In the week ending on April 4th, the US Department of Labor registered a whopping 6.6 million unemployment insurance claims. Government intervention, in the event of job loss, has proved to be of little help because the scale and magnitude of devastation by Covid is beyond comprehension. Businesses are resorting to pay cuts to stay afloat in these uncertain times. The US Government came out with a Paycheck Protection Programme, but within days, the loan limit reached its threshold levels. Pay cuts and job loss do have a ripple effect on the continuity and agility of financial markets and institutions. Uncertainty unleashed by Covid has made markets volatile and caused a significant wealth erosion for investors, thereby impacting consumption levels. Liquidity and credit crunch will continue to impact businesses and MSMEs in the days to come.
The Covid crisis has impacted all core sectors of the economy and the banking and financial services industry has been grappling with the dynamic and rapidly evolving situation. As uncertainty around economic activity looms large, businesses and financial entities are treading with caution. Caution has led to reduced banking operations. It has resulted in unpleasant branch closures and has put the digital delivery of banking channels under duress. The resilience of the digital banking system is being tested like never before. Lockdowns have forced customers to embrace digital payments over cash and the transition to online payments has resulted in a massive spike in digital transactions. Even when lockdown rules are relaxed, and a graded exit plan is chalked out, the relationship between banks and their customers would no longer be the same. Branchless banking will be the new normal and banks need to revisit their customer onboarding and engagement models to stay relevant. This begs the question: Are banks and financial institutions prepared for the paradigm shift in the post-pandemic world?
The preparedness of banks in the post-lockdown era can be enhanced by using emerging technologies like blockchain. Blockchain based Video KYC and digital onboarding solutions are necessary to ensure a contact less customer engagement model. Experts and industry veterans have reposed faith in the usage of digital engagement models in the current scenario.
[box type=”note” align=”” class=”” width=””]A recent report by FICCI, titled “Impact of COVID-19 on Indian Economy.” has put forward following suggestions to support the banking sector:
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