The coronavirus crisis has hit everyone sudden and hard. We originally thought it was a Chinese crisis and now it’s a global one. It’s shut down economies worldwide and the banking system has been asked to step in fast and address the crisis. Governments worldwide have asked banks to give out loans to large and small businesses, and payments to individuals. How have the banks fared? In general, badly.
A bank is built on risk avoidance, prudence and strong screening of any borrowing. A sudden shock to the system has tested that model fundamentally and it has failed. This is why so few people and companies who need urgent financial assistance have received it.
More fundamentally, a bank is built upon physical foundations. This crisis has closed those foundations and it is clear that most banks do not have a back-up. As an example, one major financial institution in the UK who ran their call centre in India has closed all contact. They have a technical issue online, so you cannot access their internet services; they have no app, so there is no digital contact; and they have no call centre, so you cannot talk to anyone. They have failed completely. More than this, they are not the only one.
Now, this is not a diatribe against banks and their weaknesses. We know there are many and that it is not a thing that banks are proud of. Banks have been trying to digitalise for years, but find it hard. It’s not easy.
However, this crisis is truly showing the cracks in the traditional banks ailing infrastructure. Whilst workers and media move to video conferencing and social media seamlessly, banks have no backup for office closures, branch closures and the loss of physical workers. Working from home and working remotely was not planned for. Neither was a pandemic. Although, as I write this, it’s true for large, traditional banks but what about the new banks?
Interestingly, many digital banks have transitioned seamlessly from offline to online. They tested the issues of a pandemic in February, and moved rapidly to gear up for movement from office to home. They were ready.
This is a moment in time that, using a word bandied around by politicians a lot: “unprecedented”. Yet, I disagree. This was precedented. We knew a pandemic would happen one day. The question was when, not if. This pandemic was forecast by books dating back over fifty years (The Stand by Stephen King) and films for years (Contagion). We knew this was coming.
Today, my question is not meant to be antagonistic, but it is wondering. I wonder why we planned for years for the collapse of our systems. When our technology stops working, we planned for that. It’s called business continuity. Why didn’t we plan for the closure of our offices? Why didn’t we plan for our staff to be at home? Why didn’t we create a digital backup of our physical structure?
Sure, it’s easy to ask now but, in hindsight. I guess it’s a bit like the UK Government’s 2016 simulation of when a pandemic occurred, how would the health service cope. They found the answer was badly. The health service would fail. Did they address this with a backup? Nope. There were too many other things happening: Brexit, austerity, elections and more.
The same is true with banks. Even if most traditional banks had planned for a physical meltdown, would they have created a digital backup? Maybe. But only if issues of losses, shareholder returns, share price, branch closures and more had not got in the way.
What this crisis has shown me and many others is that a digital structure to backup a bank’s physical structure has become more critical than ever. We just must wait for this crisis to be over to create it.