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Five trends for lenders in a post-pandemic world
Economies have faltered amid the chaos of coronavirus. But what will a brighter 2021, have in store for lenders? Louise Ikonomides, managing director, Banking Works, shares her thoughts.
'Move fast and break things' was the major motif of 2020. Coronavirus moved fast. And boy did it break things. As businesses have adapted, people's lives have fundamentally changed and the economics of lockdown has slowed capital investments, spooked consumer confidence and challenged lenders. The past 12 months have perfectly illustrated the curse of interesting times. But as we begin 2021 there are signs that the worst of the crisis is passing, and a year of sharp economic recovery will undo much of the havoc.
So, with a legacy of pandemic that will affect how businesses approach work, what does the year have in store for small-to-medium-sized lenders? Here are five trends they should consider.
1. Fintechs need to focus on the fin.
All too often we read headlines about how tech entrepreneurs are venturing into finance, bringing with them a dashboard of tech to tackle lenders' needs, from back-office data and automation to front-end consumer-facing apps – all with a sprinkle of AI, blockchain or cloud, according to the fashion at the time. Behind this, of course, is regulation aimed at improving offerings and opening up services, with PSD2 and Open Banking the notable examples. While tech is bellowed over the embers of finance, too few fintechs understand the financial, strategic goals that lenders must also balance. This might not matter to a large, Big 4 bank, but smaller lenders will not have the in-house expertise to integrate a tech solution into their fuller services. In 2021, suppliers who understand finance first – and can design and build tech solutions that make strategic sense – will have the biggest impact on lenders' bottom lines.
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2. Creating deeper relationships.
Dedicating time to a relationship might not suit the approach of a fintech based on scalability, but lenders need longer, thoughtful relationships with their suppliers. This means a consultant that understands the lender's position in the markets it operates, the opportunities it can tap, the regulatory framework as well as the lender's unique operational capabilities. The era of low-interest rates and the high number of lenders mean that margins are tight, and that the complete picture of strategy, capability and technology must deliver profit.
3. Crisis management isn't just for the short term.
The first lockdown in 2020 had a seismic effect on many companies and their customers, with many businesses radically changing the way they operate, and in some cases changing the markets they serve. So, too, lenders have had to pivot, re-examining their relationships with borrowers, as well as adjusting to working from home. In such circumstances many will have simply used a sticking plaster approach to fixing the problems they faced and enabling the services they offer – using out-of-the-box solutions or putting in place available yet inappropriate procedures that make business possible. However, some of the emergency measures carried out in 2020 will need unpicking, and replacing with longer-term, sustainable approaches and strategies. Those businesses that were able to think long-term even during the crisis will naturally be at an advantage in 2021.
4. Move fast, break less and mend as you go.
As every lender will tell you, financial markets rely on the trust between the parties involved. So why jeopardise valuable relationships just for the sake of being disruptive? Lenders should consider new technology and evolve their strategies, but not at the expense of everything else. In today's market, Lenders need to move fast but with consideration; look at what works, what doesn't, correct mistakes quickly, and capitalise on the successes. Chase down the big ideas by taking the small steps that move you forward and embed learning into your teams as you progress.
5. A different approach to work, and less jargon.
Have you solutionized your thought shower and leveraged through the vertical channels? Like many industries, the parlance of money lending invites jargon. Sometimes it's unavoidable shorthand, crucial for talking about often complicated, abstract ideas. More often, jargon is a means to befuddle conversations and avoid the issues that matter. Lenders need simple, straight-talking language that is part of a relaxed yet direct relationship with a supplier. If the pandemic has taught us anything beyond the importance of bookshelves, it is that time is too precious for entertaining waffle, and that a little humour and informality go a long way.
With a brighter horizon and recovering economies, here's to a happier 2021. Let's just move less fast, and mend things instead.