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How COVID-19 is Impacting the Financial Services Industry

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COVID-19 is impacting banking operations and, as a consequence, related business process services (BPS). Banks are already restructuring operations to address the emerging challenges from COVID-19 (see below for those challenges). The changes are just beginning and will continue to evolve over at least the next four months. While the global adaptation to COVID-19 will take much longer, perhaps several years, each country’s banking industry will need to make sizable adaptations to their operations in a four-month timeframe in order to survive without permanent impairment to their business. The four-month timeframe for adaptation within each country assumes two months for COVID-19 to stabilize in each market and two additional months to implement measures to mitigate any future pandemic risks. Across all markets, operational adaptation will take one to two years to fully implement. 

Operational impacts to date

So far, the operational impacts have manifested across customer access  and employee access.

Access for both customers and employees has been impaired due to:

  • The inability of customers to enter brick-and-mortar locations, often due to the imposition of lock-downs by governments
  • Volume spikes in transactions creating online access and processing delays, often due to market reactions (e.g. stock market declines and liquidity demands)
  • Alternative demands on time (e.g. from children at home)
  • Inability to conduct standard sales and customer in-person interaction.    

Actions being taken to mitigate these impacts have included:

  • Increasing remote access options by:
    • Increasing capacity for online access, typically via increasing cloud access to core systems
    • Sending omnichannel access apps to customers for their use
    • Outbound messaging on what options are available for remote access 
  • Scaling processing capacity by increasing:
    • Access to remote temporary labor
    • Use of RPA
    • Cloud capacity of core systems (especially transaction systems)
    • Processing capacity to match diurnal demand spikes
  • Operational hygiene reviews, including:
    • BC/DR plan updates
    • Liquidity planning (including drawdowns of credit by BFS clients)
    • Reviews of in-branch operations changes, including increased availability of cash in branches and customer interaction SOPs 

Bank product line impacts

The impact of COVID-19 within the banking industry has varied by product line, as follows: 

  • Commercial loans: increased drawdowns of committed loan lines by customers to assure liquidity. Also, certain consumer-focused industries such as restaurants have shut down operations, cutting off revenue-generating capabilities. These activities have increased risk exposure, tracking efforts, and funding requirements. Operational impacts include increased data gathering and reporting requirements
  • Payments: retail customers withdrawing physical cash from branches to assure liquidity if banks are shut for a period. This temporarily increases operational loads on the branch system. Operational impacts include increased staffing and a shifting product mix for daily operations at branches     
  • Mortgages: anticipated loss of income will reduce loan origination demand while increasing the need for default management. Operational impacts include changing skill sets required for bank workforces and increased loan loss reserves. Increased loan loss reserves directly require reductions in the balance sheet. Shrinking the balance sheet requires significant senior executive effort.   
  • Student loans: temporary closure of colleges seems likely to reduce demand for new student loans but is likely to lengthen the repayment period for existing loans. Reduced job prospects increase default management requirements. Operational impacts include changing skillsets from loan origination to default management.  

Additional impacts by product line will emerge over time. Trade finance will likely be very heavily impacted by the pandemic.


To summarize, operational impacts to date have been focused on reduced in-person access to financial services purchase and delivery. Business impacts to date have been focused on increased credit risk and the shift in resources from revenue generation to risk mitigation.

We expect that over time the impacts will cause banks to shift product mix, employee skillsets, and channel delivery. The costs of changing products, workforces, and delivery will be very large.

We will be monitoring this space to develop a much more granular understanding of how these impacts will reshape financial services operations. We are conducting multiple banking executive interviews (>100) across all geographies to ascertain:

  • Emerging priorities
  • Lessons learned
  • Best practices
  • Impact on business
  • Decisions made.

We are also conducting interviews with leading BPS suppliers to ascertain the impacts on their business and how they are responding to the impact of the COVID-19 pandemic. We will be reporting on this rapidly evolving dynamic over the next several weeks.

In the meantime, we would like to hear your feedback.

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