December 8, 2023


Delighting finance buffs

Coronavirus: Speeding up cash flow key to reviving virus-hit economy

Slow money is threatening to kill entire economies.

As Covid-19 spreads deeper and wider, financial transactions are slowing down. Optimistic news of accelerated growth has been replaced with dark forecasts. Decades of development and progress have been broken. Manufacturing has fallen silent. Businesses are closing. There is massive reduction in human activity.

According to the International Labor Organization (ILO), the equivalent of 195 million jobs have been wiped out by Covid-19 within a few weeks.

The economic cost of social distancing is proving to be beyond comprehension. Globalisation has been replaced with cautious and infrequent visits to the neighbourhood store for groceries.

Without a global debt moratorium, there will be a wave of devastating sovereign default. Emerging economies will be shattered by uncooperative trade policies that break economic linkages, triggering shortages of medical supplies followed by essential goods.

The challenge for financial systems is to ensure money is sent coursing back through the veins of the global economic system quickly.

This needs to happen urgently in every form, starting with government-backed rescue packages to lowered interest rates. Money needs to be injected quickly back into systems, failing which economies will be on the brink of a coma.

The US government announced the single-biggest bailout in history that will send $2.2 trillion into the accounts of businesses and individuals hit by the virus. In most instances, direct payments will be made to Americans — the major heads for disbursement are $532 billion to big businesses, $290 billion as direct payments to families, $290 billion in tax cuts, $377 billion as loans to small businesses, $260 billion for unemployment insurance, $150 billion to help states and local governments.

Germany announced a $1.7 trillion aid package while the UK went ahead with a $398 billion package. Nation after nation is announcing large-scale economic relief measures to help individuals and businesses to fight the crisis.

Money at velocity

The challenge for every government contemplating similar measures will be to send the money quickly to the right accounts before the virus sends economies into complete stasis.

Governments need to improve the availability of money at velocity. In this instance, speed won’t kill; lack of it will.

To ensure this happens, financial systems must be digital, robust and connected. They have to be linked and networked to ensure rules are used to quickly identify beneficiaries, verify them accurately and have the funds transferred directly into bank accounts.

India’s financial institutions are showing the way.

By the first week of March, India’s rural development ministry had transferred around Rs 78.2 billion into the bank accounts of 156.5 million women (part of the Pradhan Mantri Jan Dhan Yojana) as the first step to save the “poorest of the poor” from starvation and started injecting money back into the economy.

Digital to mitigate the crisis

Across the world, banks are announcing mortgage and loan holidays. They are increasing overdraft facilities. Credit card companies are deferring payments. Banks are waiving personal guarantees for SME loans.

These measures could easily become a double-sided sword.

If banking systems are not geared to manage the back end, they could inadvertently send reminders for loan payments to those who have chosen deferment, triggering alarm; poor planning could affect the credit ratings of customer who may get flagged (incorrectly) as having defaulted on payments.

To prevent this from happening, banks with crisis response policies must ensure they use Artificial Intelligence and Robotic Process Automation (RPA) to accurately manage back-ends and change business rules and processes quickly and at scale.

Banks can go one step further. They can demonstrate the more humane side of their business by sharing limited customer data with partners (open banking).

The data, such as account balance, opt-ins to deferment plans, zip code to identify pockets affected by COVID-19, etc., could be used by partners to send targeted food coupons, special offers on retail purchases, health insurance, even deferred or lowered utility and broadband bills to the financially stressed.

Banks would also do well to partner governments to create Covid-19 related applications. For example, when a government announces cash grants to SMEs, a mobile app could allow SMEs to upload the documents to establish their credentials, have RPA verify and authenticate the documents and automatically have the funds transferred to the SME’s account before updating government records.

Other major shifts in the making

Just as Covid-19 is about to fuel digital growth, it is also set to accelerate two other trends that have been on the back burner for almost two decades.

The first is the Work from Home (WFH) trend. WFH is already rising as a quick and clear path forward to get businesses back on the rails.

WFH will be the new normal as organizations equip their employees with the hardware, software and training required.

Apart from setting up the infrastructure and the security processes, WFH will demand that employees be trained and re-skilled.

As Ginni Rometty, who was CEO of IBM until recently and now holds the executive chair said: “Up to now, the focus has really been on wellness. But it will soon turn to [training and re-skilling].”

The training and re-skilling required will be broader than the demands of WFH.

The rapid adoption of automation, analytics and Artificial Intelligence (AI) will mean that employees will have to learn new skills.

But there is good news on this front: The rush for new skills will be met halfway by intelligent co-worker bots or digital assistants. The adoption of digital assistants or role-specific bots will grow.

Practically every employee in an organisation will have a digital co-worker who has AI-backed skills like testing, accounts receivable, year-end payroll skills, etc., to improve efficiency and output.

It is not too difficult to imagine that not all employees will be able to pick up new skills or pick them up at the same pace. This is where co-worker bots will prove to be a boon by playing the additional role of benign mentors. Co-workers bots will observe their human counterparts and automatically suggest exercises and processes that lead to performance improvement.

At the other end of the skills spectrum will be new levels of maturity that crowdsourcing will achieve. This is the second trend that has been on a low burner and hasn’t gained the attention and traction it deserves.

Crowdsourcing and the gig economy will be used as a means of de-risking development and, one day, even manage live applications.

With crowdsourcing, the financial services industry will solve its perpetual hunt for skills and adopt a new way of working. Over 60 per cent of organisations expect their share of contract or gig workers to rise 4X over the next five years. The FS industry needs to accept this as the new normal and set processes in place to leverage crowdsourcing and the gig economy.

Coming back stronger, coming back confident

The financial services industry is about to see dramatic transformation as digital technologies get pushed to the forefront of our response.

Digital, crowdsourcing, WFH, bots, AI, automation, RPA and similar technologies will become essential to the FS industry to lower the impact of stressful events in the future.

By top-loading these technologies, the FS industry will come out stronger and better equipped to manage disasters and other uncertainties.

For the moment, Covid-19 may have been the biggest catastrophe in the history of the industry, but it can quickly be turned into a pivotal moment that changes the entire future of the industry in a positive manner.

The industry must focus on adjusting to the new normal, adopt intelligent technologies that build resilience into systems, and reduce the need for human intervention for its day-to-day functioning.

By doing this, it will effortlessly also add speed to systems that help money circulate.

(The author of the article is Rahul Singh, President-Financial Services, HCL Technologies. All views expressed are personal.)

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