Over two weeks ago, our firm offered perspective on some things banks and credit unions can do to proactively support accountholders during the COVID-19 pandemic. Since then, we have maintained ongoing contact with our more than 1,000 clients as this situation continues to evolve. Additionally, we surveyed our industry network of clients and friends to help us understand how the virus is impacting their financial institution’s operations – and they delivered.
Given how rapidly the COVID-19 situation is evolving, we gathered this information March 17-25 to capture a snapshot of how banks and credit unions are responding. Respondents to the survey included regional and community financial institutions, a healthy mix of banks and credit unions of varying sizes.
We hope that these results offer some clarity to all during these uncertain times.
The Permanent Role of Digital/Remote Channels?
It’s no secret consumers have been growing their use of digital channels, especially via mobile devices, to do their banking. Banks and credit unions that have heavily invested in digital capabilities (and capacities) are now reaping the benefits in earnest. Of the institutions who responded to our survey, 82% rated their online and mobile channels as “vital” to operations during the pandemic. What’s more, all responses fell within the top two tiers of a five-point scale – none considered them less than “important.”
Additionally, 79% of institutions have provided more education on the use of remote channels as a means of weathering the crisis. Some of these channels may even become permanent habits; the longer social distancing and shelter-in-place remain the status quo, the more likely this will be the case. At the least, consumers will better understand their service alternatives. Those institutions equipped to deliver a positive experience during these difficult times will generate greater customer satisfaction, loyalty and potential market share gain.
Perhaps more surprising is that nearly two-thirds of respondents are allowing more than half of their staff to work from home – despite the oft-stated regulatory oversight reasons against remote models. Even banks and credit unions less bullish on remote models report roughly 10 percent of their staff currently working from home. Consumers’ further embrace of digital channels will factor into these dynamics as well, of course. Consider, now, that economic recovery from the pandemic will see most organizations finding ways to cut costs. With the cost of commercial real estate, businesses in every vertical may be more open to remote work options – including banks and credit unions. Later, if this model does become prevalent within the banking community, there are implications to branch density and other occupancy costs.
Markets Hate Uncertainty and We’re Getting a Heaping Helping
COVID-19 has already dealt grievous blows to the markets and lives of people in the United States. Over half of domestic banks and credit unions expect “severe” impact to their communities (the second highest option), with nearly all other assessments split between “extreme” and “moderate.” What’s far less clear is how long this impact will persist. Prevailing estimates on how long the expected economic hangover will be were spread fairly evenly from “less than six months” all the way to “18-24 months.” A few, however, ticked the box for “things will never return to normal.”
This uncertainty of the future also is present in banks and credit unions’ attitudes to initiatives such as new feature rollouts and system upgrades. According to the survey responses, 80% of financial institutions expect to delay either most of their projects or “non-essential” ones. It’s somewhat surprising that only two respondents expect most projects to be cancelled, although this could change if the perceived duration or severity of the situation changes. Speaking from experience, we expect renewed focus on unearthing cost savings through vendor relationships, business process improvements, and the application of automation.
Meanwhile, since COVID-19 has emerged in the U.S. and Europe, several of our own clients have renewed engagements with us across these areas. Our firm expects this trend to be consistent, if not amplified, during recovery from the pandemic, as most banks and credit unions are already operating in a state of doing more with less. Economic uncertainty merely heightens the pressure.
The Bottom Line: I doubt many financial institutions ever expected to unseal the envelope of their pandemic business continuity plan. Even so, the survey results indicate that these banks and credit unions appreciate quite well the essential role they play in their communities. Nearly 100% responded that communication during the crisis was one of the major actions taken by their teams. Both attitudes and actions will certainly evolve as more about COVID-19 becomes known. For our part, we will be collecting more data to share with our subscribers, including an upcoming brief focusing on how COVID-19 will shape the future of our industry.