# How can banks regain consumer confidence in times of crisis?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-09-25
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Financial Crisis: Impact, Challenges, and Opportunities Ahead
Meta Description: Discover how banks are weathering the storm of the current financial crisis, the impact of COVID-19, and the importance of sound decision-making in uncertain
URL: https://financedigest.com/how-can-banks-regain-consumer-confidence-in-times-of-crisishtml

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_By **Brian Holden,** Global Director of Financial Services at_ [_SAS UK & Ireland_](https://protect-eu.mimecast.com/s/lAa4CAPmGc9vOLqs887WS?domain=sas.com)

The 2008 financial crisis led to severe reputational fallout for the banking sector, with bankers seen as responsible for avoidable problems severely impacting society’s most vulnerable groups. The recession saw financial institutions across the globe crumble, and the likes of Northern Rock and Lehman Brothers cease operations completely. Since the crash, public confidence towards banks has never truly recovered, and the crisis has had a long-standing impact on the sector as a whole.

Fast-forward 12 [years and we now find ourselves in the midst of another global](https://www.financedigest.com/global-stocks-to-grind-higher-lacklustre-year-ahead-reuters-poll.html "Global stocks to grind higher, lacklustre year ahead: Reuters poll") financial crisis, this time with no credible scapegoat. The pandemic is seen as a black swan phenomenon, in that few could have predicted its happening or unprecedented consequences on our lives. Two 100-year events happening in the space of 12 years. Who could have imagined that? [Businesses have recently](https://www.financedigest.com/extracts-and-distillates-market-overview-high-demand-recent-trends-future-growth-business-scenario-technology-2022-2029.html "Extracts and Distillates Market Overview, High Demand, Recent Trends, Future Growth, Business Scenario & Technology 2022-2029") had to make some difficult decisions, and there’s no doubt more to come. That said, those banks which can support their customers throughout the crisis may see their reputations recover as the pandemic [continues to cause strain on people’s daily lives](https://www.financedigest.com/money-and-technology-the-continued-integration-of-fintech-with-daily-lives.html "Money and technology – the continued integration of fintech with daily lives").

**Starting strong**

The good news is that [banks are in a much stronger and sounder position today](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") than they were in 2008. Regulations align better with economic reality, the capital provisions are greater, and the Bank of England intervened quickly to suspend all bonuses and dividends as soon as [COVID-19 hit](https://www.financedigest.com/covid-19-impact-could-hit-japanese-automakers-output-in-oct.html "COVID-19 impact could hit Japanese automakers’ output in Oct") the UK. [Customers are better protected](https://www.financedigest.com/fraud-protection-why-customer-onboarding-requires-digital-identity-processing.html "Fraud Protection: Why Customer Onboarding Requires Digital Identity Processing") too. And with the Financial [Services](https://www.financedigest.com/integrated-finance-the-advantages-of-using-financial-infrastructure-as-a-service.html "Integrated Finance: the advantages of using financial-infrastructure-as-a-service") Compensation Scheme (FSCS) effectively guaranteeing all retail deposits up to £85,000 (£170,000 for joint accounts), a bank run of the type that wrecked Northern Rock is very unlikely.

**The** [challenges ahead](https://www.financedigest.com/keeping-ahead-of-network-challenges-in-the-finance-industry.html "Keeping ahead of network challenges in the finance industry")

However, there are difficult times ahead.  The government’s furlough scheme currently buffers banks. This has helped [keep businesses](https://www.financedigest.com/how-business-leaders-can-adapt-or-replace-covid-related-perks-to-the-post-pandemic-world-while-keeping-employees-on-side.html "How business leaders can adapt or replace Covid related perks to the post-pandemic world while keeping employees on-side") afloat and employees paid. But these funds won’t last forever, and unless there’s an immediate bounceback after the lockdown, the worst of the crisis is surely yet to come. Not so much a “V-shaped recovery” – rather a “long tick.” When the money runs out, banks will have to start making difficult decisions, especially about lending.

What will make these decisions even more difficult is that the crisis has turned a lot of received wisdom about creditworthiness on its head. Who would have thought at the start of this [year that airline pilots might be a credit risk](https://www.financedigest.com/is-2022-the-year-green-finance-incorporates-climate-risk.html "Is 2022 the year green finance incorporates climate risk?"), for example? In fact, many professions are likely to see significant reductions in [business volumes](https://www.financedigest.com/fluid-coolers-market-by-covid-19-impact-analysis-volume-and-value-revenue-business-opportunity-future-projections-and-key-trends.html "Fluid Coolers Market By Covid-19 Impact Analysis – Volume And Value, Revenue, Business Opportunity, Future Projections, And Key Trends") and income over the coming months. And since many professionals are used to leading relatively credit-hungry lifestyles with large outgoings, the strain will soon start to show.

**Decision-making revisited**

This is a problem because many banks currently take a bare-minimum approach to credit [risk modelling](https://www.financedigest.com/insurers-must-reimagine-traditional-risk-models-to-adapt-to-climate-change.html "Insurers Must Reimagine Traditional Risk Models to Adapt to Climate Change "). Most [banks make day-to-day credit](https://www.financedigest.com/analysis-powerful-swiss-central-bank-faces-reform-calls-in-wake-of-credit-suisse-rescue.html "Analysis-Powerful Swiss central bank faces reform calls in wake of Credit Suisse rescue") decisions using dated processes and data. They base them on a very broad segmentation of the [customer base because when times](https://www.financedigest.com/uk-and-eu-reach-post-brexit-customs-deal-for-n-ireland-the-times.html "UK and EU reach post-Brexit customs deal for N.Ireland-The Times") were good, it didn’t seem worth the trouble to drill down to the individual level. Meanwhile, anomalies and unusually complex cases are referred to senior decision makers who use their experience to make the right calls manually, with expert judgment.

