By and large, the banking industry has been built on stability and rigid structures.

As a general rule, banks of all sizes are naturally risk-averse and would prefer a relatively smaller but certain return on their investments, rather than a higher risk option with a greater return.

This operating model seems to have informed much of the banking industry’s decision-making and turned it into the trillion-dollar business segment it is today.

Here’s Why Corporate Banks Must Commit to Change

Unfortunately, this model has also made financial institutions fairly unresponsive to large-scale forces that are beyond their control and threaten to remake the face of the industry completely.

As a result, banks must depart from their standard operating procedures and adjust to these shifting, uncertain times that we live in today. Here are some of the forces that modern banks will have to contend with.

Social Upheaval

There can be little doubt that the COVID-19 pandemic has reshaped almost every aspect of human life and the banking industry is no exception. Suddenly, physical branches had to cease operations, with clients and banks alike left searching for stopgap solutions.

What makes this particular external event so fraught is that there is no indication that this will be an isolated event that banks can simply brush off.

Now that the idea of a pandemic has become so present in the zeitgeist, banks would be wise to be proactive in their preparations, should anything similar happen in the future.

Consequently, banks have had to adapt, and have turned to corporate banking products from third-party technology providers to try to protect themselves in the future.

Competition and Macroeconomic Conditions

As early as 2016, economists had begun to predict a major shift in the competitive landscape of the banking industry. Specifically, banks would have to divert their gaze away from the European and American markets that had been their market centers for so long.

Instead, they would end up refocusing their efforts to winning over the burgeoning Asian market. Forecasted GDP by the International Monetary Fund estimated growth of between 5 and 7.5 percent throughout Asia, far outstripping estimates for the United States and most European countries.

Granted, these estimates were made prior to the arrival of the coronavirus, and GDP growth was not quite as robust as initially expected. Nevertheless, banks have had to consider the global marketplace more than ever before in order to maximize top-line gains.

The Market Shift to Millennials

Banks have also had to learn to engage a new market segment with demands and expectations, unlike anything they had ever experienced before.

Having grown up surrounded by technology and having been immersed in it seemingly since birth, millennials are accustomed to having information literally at their fingertips.

No matter what they need to know, a few taps of their smartphone are likely to provide them with answers.

The immediacy and convenience that millennials have come to rely on from their smartphone have colored their expectations of almost everything else they interact with.

This need for immediacy has clashed with the measured pace at which most banks conduct their business.

The process by which banks vet and qualify their clients, onboard them, review their credit and transaction history, and deliberate over whether loans should be granted would not appeal to millennials, and facts bear this out.

Much of the millennial market remains unbanked or insufficiently banked, and many of them turn to financial technology companies for their bare banking essentials such as savings accounts and debit facilities.

The banking clients of today want quick responses, immediate loan decisions, and the flexibility to choose which financial product is suitable for them.

Fintech: Competition vs Collaboration

Speaking of companies that operate in the fintech space, banks now have to decide how they want to relate to them.

On the one hand, a more adversarial position can be taken, viewing these upstarts as new competitors who are attempting to eat into traditional banking markets.

To be fair, this is an accurate depiction of what many fintech companies have done successfully.

As mentioned, millennials who were dissatisfied with the services and products provided by traditional banks have coursed their needs to fintech companies in an ala carte manner: one app for savings, another app for cash transfers or remittance, and still another for online shopping.

On the other hand, some banks have accepted that these finance industry newcomers are here to stay and have reconfigured their strategy around this idea.

They have sought out ways to integrate their technology into their own banking systems, using APIs to allow disparate systems to interact with one another.

This course of action will allow banks to remain engaged and relevant despite the market changes surrounding them.

Banks of all sizes have truly been beset on all sides by challenges that are almost universally new to them.

Amidst all this uncertainty, one thing is sure to be true: any banks that are unable to adjust to these shifting tides will inevitably be overwhelmed by them.

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