Covid-19 has forced more than three-quarters of banks to change their future banking strategy, increasing their focus on digitisation.
This is according to card issuing platform company Marqeta, which has issued a report examining the impact of Covid-19 on banking following a survey of 200 European banking executives.
With the closure of many physical retailers during the early stages of lockdown seeing a surge in e-commerce, banking has followed a similar trend, with a growing number opting for digital banking as opposed to visiting bank branches.
According to Marqeta there was a 72% spike in fintech app use by the end of March, with cash withdrawals down 60% at the end of April compared to when lockdown began.
Not only has Covid-19 triggered a change in consumers’ banking habits, banks themselves have also had to pivot, focusing more than ever on digital banking tools.
96% of the European banks surveyed said that Covid-19 has had a significant impact on their operations, with 99% agreeing that changes to consumer behaviour brought about by Covid-19 will significantly impact banking in Europe. 54% of banks said they plan to reduce their physical branch network.
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75% said that Covid-19 had changed business banking models forever, with Marqeta describing this as a “watershed moment”.
According to the report, 88% of banks said they were overwhelmed by the demand for online and mobile banking during the pandemic, with three quarters saying they were not prepared for the changes in consumer behaviour that occurred.
In response to this increase in demand, 80% of those surveyed said they had accelerated their digital transformation plans, with many believing that Covid-19 has meant that such projects will now need to be delivered sooner.
Banks are therefore investing in ways to improve their online and mobile banking such as differentiated payment services, security and anti-fraud solutions and banking and payment platforms.
“The future of banking has come around quicker than most expected. The onset of Covid-19 accelerated many trends in consumer behaviour, with more people moving away from cash and adopting digital services such as online and mobile banking,” said Ian Johnson, managing director Europe at Marqeta.
“These are all trends that were set to slowly change over time and banks would gradually transform to adapt. But Covid-19 has drastically moved up the timescales, with 36% of banks saying Covid-19 has ‘opened up the floodgates’ to modernising core banking and payment systems. Attitudes to modernisation have clearly changed. Banks are now speeding up efforts to transform because they know that the winners of the next age of banking will be determined by who can best adjust their strategy to adapt to the new normal.”