Adapting to the New Normal: A Response to COVID-19 | Asian Banking & Finance - The Latest News, Headlines, Insight, Commentary & Analysis

Adapting to the New Normal: A Response to COVID-19

By Eiichiro Yanagawa

It is fair to say that financial institutions have, with technology, largely succeeded with stopgap measures in the initial drive to adapt to the new normal of the “After COVID-19” (AC) world. Celent released the results  of its global survey at a digital event on April . Of course, financial services depend to a large extent on country-specific regulations, business practices, and consumer behavior. Likewise, the impact of the COVID pandemic and its effect on financial technology will vary by region and depending on how the pandemic plays out in different places.

The survey inquired about responses to the new normal from four perspectives: Effectiveness of remote work and WFH; IT difficulties in responding to the crisis; Deployment of new IT in response to the crisis; and Postcrisis usage plans for the cloud (or SaaS).

Many survey respondents indicated they had successfully responded to the IT challenges of the AC era and were preparing for the future (440 individuals answered the first question online in real time, after which the number of respondents fell to 254). The field of survey participants included financial institutions and IT vendors, and was skewed toward larger companies, which presumably accounts for the positive responses indicating success in dealing with the pandemic challenges.

Effectiveness of Remote Working and Work From Home
Some 64% of survey respondents answered that they had been able to very effectively manage and minimize work disruptions with remote work / working from home (WFH). Some 34% of respondents said that WFH had come with a degree of confusion and disruptions but that WFH had allowed them to generally be able to manage. Overall, only a mere 2% felt that WFH programs were ineffective.

These results indicate that, at the very least, the surveyed companies were able to successfully transition to WFH in the early stages of the response to the crisis. Of course, these results are dynamic and change with time, meaning this data does not necessarily indicate that WFH is still being conducted effectively.

Besides, it is worth noting that the majority of Celent event and survey participants belong to organizations positioned to implement business continuity and disaster response (BC/DR) plans. It is safe to assume that many smaller financial institutions and IT startups are currently grappling with many challenges related to the sustainability of WFH, including BC/DR.

This challenge is largely uniform across regions. The majority of internationally active companies are equipped with BC/DR programs on a global scale. The WFH programs enacted for this crisis can be assumed to be an extension of these. To that point, none of the APAC respondents said that their WFH programs were ineffective.

At the same time, APAC survey  responses indicated confusion on the part of FIs and IT vendors in Japan and APAC, and significant differences in abilities to respond to the crisis.

IT difficulties encountered when responding to the crisis
Of the five topics prepared for the survey — project management, collaboration, content management, security, and compliance — the most popular answer, given by 38% of respondents, was that none of them apply. Presumably, survey participants are companies with a keen interest in financial technology and firms that successfully address common IT challenges. Ostensibly, particular IT challenges in crisis response are highly dependent on the circumstances of individual companies.

The next most popular response was “Pipeline, project, and task management,” given as a challenge by 29% of respondents. This challenge was perceived to be greater for IT vendors than for financial institutions. IT managers and business executives should pay particular attention to this area as all three top answers relate to IT control and collaboration. At the same time, Celent wants to draw attention to the less-prominent areas of compliance and security.

There are vast regional differences when it comes to this challenge. Compared to the internationally active and Western companies, APAC-surveyed companies had a higher response rate to the five topics addressed in the survey (project management, collaboration, content management, security, and compliance).

At the same time, APAC survey results indicated the three areas of security, collaboration, and project management as crucial challenge areas. Presumably, these will be tackled as priority areas in IT responses launched in the AC era.

Status of IT deployment
Next, the survey asked about technology changes required to promote WFH. Some 44% of respondents said their level of technology was already adequate to accommodate the needs and that they had no plans for related IT policy changes. A more granular look at the responses indicates that IT vendors recorded a much higher level at 50% compared to 27% for financial institutions on this item. Among financial institution respondents, the most common answer was “Pushed out new software,” with 50% selecting this versus 34% of IT vendor respondents.

Following new software deployment, the next most popular response was “Already made radical changes to our technology infrastructure,” given by 36% of financial institutions and 22% of IT vendors. Additional supporting comments from respondents included the following:

•    “Our company approved a draft of what had been a stalled digital transformation project in the days following the start of the pandemic.”
•    “[As a financial institution that usually works from offices,] we had to purchase thousands of laptops for employees who were suddenly forced to work from home."
•    “We rapidly distributed remote Wi-Fi and VPNs for remote computing work, but our server-side expansion could not keep pace with the needs (due to the rapid increase in remote access of people working from home).”

