Recession and technology: What is going to happen?
The economy has fallen around 17.2% since lockdown began back in February. This is due to the vast number of businesses that have had to close their doors temporarily and permanently due to restrictions, with pubs, airlines and hotels feeling the worst hit from this. However, it may not all be doom and gloom, The Great Depression sparked the production of electric razors and car radios.In addition, The Great Recession allowed for huge success for major technology companies such as WhatsApp and Uber.
This pandemic has bought all economies to a near standstill, in America, nearly one in four people are out of a job. Although, the people still in a job have had to adapt to remote working, this has been stressful at times but companies like Dell and Google will be lapping it up as sales of Chromebooks have increased by a staggering 400% and sales of computer monitors have increased by 138%.
A recession is a good time to make an acquisition, McKinsey strongly recommends that you make significant acquisitions during this downfall to add to your portfolio and give you a competitive edge as the economy emerges out of this situation.
Technology can help us recover from this recession and the COVID-19 economy. The first way that innovative technology can power this recovery is through the 5G infrastructure, this infrastructure is predicted to be deployed throughout the nation by 2022, this will allow for technology companies to bring new possibilities to the market. Augmented reality and virtual reality are on the cusp of mainstream adoption, this will provide more opportunities, products and therefore jobs.
It goes without saying that technology has played a massive role in remote working, as more employees work from home and more companies become favouring of remote working, some employees may find themselves moving away from the city due to not needing to commute. This move will mean that their cost of living will decrease and they will have a higher disposable income to spend and benefit the economy with.
Do you think the technology will thrive in this recession? Tweet us at @TechnologyMagBC and let us know.
'Doing digitalisation wrong and risk being left behind'
Research has shown that 55% of bank executives view non-traditional players as a threat to traditional banks. The fear is justified, as digital banks could have a cost base approximately 60-70% lower than theirs. If this looming threat from innovative and digital-minded industry disruptors has not been enough to trigger a digital rebirth of legacy financial institutions, surely the biggest disruptor of them all – the pandemic – would force change?
It seems that despite studies showing COVID-19's long-lasting effects on the global economy to be of the likes of a substantial one-year reduction in worldwide GDP of more than 6%, the necessity of cost-cutting in 2021 is still not a stake high enough to steer legacy financial service CFOs in the same digital direction that the world is heading to.
Modern living now operates online, both professionally and personally. Distributed working, retail, and socialising are all the ‘new normal’, and the financial services sector is no different; the pandemic has resulted in 71% of global consumers now using digital-banking channels weekly – with contactless and digital payments at the forefront of this shift.
Due to this demand, many banks are experiencing a 50% increase in the use of their digital services. Research has shown that accelerated consumer adoption of digital banking tools has led to the growth of new digital banking users by approximately 20% over the last year alone. The decision-makers at legacy banks now have a choice to make: understand and adapt to the modern consumer’s needs and lifestyle or watch them leave.
This is different from the threat legacy banks saw in the 1990s with the rise in internet banking or even the financial crisis of 2008. Consumers now have a plethora of options available to them with a click of a touchscreen button in the palm of their hands. In order to remain a noticeable competitor in the industry, legacy financial institutions will have to cut costs by 25-50% in the next 3-5 years, which simply won’t happen. A lot needs to change.
Transformation in various forms
This transformation can materialise in various forms, from introducing operational efficiencies and superior customer experience by leveraging AI, modernising legacy systems and processes to allow for cloud-native end-to-end experiences, to building digital onboarding, quick loan disbursements, and real-time payments. With studies finding that firms could digitise many activities 20-25 times faster than previously thought possible, it’s a convenience simply waiting to happen.
It would be wrong to imply that all legacy financial institutions have not thought about accelerating their digitisation. Research has shown that 45% of banking executives are keen on transforming their existing business models into digital ecosystems right now. So, if sentiment and plans to pivot are beginning to take shape, where are legacy banks going wrong and why are changes not being made?
It’s simple. They have their priorities all wrong. Data looking at the top banking priorities for post-pandemic FS shows the three lowest priorities mentioned are instrumental to achieving digital transformation success: innovation, operational excellence, and culture development. This lack of focus on technology, operations and culture will ultimately derail most digital banking transformation efforts, rendering these legacy banks obsolete.
Changes need to be made for these institutions to stand a chance of surviving against their disruptor counterparts. As Jack McCullogh, founder of the CFO Leadership Council, astutely said: “Few, if any, investments can give an organization a sustainable competitive advantage like an investment in technology”.
In every crisis there is an opportunity, and the pandemic is a perfect time for legacy banking to reassert themselves as a viable option for consumers and as noticeable competition in the industry. The world has been forced into digital, and these legacy firms are no exception. It is now or never.