAH/ Shutterstock
Guest post by Ed Molyneux, CEO and co-founder of cloud accounting software company, FreeAgent