When banks were flooded with loan requests from businesses struggling with the fallout of the coronavirus pandemic, hastily built robots helped several lenders cope with the deluge.
The bots were one of many quick technology changes deployed across the industry during the crisis, a contrast to the slow progress it’s made in the past two decades to improve technology in the face of increasing competition from fintech rivals.
Now the jolt from the COVID-19 pandemic has accelerated the process even though banks globally are having to cut IT spending this year for the first time since 2009, based on data from research company IDC.
“Bots allowed us to process a much higher volume of applications than we would have been able to do before. It meant the timelines didn’t get longer with the massive volume,” said Simon McNamara, chief administrative officer at Britain’s NatWest, which has granted more than 13 billion pounds ($16.90 billion) of state-backed loans.
It is a pattern that has played out across banks globally, where technology changes that would usually take months were done in a matter of days.
At Citigroup, there was a 300% rise from a year earlier in the number of new accounts opened digitally by corporate or fund clients during March, while the number of those clients using its online and app services rose 25%.
“We were seeing this trend pre-COVID but it accelerated during COVID,” Naveed Sultan, Citi’s global head of transaction banking, said.
“The traditional ways of working became almost non-existent.”
But as banks have to budget for a pick-up in loan losses due to the pandemic, some projects, such as large-scale customer data mining to offer more personalised services may have to be shelved, IDC research showed.
Global IT spend by banks is set to shrink by 1.7% this year to $200 billion, down from $203.5 billion in 2019, based on IDC data. Growth is then forecast to resume over the next three years, albeit at a slower pace.
Banks have prioritised process automation in the face of spiking workloads as a result of the COVID-19 crisis, based on IDC surveys of bank executives.
Santander’s UK division rolled out data analytics tools to speed up loan application processing and credit checking as borrowers came under strain.
“We had prepared but the volume was higher than expected,” Santander UK’s chief technology officer Carlos Selonke told Reuters. “It’s a huge focus for us, making changes to increase our velocity.”
Swiss bank UBS developed six bots within three days which assisted client advisers in handling the immense inflow of coronavirus crisis loan requests from businesses in Switzerland, said Mike Dargan, global head of group technology at UBS.
Banks have also been prioritising shifting data to the cloud to speed up response times and allow more staff to work from home, while also bolstering defences against the growing threat of cyber attacks.
“We had four main focus areas, remote working to enable the employees at UBS, system stability, as we saw a lot of volatility, cyber security, and operations continuity,” UBS’s Dargan told Reuters.
‘MOONSHOTS’ ON HOLD
On the flip side, bank spending on consumer-facing technologies for branches and online services is forecast to grow more slowly, increasing from $31 billion in 2020 to $40 billion in 2024, according to IDC.
Other less urgent projects such as systems overhauls and longer term so-called “moonshot” digital ventures are being shelved.
“Banks are struggling to deploy new software,” David Buxton, chief executive of Arachnys, a startup that sells compliance technology to banks. Many employees are still working remotely which means they may not have the tools needed for new and more ambitious IT projects, he said.
NatWest ditched its fledgling digital savings brand Bó early into the pandemic.
McNamara said the pandemic was a factor in the decision as there was strong demand for the bank’s existing mobile app, which has added 700,000 users since the pandemic started.
Although banks have reined in IT spending overall this year to cope with the initial pandemic fallout, IDC predicted growth will resume from next year, with overall spending forecast to jump by a quarter to $250 billion in 2024.
Industry experts say the pandemic has focused bank executives’ minds when it comes to IT spend and more digitally savvy lenders will steal a march on competitors.
“There is a digital divide,” Jerry Silva, global banking research director at IDC said. “Sometimes I call it the predatory gap, because those banks are going to be able to steal market share from those that weren’t prepared prior to 2020.”