More than two years have passed since the World Health Organisation declared Covid-19 a pandemic. Lockdowns have impacted hundreds of millions of people. Many people have made the abrupt transition to working from home, and millions have lost their jobs as a result. The future appears bleak. We don’t know when or if our societies will be able to return to normalcy, or what kind of scars the pandemic will leave. The changes have been swift, but are they permanent? Many people, including those who have moved into hybrid or remote office environments or changed careers entirely, believe the answer is yes. But, even if the pandemic has caused many long-term changes in the workplace, has it permanently altered how businesses should think about business strategy?
The pandemic has also shifted the balance of power between the market economy, the state, and society in the G-7 and beyond. While economies collapsed as a result of the shutdown of large swaths of the economy, the role of the state and civil society in protecting people from the effects of the pandemic took on new significance. This dramatic shift, in response to the global shock, has re-calibrated the public’s perception of the roles of markets, government, and society.
On top of that global businesses face greater risks and uncertainty due to the changing nature of international politics. In a more interconnected world, business operations are increasingly affected by political dynamics, conflicts, and crises that may have seemed far away not too long ago. As an example, US-China competition and the Russian war in Ukraine are having a profound impact on the global trading system. One thing is crystal clear: global businesses are in a new geopolitical reality, where the old platitudes and policies no longer apply.
And then there is the threat of climate change to consider. Forgot about that one did you?
In the midst of this great turmoil, businesses are asking profound questions: What are the biggest unknowns we face? How will we work, live, and thrive in the post-pandemic world? How has Covid-19 reshaped our world – potentially forever? How should we manage our businesses in a world facing geopolitical and climate uncertainties?
Any attempt to answer these questions requires a broad and deep knowledge of the wider world. Therefore at Aspioneer we decided to speak to Jason Blick, CEO of EQIBank, an institution which operates in more than 180 countries on how we may move forward in a global world marked by uncertainty and upheaval.
Aspioneer (A): Thank you for being with us today Jason. As a start let’s talk about your own field of operations. How has the COVID-19 pandemic affected the banking world in general?
Jason (J): Thank you for having me here. Gosh, where to start. What a ride the last couple of years has been for all of us. One thing we’ve learned in the last year is that you can speed up anything. A decade of ecommerce innovation was compressed into a 10-month period by the banking and fintech industries. People, predictably, have adapted. Consumer expectations have shifted, and businesses have shifted in response.
Customers embracing digital services, including many who had never completed financial transactions online before, have represented this shift in the finance sector. Millions of people are currently banking without visiting a physical location, and this trend is unlikely to change. It is frequently stated that “necessity is the mother of invention.” This pandemic has demonstrated that necessity is also the mother of adoption in many ways as well.
The most successful banks will increasingly rely on non-traditional services and revenue streams. They will be more reliant on their ability to see their customers’ financial needs from beginning to end and to meet those needs in a connected, seamless, and frictionless manner.
And that’s precisely the reason EQIBank was created. We are the world’s first global digital bank focused solely on businesses and high-net-worth individuals. In over 180 countries we now offer offshore, tax-free, and tailored personal and corporate banking services to clients who need it. Our goal is simple: to accelerate simplification by utilising Open Banking Standards and Open APIs to create a new global standard of banking.
A: Where do traditional banks fit in this rapidly changing digital landscape? Are they prepared to provide the products, services, and experiences that customers desire? What are the major operational and technological challenges that will shape their future?
J: Banks that want to succeed will need to use the wealth of data available today to anticipate customer needs and provide highly personalised offerings. Customers need to feel as if they are now being treated as one. And it should, given how much information their bank has on them. Unlocking this data could provide customers with the kinds of insights and analysis that will help them make better financial decisions. You progress from ‘here’s something you might be interested in’ to ‘actually, you should take this course of action.’
To be sure, this is already happening to some extent. However, many bank recommendations today are broad brush rather than truly tailored to the customer’s specific circumstances.
A: So, what’s keeping banks from offering more personalised services?
J: There is certainly a greater awareness of the importance of the customer experience, as well as the importance of data in order to improve that experience. But it’s like moving a glacier: It takes a lot of effort to unbundle architecture and years of product-centric thinking in order to become more client-centric. Even if you have it down pat for your front office, you must apply it consistently throughout your organisation.
At the functional level, traditional banks still have many silos, and data is trapped within those functions and lines of business.
