Earnix Blog > Reigning in the Chaos – The post corona era and how banks can thrive in it

Reigning in the Chaos – The post corona era and how banks can thrive in it

Peter Reynolds

17. April 2020

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“What’s just happened?” we have been asking ourselves since mid-March. The answer is straightforward, obvious, and somewhat disheartening. We are living through an event that historians will be discussing in 500 yearsLet’s get a head start on it – and take an analytical look at what’s been happening.  

From health crisis to credit crisis  

Beyond the catastrophic shock to healthcare systems around the globe, COVID-19 has led to a systematic shock to the global financial system 

When it comes to banking, the most notable difference is the exponential increase in demand for different credit solutions, both from individuals and SMEs (small and medium enterprises)And the demand will have to be met, otherwise the financial system is going to collapse – making the healthcare emergency a mere appetizerBanks are facing a reality where a significant number of their customers (both individuals and SMEs) will be in dire need of assistance which will have to be managed while a pandemic is weighing down on us all. 

From steady to volatile 

The economic and social pace of change has been frightening. A pricing decision that was valid in the morning can be dangerously incorrect by the afternoon. Banks have been having an exceptionally hard time coping with the pace of change; entire lines of credit have disappeared from the market, and banks are struggling to understand the underlying fundamentals of risk and pricing in this new eraA new era that requires brand new models and accurate data – a true reflection of their new customer. 

Meanwhile, governments have stepped in with extraordinary measures to provide SMEs and individuals with credit options. Sometimes through the banks themselves and sometimes in a way that will be in competition to the banks. This changes the fundamentals of financial risk modelling, management, and credit ratings as the classification of who belongs to low risk or high-risk groups have changed overnight - and will keep changing as the crisis and global preventative measures evolve.  

From brick-and-mortar to digital 

Digital transformation chatter and experiments have been gradually progressing in the past few years. Unfortunately, though, time is up. Social distancing is here to stay and providing your customers with a fully digital banking experience just became the base expectation – getting your systems ready to support this reality is critical. 

The grim reality 

Unless banks move fast and adapt to the new normal, I predict we will lose some household names in banking. The COVID crisis brought us to banking’s watershed moment where those who won’t systemize the process of quickly redefining and deploying the right products and prices – will fail. This is banking’s NokiaKodak and Blockbuster moment all at once. 

The Post-COVID-19 World 

As COVID-19 comes under control, banks will be forced to revisit every single credit relationship they have. They will be pushed by their governments to quickly lend money to the millions of people and businesses in need and renegotiate with those who, due to their changed circumstances, are about to default.  

This, in turn, means that some of the lending will have to be done at a negative margin, making the performance of the wider lending programs of utmost importanceMeanwhile, the media is filled with reports about banks becoming picky about loan approvals – just when people (individuals, businesses) would need loans the most 

Banks’ survival in this new financial ecosystem just became a fundamentally different game from what it was just a couple of months ago. Banks will need to show global regulators what they are doing to support and save individuals from financial distress and businesses from bankruptcy. As I have said, the availability of credit and the speed that it can be acquired will largely shape the world we return to.     

Meanwhile, banks must also retain their existing customers (who will be aggressively hunted by competitors with cut-price offers trying to solve the same issues).  

The analytical enterprise  

During this cataclysmic change, banks will have to restart from (close to) zero when it comes to the available data for financial modellingHistoric behavioral models will no longer be valid. Effectively collecting and immediately operationalizing (even just a weeks’ worth of data) will become a new competitive edge.  

This will be the beginning of the era of extreme agility, where changing prices only monthly will feel like manually rolling down your car window Scenario analyses and what-if simulations will need to deliver real-time results – providing the foundations for an assertive, fact-based executive strategy 

Same with AB price tests. They need to happen in real-time and automatically – to replace years’ worth of relevant data collectionWhat about everything else? Automation, automation, automation. Every process needs to be linked to the larger system by advanced automation.  

And, of course, personalization. Once analytical processes are in shape, the next goal is to leverage data and create a 360-degree view of every customer. To know them better is to serve them better. 


The size of the best demographic to lend to has shrunk dramatically.  

Identifying who they are, what they need, and how to create prices for them is mission-critical to all banksThis will become the battle ground for the next few years.  

A battle ground, that’s going through a dramatic transformation of its own; customer touchpoints moving from branches to websites and apps. We also see that relationship managers will have to be armed with the latest sophisticated analytical intelligence as they look to differentiate their approach with SMEs (who may be overwhelmed with offers of credit).  

On the same note fintechs are no longer potential threat to keep an eye on. They’ve just become standard competition, only far better positioned with ground-breaking technology and low-cost base - exactly what customers during (and after) a national lockdown are looking for.  

And let’s not forget about the FAANG. Big data companies - and especially Amazon (millions’ lifeline during the lockdown), are now poised to become the go to credit provider. Banks that don’t take this seriously will fail.  

Banks have to build towards a single overarching analytics-based and agile system that enables the organization to attend to their customers’ needs in a truly 21st century fashion.  

The road towards such an end-to-end structure has two major steppingstones 
  • Systemization - making sure that governance, compliance, planning, execution, agility, what-if simulation and automation are enabled via a single system. 
  • Once this is up and running, banks need to embark on the first part of their critical personalization journey to be able to provide the right prices to the right customers at the right time. A good-to-have before corona. A must-have after. Such a development should eventually give organizations the ability to systemize:  
  • The detection of events such as a client’s distress,  
  • Automatically and analytically recommend personalized products,  
  • Price them correctly.  


We are living in cataclysmic times. Navigating them wisely is crucial for the long-term health of any bank. As an odd turn of fate, this current crisis is pushing banks into directions that won’t only help them survive in the short run – but will turn them into sustainable, lean, and agile organizations serving their customers wisely and kindly.  

To achieve such infrastructural health, banks need to build up their organization-wide, end-to-end pricing machines in order to systemize their pricing operation, and achieve compliance, governance, agility and a sophisticated system running on top-notch analytical models. After the establishment of a solid analytical foundation, they can develop into a fully personalized banking organization – and begin to serve their customers in a truly customer-centric, 21st century way.  


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Peter Reynolds