This approach simply won’t work in a situation where many more [businesses and individuals](https://www.financedigest.com/prime-bank-and-agam-spark-lending-revolution-for-individuals-and-business.html "Prime Bank and AGAM spark lending revolution for individuals and business") are skating on thin ice, and a much larger proportion of decisions require sophisticated analysis. There just won’t be enough expertise to go around.

Until now, this hasn’t been an issue – after all, at high tide, most ships can sail serenely. But when the tide goes out, [it’s the boats with the deepest draught that are the first to run](https://www.financedigest.com/run-dtc-its-tricky-but-heres-what-the-next-evolution-of-ecommerce-will-look-like.html "Run DTC’: It’s tricky, but here’s what the next evolution of ecommerce will look like") aground. In the same way, [it’s the banks](https://www.financedigest.com/its-time-for-banks-to-spend-on-digital-mortgage-journeys.html "It’s time for banks to spend on digital mortgage journeys") with the most historical baggage that are in the greatest danger. If their legacy systems, siloed processes, organisational structures and change-resistant cultural norms make them unable or unwilling to adapt, they won’t have the agility to respond to the new reality.

In short, the UK’s largest [banks need](https://www.financedigest.com/traditional-banks-need-an-overhaul.html "Traditional banks need an overhaul") to act now. They [need to put the right decisioning processes and infrastructures in place to support](https://www.financedigest.com/hung-out-to-dry-smes-need-further-support-to-stay-afloat.html "Hung Out to Dry: SMEs need further support to stay afloat") their human experts in making more tough decisions, faster and more accurately. And they also need that technology to guide a new generation of less-experienced decision makers, helping them make the right calls to help [customers get back](https://www.financedigest.com/why-transforming-the-back-office-is-key-to-customer-experience-success-in-financial-services.html "Why Transforming the Back-Office is Key to Customer Experience Success in Financial Services") on an even keel.

**Making more intelligent decisions**

The only option is for [banks](https://www.financedigest.com/embedded-finance-is-the-new-norm-in-banking-but-what-is-needed-to-unleash-its-full-potential.html "Embedded finance is the new ‘norm’ in banking, but what is needed to unleash its full potential? ") to level-up and simplify financial decisioning processes by adopting a more powerful, real-time and comprehensive approach to credit decisioning – one that will satisfy regulators and comply with all internal and external audit standards. A [decisioning fabric](https://protect-eu.mimecast.com/s/2mynCBLnJsVgKp2tNkmhV?domain=sas.com) which enables banks to assess each individual case on its merits and take the right action to support each customer.

This ability to make responsible decisions and act effectively in real [time is vital for banks to support vulnerable customers](https://www.financedigest.com/why-now-is-the-time-for-banks-to-use-their-data-to-support-customers.html "Why now is the time for banks to use their data to support customers") through the COVID-19 pandemic and to help rebuild “UK plc” in its aftermath. Moreover, in the longer term, [intelligent decisioning will help bind banks](https://www.financedigest.com/artificial-intelligence-in-banking-magazine.html "Artificial Intelligence in Banking Magazine") and their customers closer together and demonstrate that banking is more than just another utility service, like electricity, water or gas. By getting closer to their customers and understanding their lives, needs and desires, [banks can shift the perception of the value they offer and assume a role as trusted](https://www.financedigest.com/u-s-to-move-3-5-billion-in-afghan-central-bank-assets-to-swiss-based-trust.html "U.S. to move .5 billion in Afghan central bank assets to Swiss-based trust") adviser and business partner. They will become an integral part of the fabric of the networked society.

**The human element**

The pandemic has made it clear how today’s banking landscape is a people business, meaning that a solid [customer understanding is all the more important for banks](https://www.financedigest.com/lost-in-translation-why-banks-must-learn-the-language-of-their-customers.html "Lost in Translation: Why Banks Must Learn the Language of their Customers"). Rather than being purely about payments, banking is now firmly engrained into our everyday lives – and this will only increase as elements like [open banking](https://www.financedigest.com/the-open-banking-revolution-enabling-accessible-and-inclusive-finance.html "The open banking revolution – enabling accessible and inclusive finance") demonstrate the value of modern financial technology.

Under current circumstances, financial decision-making is having more of an impact on our [personal](https://www.financedigest.com/cracking-the-personal-finance-code.html "Cracking the Personal Finance Code") and professional lives than ever before. Getting it right therefore becomes mission critical, and any mistakes could lead to irreparable reputational damage. By providing decision-makers with visibility around each customer’s individual situation and financial health, banks have a chance to [save cash-strapped businesses and guide customers through this crisis](https://www.financedigest.com/saving-on-water-bills-more-than-just-a-drop-in-the-ocean-for-businesses-facing-the-cost-of-living-crisis.html "Saving on water bills: More than just a drop in the ocean for businesses facing the cost-of-living crisis"). This will ultimately accentuate their [role](https://www.financedigest.com/whose-role-is-it-anyway-why-finance-underpins-data-led-digital-transformation.html "Whose role is it anyway? Why finance underpins data-led digital transformation") in the UK’s financial recovery and help them regain what was lost in the last financial crisis – their reputation.


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