The coronavirus pandemic and the ongoing lockdown measures imposed in many countries around the world could “change the face of banking forever”, according to card-issuing platform Marqeta.
In the UK, some bank branches have closed or are operating limited opening hours, even though banks are classified as essential businesses that are permitted to remain open. For example, TSB has closed a fifth of its branches, and Lloyds Banking Group has closed 200 branches.
This is part of a more long-term trend in bank branch closures in the UK, with 3,509 closures since January 2015.
ATM usage has also dropped by 50%, according to ATM operator Link, and online and mobile banking services are now more important than ever.
Coronavirus accelerating the digitisation of banking
During lockdown, the use of fintech apps has also surged, with deVere Group reporting that the use of financial apps in Europe has risen by 72%. Marqeta has warned that this could create challenges to traditional banks if they are unable to adapt, and may find it difficult to keep up with their digital counterparts.
“The contactless limit has been raised to £45, and more and more retailers have moved to card only while cash usage has halved, according to ATM operator, Link,” said Ian Johnson, managing director Europe for Marqeta.
“This indicates that we are seeing a significant change in behaviour in the wake of the current crisis. Banks will need to be ready to manage the move away from cash, and ensure their infrastructure can cope with the rise in mobile, contactless and card payments.”
According to research by Fujitsu, good digital services are a high priority for 47% of UK respondents when choosing where to bank.
Johnson believes that the current pandemic could further accelerate the uptake of digital-focused banks.
“Over time, this global event could trigger a swing in the balance of power between digital and traditional banks. Historically, digital banks have struggled to encourage users to fully migrate to their platforms; many still use a traditional operator as their ‘main’ bank, while using their digital bank for very specific activities,” he said.
“Yet assuming digital banks prove themselves stable and reliable through the current crisis, this could all change. Digital banks are far more nimble and agile when it comes to responding to upheaval. Given the unprecedented disruption taking place right now, this ability to adapt will be invaluable.
“The Covid-19 pandemic will expose some of the gaps in traditional banks’ digital infrastructure – gaps which they may have previously been able to paper over, but no longer can. This will force many to accelerate their modernisation plans, while strengthening ties with fintech providers, to allow them to meet this new demand for digital services.”