Why Banks Should Maintain Their Digital Initiatives After The Pandemic

The pandemic has served as the biggest financial industry crisis since the 2008 recession, with social distancing guidelines, stay-at-home orders and the economic fallout, forming a triple threat that has rocked the sector. Thousands of bank branches across the U.S. have closed temporarily or permanently while others have limited their hours or switched to appointment-only models to reduce the risk of infection.

Greater shares of bank customers have applied for government-backed loans or set up new accounts to receive stimulus money than ever before, however. Financial institutions (FIs) have responded by pulling out all of the stops with their digital banking systems to close the demand gap, testing the digital networks they have spent the past decade developing and improving. Larger banks with more sophisticated in-house digital operations have experienced greater success than their smaller counterparts, but staying on top of customers’ demands for digital services has been challenging for every FI.

Vaccine production and distribution are now in full swing, and the pandemic’s end may be in sight, but should it pass, banks will have to look back on the lessons they learned during the crisis and determine which changes will revert and which will remain. The following Deep Dive explores how banking has changed during the pandemic and analyzes which customer habits and bank strategies will become the new normal moving forward.

How Banking Has Changed During The Pandemic

The banking industry’s single largest pandemic-driven change has undoubtedly been the massive shift from in-person to digital banking, and this trend has been evident across a wide range of FIs. Bank of America, for example, observed that 41 percent of its customers used mobile channels in 2020, whereas 37 percent did the same in 2019 and 26 percent did so in 2018. Half of all U.S. bank customers used mobile apps or websites to interact with their FIs at least once a week, up from just 32 percent in 2018. Weekly ATM usage, meanwhile, dropped from 37 percent to 29 percent during the same period as customers grew more used to digital channels and did not want to leave their homes.

Customers may be irked by the multitude of changes they have faced during the health crisis, but they have been very receptive to the measures banks have taken to serve them. One survey found that 71 percent of bank customers were satisfied with the steps their FIs took to cope with the new paradigm, and 20 percent said they had more trust in their banks as a result. Eighty-two percent and 79 percent, respectively, said that their banks met or exceeded expectations when it came to digital banking offerings, and 68 percent said the same about the modified in-branch services they used during the pandemic.

This is undeniably good news for banks, but some warning signs still exist. Seventeen percent of bank customers said that their nonprimary bank was better at meeting their needs than their primary FI, and 40 percent of those who were dissatisfied with their primary banks said their financial needs were met by non-FIs such as credit card issuers. Banks must continue to build on their successes once the pandemic ends to avoid harming customer loyalty.

Digital-First Banking

The best post-pandemic plans for banks will likely be to continue the paths they have charted during the pandemic, as many customers will be doing the same. Recent research found that 87 percent of customers who stepped up their use of digital channels during the pandemic are planning to continue doing so once the crisis ends. Bank customers are also likely to continue using smartphone-based payment methods after the pandemic, even though many began using such solutions to avoid the risk of COVID-19 infection from handling cash. Another report found that 420 billion transactions — worth approximately $7 trillion — will shift from cash to digital payments by 2023 and projected this number to swell to $48 trillion by 2030.

Customers may be attached to digital banking but are not necessarily loyal to a particular bank or app, meaning customer experience will be key for banks looking to benefit from consumers’ shifting habits. Myriad banks have already improved their customer experiences to address the increased digital banking demand during the pandemic, and customers have reacted well to these developments. Seventy-four percent of millennial bank customers said their banks understood their customer experience needs in January 2020, but 84 percent said the same in August. Generation X respondents and baby boomers also reported improvements in this area.

These findings suggest that banks are largely on the right track when it comes to developing services to suit customers once the pandemic ends, but they should not rest easy. FIs must still stay attuned to customers’ demands and keep developing their digital offerings to build on the goodwill they have earned during the pandemic.