The Social-Distanced Playing Field for Modern Banking

Posted by Larry Pruss on Nov 9, 2020 8:00:00 AM

The Social-Distanced Playing Field for Modern Banking

I recently had the privilege of speaking on a Minnesota Credit Union Network’s panel with some of the region’s local leaders about what they’re facing as a consequence of the pandemic. Although the venue was tailored to credit unions, I believe the perspectives apply to all financial institutions.

Four key points that stood out are noted below - some completely novel; some we can’t say often enough.

1. Redefining Human Touch

The coronavirus has elevated digital banking from an alternative to the primary channel for the delivery of financial services. Whether opening a new account, applying for a credit card, or taking out/modifying a loan, many people are getting their first taste of truly digital banking due to the pandemic.

Numerous surveys indicate nearly 80% of consumers want their financial institution to offer more fully digital banking options going forward. At the same time, they also don’t yet seem prepared to return to the physical branch. Only one in ten say they’d be more likely to visit their branch if offered masks, hand sanitizer, and other precautions.

This doesn’t mean customers are ready to relinquish human touch. However, technology being deployed in the digital channel is giving the virtual world a warmer feel. AI-driven personal assistants such as Bank of America’s Erica and Capital One’s Eno are good examples of digital solutions which manage to incorporate a personalized feel.

Small businesses, in particular, remain attached to the attention and service they receive at a branch. We have yet to fully solve this puzzle, and now the pandemic has raised the bar for credit unions and banks when it comes to serving these organizations in a remote and/or automated setting.

2. Branching Out and Touching Less

Branches will remain part of the equation, although, even there, the model will shift toward fewer physical interactions - for example, greater demand for drive-through or curbside banking services. However, with commercial real estate lease rates likely to fall, the existing trend toward fewer branches could slow. But with institution’s looking at a need to address compressed interest rates, even the reduced cost savings gained from closing branches may be too good to pass up.  

In another category of safe distancing, we can expect continued growth in Card Not Present transactions over the holidays, with recent trends in grocery and restaurant shopping adding to longstanding e-commerce gains. Likewise, contactless point-of-sale payments (whether through digital wallets or tap-and-go cards) will gain acceptance as consumers find ways to avoid touching terminals or using cash.

 

3. I Can’t Say it Often Enough (and Neither Can You)

A fundamental objective of human interaction is communication. At times of uncertainty and stress, people crave more communication, not less. That’s why it’s essential for banks and credit unions to over-communicate with their customers and employees at this critical juncture.

Leaders may not yet have a clear view of the pandemic’s long-term implications for operations or service models. Yet, silence on pressing issues can be damaging to morale, as well. From an executive’s perspective, always a good first step is to stay informed in order to understand the economic impacts, government responses, and public health safety guidelines. From what is known, communicate what is confirmed and avoid speculation. At a minimum, this demonstrates your understanding of the situation and shows that you care about the challenges faced by the community.

As mentioned previously, we know the COVID outbreak and its economic spillover is impacting consumers’ income and ability to pay bills. Prepare in advance to offer emergency loans, payment deferrals, and free financial counseling programs, and encourage account holders to seek assistance, if they need it. To help with local economic recovery, credit unions and banks may also consider creating new services for small business owners.

4. Let Them Upgrade You (at Lower Costs)

Another thing we’ve said before is that now, more than ever, banks and credit unions should be reviewing third party vendor relationships for ways to maintain the same level of service at lower costs. Given the shock to the system over the past seven months, it’s quite possible the assumptions under which an agreement was struck may no longer apply.

Also, remember that even in these economically uncertain times, people are willing to pay for convenience. Look no further than Grubhub and DoorDash for evidence. If institutions can find similar approaches to remove friction from financial service delivery, they may generate new revenue sources to partially offset other challenges facing them.

The Bottom Line: Certainly financial institution’s were well into digital but the pandemic is increasing adoption rates and putting pressure on institutions to close gaps that may exist between what can be done in the branch versus what can be done on a mobile device. Human interaction is still a part of the financial services landscape. Even after the risk of infection drops, individual’s will retain concerns about sustaining their personal health. Developing plans to mitigate those concerns is an urgent matter. Revisiting existing vendor relationships to find features which are helpful and convenient for the consumer may be helpful. Another reason to revisit those vendor relationships is to confirm that the prices you are paying are “at market.”

To watch the full panel discussion with Minnesota CU Network, click here.

For more on this topic, read COVID-19’s Digital Transformation Wrecking Ball

Topics: COVID-19

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