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At the beginning of 2020, "contactless" was an obscure term typically associated with the new generation of debit and credit cards. Using near-field communication (NFC) payment technology, these cards are capable of being tapped instead of swiped or dipped - shedding several seconds from time in the subway turnstile or checkout line. However, despite Visa and Mastercard's heavy promotion, US adoption has been gradual, shaded toward frustratingly slow…until the pandemic hit.

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.

In the early stages of the US coronavirus pandemic, SRM reached out to banks and credit unions to gather insights on initial FI reactions and changes in customer behavior. A previous blog detailed the findings of that March survey.

In late June-mid July, SRM again collected responses on how perspectives had evolved once leaders had more time - and a bit more information - to assess their options. We received an even greater response, with impressive diversity in geographic footprint, asset size, and credit union/bank participation.

In mid-March, when Americans were beginning to absorb the notion of shelter-in-place orders, SRM reached out to our financial institution clients to get a snapshot of their mindset regarding approaches to meeting consumer needs in the age of the pandemic. The findings of that initial survey can be found here. 

To refresh this view and learn how time in the “now normal” was impacting banks and credit unions, a second survey was planned in late June. Of course, by the time the second survey was ready to go into the field, COVID-19 was re-asserting itself across the United States. We retooled the study to accommodate the circumstances, revisiting some of the questions from the March survey and drilling down into digital transformation and payments.  

Delinquencies & Defaults Brewing on the Horizon 

Despite the many uncertainties in our “now” normal, Covid-19 is undeniably changing consumer spending patterns – and it shows. According to its 8-K filing from June 1, which compares May 2019 to May 2020 payment volumes, Visa’s cardholder spend in categories like travel, entertainment, fuel and restaurants had 20-40%+ declines year-over-year, while spend in categories such as groceries, home improvement, retail sales and telecom/utilities grew 20-40% for the same period.      

In the months since the pandemic was announced, SRM’s experts have weighed in on the operational impacts of COVID-19. We also gathered perspectives from a cross-section of banks and credit unions through a survey conducted in the early days of shelter-in-place orders (results from survey 2 coming soon). Now that the bills have come due for April and May, we noticed some unusual emerging trends in the invoice tracking data.

While community bankers were already weighing options on core processing and digital solution strategies before the pandemic, these decisions weigh heavily enough now to quickly tip the scales of survival. We’ve already shared our thoughts on how the “shelter in place” environment and its aftermath gave a serious jolt to any bank or credit union leader still on the fence about the importance of a robust digital backbone. 

In our last blog post, several SRM experts weighed in on the future of banking in the now normal - how consumer spending behaviors would influence branch operations and non-interest lines of revenue. In this post, we will shift our focus to big data, cyber risks and the need to reinforce legacy infrastructure.   

We are spending a lot of time thinking through the near- and mid-term ramifications of the coronavirus pandemic, especially impacts to the financial services industry. SRM has already shared several perspectives on this topic, including similarities/differences between today’s downturn to 2008’s financial crisis and financial institutions’ latest wake-up call concerning digital channels. Now, our lens focuses on what adapting to post-pandemic consumer banking and spending behaviors might look like. 

There is a business cartoon that has been circulating around social media – a group of employees is holding court in a conference room. The manager at the head of the table declares, “Digital transformation is years away – I don’t see our company having to change anytime soon.” Meanwhile, outside the window just behind him swings a giant wrecking ball labeled “COVID-19.”  

The term “bank” never appears, but there is no sector for which the message rings truer. While the migration of banks and credit unions to digital channels has been underway for several years, of course, the national brands have been the most aggressive, creating an online capabilities gap over most community financial institutions. Given the pandemic-prompted closing of most branches and the energetic push of customers of all stripes toward remote channels, those investments by the largest institutions seem more prescient than ever.