Banks must ensure that they have the right people in place to deliver data-enhanced products and services. Data scientists, cybersecurity experts, and digital transformation specialists will all play critical roles in enabling data flows, implementing cloud-based solutions, and ultimately delivering the type of digital banking services that customers desire.
A: If you are a bank today and need to start the transformation, where should you start?
J: One major area in which banks must invest as we have done in EQIBank is the digital experience. Is the process of opening a checking account as simple and straightforward as possible? It’s especially important to remember that the experience should be consistent across desktop and especially mobile. I don’t see consumers doing any significant banking on any other device than mobile. Most of our customers who are opening bank accounts today are doing that through mobile selection.
Mobile technology also allows for new ideas in areas such as personal finance management. Apps powered by artificial intelligence, for example, can provide consumer analytics, reminders, and personalised advice.
Customers, of course, want to speak with real-life financial representatives, so video consultation is another technology to consider. This tool could work well with simple scheduling technology, but many traditional institutions aren’t even using that
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A: What frustrates customers when they interact with brands online? Will the ability to communicate with a human being still be maintained?
J: As long as it is brilliant, digital interaction is brilliant. However, when you fall below that level, you run into issues. Customer frustration does not exist if you have an excellent platform that is completely user-friendly. However, if it is not highly intuitive, it leads to customer frustration, and people prefer to speak with a live person.
There’s also a generational factor at work here. Someone in their twenties may believe that talking to a human being isn’t always beneficial. Whereas my default feeling is that I can solve a client’s problem faster digitally, if someone wants to talk we should be prepared as well.
A: How do you think the financial landscape will change in the next 5-10 years? Will the transition to cashless be accelerated, for example?
J: Cash will continue to exist… This is due in part to generational differences as well as the black economy. Another significant change that will occur in the coming years is the transition to a completely different interest rate environment. We’ve been in a low-interest-rate environment since 2008, so some people have never seen their mortgage interest rate rise. It’s just been on a downward spiral. This is going to change and fast.
The advent of digital and the ability to provide insight and information creates a customer expectation of some sort of proactive engagement. Clients want advance notice. They want notifications. They want to know where they’re going and how it’ll affect their disposable income. Before it came in a letter, now it’s going to come on the phone.
The rise of Banking-as-a-Service will also enable more mutually beneficial partnerships with non-banking firms that want to offer their customers financial services and products. Third-party developers can use BAAS to create products and services for bank customers. They can then focus just on platform functionality while the platform manages data exchange and authentication. It also gives banks the opportunity to form new partnerships and reach new customers.
A: Inflation around the world especially in the United States has reached a 40 year high. What are the reasons for this phenomenon? Do you think we have a way out?
J: That is an interesting question and many people think that the reason the US and Europe are facing high inflation is due to the high price of oil due to the Ukraine war. However if you look at the data we see that this isn’t true at all.
The simple answer is that there is too much money. When the government injects too much money into the economy, it encourages people to spend more, which eventually leads to price increases by sellers. This has made the average American worker poorer: their paychecks have risen at a slower rate than the prices of the goods they buy.
The Federal Reserve is the agency in charge of managing the United States’ money supply. During the pandemic, the Fed pumped trillions of dollars into the economy, encouraging Americans to borrow and spend, driving up prices. It also reduced interest rates to near zero, boosting spending by making it easier for businesses and individuals to borrow. The Fed purposefully stimulated the economy to hasten the recovery after the pandemic, but it did so for far too long, leading to overspending and inflation.
Congress is also to blame in some ways. They increased spending by about $5 trillion in 2021, much of which was unnecessary because it came at a time when the economy was already recovering. The Fed backed these programmes by purchasing more than half of the Treasury bonds issued to cover the additional spending. Because of the Fed’s actions, the majority of the federal government’s pandemic spending will not be paid for with regular taxes. Instead, Americans will pay for it by paying more for their goods.
The Federal Open Market Committee (FOMC) reversed course in June, raising short-term interest rates by 0.75 percentage point. Following the decision, market expectations of inflation over the next five years fell from 3.11 percent per year to 2.8 percent per year. However, given that the median FOMC member expects PCE inflation to be 5.2 percent in 2022 and 2.6 percent in 2023, it appears that more drastic measures will be required to address the massive inflation problem.
A: You mention the war in Ukraine in the preceding paragraphs. In your opinion, how much will geopolitics affect the business world in the future? What can businesses do to mitigate the impact?
J: The world is certainly entering a period of global change. Populations are growing, technology is allowing civilians to become more connected, and governments are being asked to work together to address threats such as climate change. In many ways, global political and cultural goalposts are shifting, and managers working internationally must deal with completely new perspectives and situations.