We at Celent want to sound a warning when it comes to the sustainability of current solutions. To address the needs of the new AC normal, a new scope of IT solutions is needed. No one believes that the world will be returning to the BC era when things stabilize. As piecemeal solutions cobbled together to withstand the initial onslaught begin to give way, financial institutions will be pressed to establish new technology strategies.

Amongst APAC survey respondents, popular responses were “Pushed out new software to our employees” (39%), “Already made radical changes to our technology infrastructure (e.g., VPNs to accommodate increased traffic)” (36%), and “Will need to make additional changes to our technology infrastructure” (31%).

At the same time, APAC survey respondents also offered the following comments:

•    “The digital transformation will only accelerate further.” — Major Tokyo-based asset management firm
•    “We have revised various guidelines in response to the demands of social distancing. We will be revising our IT standards moving forward.” — Foreign-owned sell side firm in Tokyo
•    “This will result in the wholesale and immediate erasure of remnants of the analog era. Establishing new operations and IT is a matter requiring immediate attention.” — Foreign-capitalized sell side firm in Tokyo

Now is precisely the time to plan IT for the new normal. During the lockdown and slowdown, mid- to long-term strategy changes should be planned, formulated, and rapidly implemented when restrictions are lifted. Hypothetically, even if a return to the BC era were possible, it is not clear that the AC era IT would then remain relevant or effective. This pandemic proffers an opportunity to undertake radical and fundamental change.

Superficial symptomatic solutions cannot be regarded as an answer to the AC era and the new normal it represents. A digital transformation (DX) “treatment” that gets at root causes is required. Such an approach gets to the root cause of the issue or, for this analogy, the “affliction” and is the polar opposite of a superficial, stopgap “treatment.” Eventually, relieving the “symptoms” will require treatment and the help of natural healing powers, but some of the issues have a single direct cause (such as calls for social distancing calls) and other multiple and compound causes (such as macroeconomic slowdown and changes in consumer behavior). In light of this, a new policy approach will be critical to adapt to the new normal.

Planning to Harness The Cloud (and Software as a Service)
Finally, the survey concluded by asking how companies had changed plans to deploy cloud and software as a service (SaaS) following COVID-19. Some 45% of respondents said they had no changes planned, 16% said they planned to increase the use of the cloud, 32% said it was highly likely they would increase cloud usage, and 7% answered that they were starting to assess future cloud plans. Little difference was evident between the responses of financial institutions and other companies. The majority of responding companies said they plan to modify their cloud usage stance based on the future.

APAC participants gave more in-depth answers: 26% responded with no change, 32% said they had plans for change, 32% said the likelihood of an increase was high, and 10% said they would begin an evaluation. APAC survey responses were representative of the whole. One Tokyo global IT service firm respondent noted that while new development will slow down, there will be new IT demand and opportunities to review outdated infrastructure, with a focus on remote real time communication and security support.

Demands for social distancing signal the end of traditional SI service offerings. In particular, this should be an opportunity for a radical rethinking of IT sourcing models across IT development, operations and maintenance at financial institutions, and a change of IT vendor business models on-premise and scratch development. As one respondent from a global data vendor in Tokyo put it, “More than cutting costs, we should see this crisis as an opportunity to radically rethink and reengineer the efficiency of all our operations.”

Beginning Work To Address Root Changes
It is fair to say that financial institutions have largely succeeded with stopgap measures in the initial drive to adapt to the new normal of the “After COVID-19” (AC) world. At the same time, for firms determined to take action to tackle root causes and not sit idly, satisfied with initial success, the second half of 2020 is the time to launch new IT strategies to respond to the new normal.

Drastic innovation in IT sourcing models will be essential for some. Celent anticipates the dawn of a cloud-native era across all financial IT fields and will strive to support cloud technology selection efforts at financial institutions and solution development by IT vendors with the frameworks.

Financial institutions seem to have generally succeeded in implementing stopgap measures to cope with the AC world. At the same time, companies that seek to address the fundamental cause of the challenges should not allow themselves to be satisfied with initial success but rather regard the second half of 2020 as the time to launch new IT strategies for the AC world. Institutions can’t afford to squander the opportunity presented by any crisis. While COVID-19 is undoubtedly an unprecedented crisis, it also presents an opportunity for companies to address the risks and potential associated with the change it brings to the postcrisis world.

There is no going back to the pre-COVID world. It is imperative to launch initiatives to fundamentally adapt to the new normal.