Virtualization: Disruption in Financial Services
The financial services industry is going through a phase of disruptive transformation with the advent of contemporary technologies, changing consumer demands, new competitors, and, of course, COVID-19. The challenge of connecting and engaging with customers is not unique to financial institutions, and many, if not most, of them are already pursuing digital transformation and virtualization. But the ability to operate in a virtual environment will require even more sustained, strategic effort with respect to connecting with customers and enabling remote work.
This poses two imperatives for financial institutions:
Virtual customer connect: The future of interacting and working with customers for financial services firm is moving beyond physical branches, call centers, and mobile apps to virtual branches, virtual assistants, and virtual reality. This shift will enhance the customer experience and the value proposition.
- Virtual branches for truly personalized experiences: Financial institutions, in particular banks, are looking to reduce or modernize their branch networks, and the concept of virtual branches is gaining traction. A virtual branch can simulate the interactions of a regular branch, going beyond a digital connection to offer live discussions with employees to improve customer experience and to deliver value-added services. The concept has already gained traction in Europe and Asia, and it is still emerging in the United States.
- Virtual assistants for enhanced customer experiences: Conversational AI-based virtual assistants and chatbots continue to gain traction amid reduced branch visits by customers. Chatbots are becoming the norm for many financial institutions as they develop their own virtual assistants, independently or in partnerships with technology vendors. COVID-19 and the pandemic have accelerated the adoption and acceptance of chatbots and virtual assistants, which, leveraged along with other technologies, provide the ability to customize services and interactions that improve customer relationships.
- Augmented Reality (AR) and Virtual Reality (VR) for improved transaction experiences: Another consequence of COVID-19 is that customers have moved to digital technologies to conduct transactions (for example, contactless payments). AR and VR can play an effective role in replacing in-person/in-branch encounters and, at the same time, offer new opportunities to engage with customers. For instance, a VR solution built into a digital banking platform has the potential to transform the car-buying experience by providing an auto loan offer directly through the dealer’s virtual showroom (Wipro’s contextually aware solution miliu (https://www.wipro.com/banking/miliu/) does this). VR can also create a virtual bank branch where customers can engage in a more personalized way through virtual assistants. In insurance, remote property assessment can be performed in real-time using AR technology when it comes to investigating claimed losses.
Virtual workplaces: Financial institutions also need to virtualize their workplaces by providing adequate resources to the workforce and by introducing clarity about how workers should collaborate across business units and functions. This requires assessing solutions with a long-term perspective to ensure business continuity and to enable anywhere/anytime/any-device access with seamless connectivity and enhanced security. Virtual Desktop Infrastructure (VDI) is increasingly gaining attention across financial institutions, and investments in VDI in financial services and could reach $6.3 billion by 20271, due to multiple benefits including remote access, security, cost savings, and simplified IT management. Several technology companies have started developing or already developed a hybrid cloud managed workspace solution (e.g., virtuadeskTM from Wipro) to transform workspaces for the financial services industry. Like enterprises in many industries, financial services firms are using virtual meeting, collaboration, knowledge sharing, and project management apps to support a large employee base across organizations.
To support these two imperatives, financial institutions are building virtual IT infrastructures that provide greater flexibility, innovation, and cost optimization. Examples include consolidation of servers and cloud computing solutions. Cloud is becoming a mainstay for the financial services industry, and COVID-19 has accelerated the adoption. Moreover, financial services companies are looking to leverage data centers by moving them to cloud-based servers; many of them lack adequate and updated technology infrastructure, which limits their virtual access to data and critical systems.
Senior managers of financial institutions should work with their technology leaders to support essential remote access to key systems and data while maintaining proper information security—critical to banking and financial services. The migration to a virtual environment creates more external access points to systems, potentially making them more vulnerable to cyber risks, including data theft, ransomware, and other attacks. Financial institutions also need to build security and resiliency against internal and external threats with robust DevSecOps pipelines and environment management.
The way forward
There has never been a better opportunity to use today’s technologies to transform the financial services industry to meet the many challenges of engaging with customers and managing a remote/virtualized workforce across multiple business segments. In order to get the best decisions to meet these challenges, financial institutions should throughout articulate their existing issues, map their goals and strategies, and invest in technology capabilities that meet their size and structure. Having virtualization as a key component of technology budgets and functional strategy frameworks can help financial institutions gain competitive advantage and enable them to make seamless migration to the virtual environment.