COVID-19: A catalyst for change in the banking industry

COVID-19 has posed huge and sudden challenges to societies and businesses, disrupting old ways of living and working. One of the most visible manifestations of this in the corporate sphere has been the need for organisations to rapidly transition all or most of their workforce to a remote working model. For financial institutions, key priorities have been to ensure that service and support has been maintained for customers in difficult times and that emergency loans and payment holidays are in place for those who need it. But another priority has been to maintain payment operations. After all, an effective payments system is the lifeblood of the financial system itself.

Physical operations pose challenges The fact is that while electronic payments happen systemically through various automated payment platforms, banks still rely on physical groups of people to run payment operations. This includes the processing of physical instruments like cheques and cash and running highly secure electronic transfer operations. Across both electronic and physical payments, teams of people are also needed to deal with exception processing and to ensure compliance with critical regulatory requirements such as anti-money laundering and fraud checks or the investigation of payments that may be to or from sanctioned entities or jurisdictions.

The good news is that to date, a great majority of personal and business customers will have noticed no difference to payment processing speed and efficiency due to COVID-19. Faster electronic payments have continued unaffected, contactless and mobile payment services have continued to work, and salaries have been credited through payroll processing as normal.

However, the reality is that behind the scenes, the disruptions created by COVID-19 have spawned some significant issues for payment operations to deal with. Cheque processing is a case in point. While cheques have all but died out in many regions of the world, in some jurisdictions such as East Africa, they are still widely used. Processing them promptly and minimising the risk of fraudsters trying to intercept or redirect payments is therefore a matter of great importance. But, despite all the automation that has been introduced to the origination, printing and distribution of cheques, there inevitably remains a significant manual component accompanied with a higher probability of misuse and fraud. Teams of people must work in relatively close collaboration to process them. This has had to continue with appropriate social distancing and introduction of hygiene controls.

Electronic transfers have been another challenging area. These are key to the flow of liquidity in the market, with trillions in regional currencies being transferred daily. The controls in place to process these are necessarily very rigid, taking place in a highly controlled physical environment. Bank responses have varied here, with some being able to move their entire electronic transfer operations to a virtual model, while others have simply not been able to.

Many banks have therefore continued to physically staff both cheque and electronic transfer operations, but on a reduced basis with perhaps a quarter of the normal workforce onsite at any one time, and with new policies and procedures introduced to balance operational effectiveness with safety requirements. Most have opted for a split team approach, alternating the groups of people that come in.

Remote working requires workarounds Organisations have also struggled to adapt to the need to deal with payment exceptions and regulatory controls, remotely due to increased cycle times and inefficiencies across operations and customer support. With staff now working apart and accessing systems through remote desktops or Virtual Private Networks (VPNs), the time-consuming manual activities and virtual handoffs required (i.e., emails between team members and workflow approvals) have led to elongated service level agreement delivery times and have challenged traditional governance, control and data protection mechanisms. The monitoring and tracking of payments against fraud and other financial crimes has also become significantly more difficult and time-consuming.