Geopolitical competition will only intensify further, not only between China and the United States, but also between China and the European Union, forcing companies to consider political risks in new business areas. With EU leaders frequently referring to China as a “systemic rival,” businesses should expect an increase in regulatory measures that increase political risks to their operations. These will include additional trade defence measures, supply chain rules, and investment restrictions, as well as expanded cooperation with the US on technology trade restrictions on China under the Trade and Technology Council.
This trend can already be seen in the increasingly politicised technology and data-intensive industries. As data and technology become more important resources for economic and political competitiveness, they face increased government scrutiny, restrictions and reviews, and politicisation. Digitalization, which includes automation, the Internet of Things (IoT), and the development of data-driven revenue models, means that more businesses will face the same data and technology-related political risks, particularly in supply chain management and cross-border data transfers.
If businesses want to perform well they will need to concentrate their efforts in the following areas:
Rising compliance burdens and ambiguity: These include the difficulty of complying with tariffs, export or import controls, and other sanctions imposed by the United States, the European Union, or China, as well as new supply chain regulations, data localisation rules, or changing market access requirements.
Costs and business continuity: Businesses will face increased political and operational pressure to strengthen their supply chains. Balancing cost, efficiency, availability, and geopolitical risks will take up more time during business planning for leadership teams.
Competitiveness: Geopolitical pressures and perceived supply chain risks have fueled nations’ efforts to localise or onshore products and technologies deemed strategic or critical to national security. To succeed in different markets, businesses will need to understand their level of exposure to ‘buy local’ trends and adapt their supply chains.
Brand management: To remain competitive, businesses will need to manage their brand and reputation more closely. They must be better prepared for crises at a time when businesses are more likely to face zero-sum decisions when dealing with politically sensitive issues.
A: Speaking of risks, what impact do the phenomenon of climate change pose to businesses? Can businesses somehow take advantage of such changes?
J: We don’t know how climate change will ultimately affect the world, but two things are certain: Its complex environmental impact will have an immediate impact on business, society, and ecosystems, and governments will seek to mitigate its effects through stringent regulations. Companies have, for the most part, freely emitted carbon until recently, but those emissions will increasingly come at a high cost, both monetary and social. As a result, businesses that remain on the sidelines will be severely disadvantaged in comparison to those that are developing strategies to reduce risk and gain a competitive advantage in a warming, carbon-constrained world.
On one hand, it introduces a slew of new business risks. Aside from the most obvious physical risks, businesses face transition risks as a result of society’s response to climate change, such as changes in technologies, markets, and regulation, which can increase business costs, undermine the viability of existing products or services, or affect asset values. Another risk for businesses is potential liability for greenhouse gas emissions (GHG). In recent years, an increasing number of legal cases have been brought directly against fossil fuel companies and utilities, holding them accountable for the harmful effects of climate change.
However, climate change presents opportunities as well. To begin, businesses can strive to improve resource productivity, thereby lowering costs. Second, climate change can inspire new products and services that are less carbon intensive or that enable others to reduce their carbon footprint. Third, businesses can improve the resilience of their supply chains by shifting away from price-volatile fossil fuels and toward renewable energy. These actions, taken together, have the potential to boost competitiveness and open up new market opportunities.
A: Finally, Jason, it appears that the world is changing too quickly for anyone to keep up. People are afraid, stressed, and concerned about the future. How can we, as individuals, cope with a world that is rapidly changing, sometimes beyond recognition?
J: (smiles)… I understand what you mean. The last couple of years have been so stressful for all of us and it seems that the world is getting worse. Things which we thought were impossible a few years ago seem to be in vogue these days. Fear of such uncertainty is understandable. I know how you feel because I do as well.
If there is one thing I have learnt to cope with fear of uncertainty is to check out. There are more sources competing for our attention than ever before. What we pay attention to has a big impact on how we feel. Limit your time spent watching or reading the news. Spend only 30-60 minutes per day getting the most up-to-date information, then move on to something else.
Worry stems from worrying about potential difficulties or an uncertain future. If you notice this happening, choose to shift your thoughts to the present moment. Keeping our minds focused on the present moment prevents our imagination from wandering and can help us feel in control.
Remember that people accept and adjust to change at different rates, and they have varying levels of comfort with uncertainty. Keeping this in mind can help us be more patient with others, whether they are family, friends, or strangers. Most importantly, be gentle with yourself as well.