The economic crisis resulting from COVID-19 pandemic-led lockdown has brought about drastic changes in everyone’s life and the way businesses are done, including the banking industry. While there have been a lot of talks to move to a more digital banking model for almost a decade, the COVID-19 outbreak has coxed the banking sector to accelerate digitization overnight. The pandemic and lockdown has made the need for reduced operational costs and improved digital experience more important than ever.
Due to the COVID-19 outbreak, people are likely to see a dramatic rise in online banking and a decline in visits to bricks and mortar branches. The pandemic has pushed customers who once resisted online banking to access digital banking services. In March, a survey by Lightico revealed that 82% of customers were concerned about going to their bank branches and 63% of polled people were more inclined to use a digital app or websites. The more these customers realize the convenience of digital banking, the less likely they are to visit their bank branches.
The research titled as The Future of Work in Banking, conducted by Digital Banking Report, puts the future of financial institutions in a good light, especially those who are prepared to embrace a new future of work realities. “The future of work in a post-COVID-19 world will be defined by humans augmented by the power of technology,” writes Jim Marous, CEO of Digital Banking Report. Marous further writes that organizations that embrace this opportunity will be able to enhance the role of employees, creating increased efficiencies and better customer experiences.
The new banking will shift from manpower-led, product-centric organizations with traditional technologies and culture to a customer-centric organization with more personalized solutions delivered seamlessly. The World Banking Report 2020 from Capgemini and Efma says that organizations that can offer fully digital and platform-based banking will enjoy improved efficiency and much lower distribution and channel cost.
Digital banking trends we are likely to see in the wake of COVID-19 crisis
Acceleration in digital customer experience
While online banking services were already an integral part of banking, especially retail banking, the impact of COVID-19 has reinforced this trend which is likely to continue post crisis as well. Digital customer experience will be the principal focus of attention and competition for financial institutions. Customers who have started using online banking services are likely to continue to do so. According to a recent Deloitte survey of 1,500 working-age individuals living in Switzerland, most of the respondents who have used digital banking services for the first time during the pandemic are willing to continue to do so. Only 51% of first-time users want to use a mix of online as well as in-branch services, and 14% say they will switch to online banking once the pandemic is over.
We are likely to see a systematic and widespread digital integration in the banking sector. Digital distribution channels offering simple, customer-centric banking experience will be of utmost priority for all financial institutions. Digital banking apps offering simplified and streamlined customer experience will open up online banking to customer segments that are less tech-savvy.
Effective digital engagement
Customers will have grown accustomed to using online platforms to access banking services till the time the COVID-19 crisis subsides, and hence will make less visits to branches. Hence, banks will need to market and sell more products online. So banks will need to shift their business model from only offering services like fund transfer, balance checking and bill payment to enabling deeper customer engagement. Banks will need to adopt digital marketing strategies equal to those of e-commerce giants like Amazon, Alibaba or Flipkart.
As a result of COVID-19, data-enabled services will be infused into more aspects of life than ever before, according to Harvard Business Review. For effective digital engagement, banks will need to implement a sophisticated data analytics tool in a combination with real-time campaigns. It will also help generate revenue for financial institutions after COVID-19.
Reimagining physical bank branches
Experts believe that physical bank branches will continue playing an important role in providing banking services after the pandemic, but there will be changes in the way these branches look and operate. Digital banking allows bank employees to focus more on value-added services, like financial planning, and less on transactional activities, like fund transfer, bill payment and account information.
We might see the closure of some bank branches due to the pandemic and infusion of more digital services. According to an estimate by Rob Aulebach, a former retail distribution executive with Bank of America Corp, up to 30% of branches that were closed due to COVID-19 may never reopen.
Adoption of next-generation technologies
Post-COVID-19, banks will be dealing with changes and uncertainties at breakneck speed, which will put pressure on legacy technology infrastructure. The digital competition will require financial institutions to continuously develop enhanced features for better banking services. In the future, banks will need to move towards adopting agile and scalable digital technologies like cloud computing, artificial intelligence (AI) and machine learning (ML). These technologies are capable of improving efficiency and reducing the cost of process and storage. The next-gen technologies will enable banks to fulfill customers’ requirements and handle their queries efficiently.
The pandemic continues to pose new challenges to the banking industry. The behavioral and economic effects of the COVID-19 crisis will be profound and long-lasting on the financial institutions. Retail banks will face stiff competition and need to increase their agility in execution.
The COVID-19 is driving consumer behavior change in banking. According to a survey by Simon-Kucher & Partner, 42% of respondents in the U.S. and 47% in Canada said they will reduce branch visits after the COVID-19 lockdowns are over. Implementation of advanced technology and digital ecosystems will be central to that success.
With the help of next-gen technologies, banks will reduce costs and drive efficiencies to withstand the coming storm and redefine their value to customers in a shifting market. By the time the world gets over the aftermath of the Coronavirus, financial institutions would have undergone a tremendous transformation in terms of processes, systems and customer relationships.
New technologies including artificial intelligence (AI), machine learning, the Internet of things (IoT), blockchain, robotic process automation (RPA,) etc. will offer as secure, easy and welcoming experience as the physical branches provide.
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