Monday, June 15 marked the scheduled reopening of the UK and other economies around the world following the lockdown measures introduced due to Covid-19, which had led to almost all businesses and public places temporarily closing to mitigate the spread of the virus.
While the exact nature of lockdown has varied between countries, with US and UK banks keeping some branches open on a reduced-service basis, certain banks in Europe such as BBVA in Spain have remained completely closed during the lockdown period. They now reopen with the necessary personal protective equipment, physical barriers, one-way systems, and deep-cleaning protocols in place to safeguard staff and customers.
However, over the course of the lockdown period, the increased usage of digital and particularly mobile channels to bank had signaled the end of the brick-and-mortar banking experience. In particular, Citibank recorded an 84% increase in mobile usage, while Bank of America’s AI chatbot, Erica, interacted with over two million customers and handled over 15 million complex enquiries in April alone.
Consequently, despite the reopening of banks and the queues that are likely to be seen as digital holdouts visit branches, the changing pattern of mainstream consumer behavior is likely to persist. Fidelity National Information Services reported that 45% of the 1,000 American consumers surveyed had changed the way they interact with their banks since the outbreak, while 31% of respondents stated they would increase their usage of online and mobile channels after the pandemic is over.
Similarly, despite the reopening of economies around the world, the continued threat of a second wave of the virus – as seen most recently in China, where 49 new cases were reported on June 15 with 36 of them in Beijing – is likely to encourage customers to continue using channels that do not put them in harm’s way. This is particularly significant in countries that were worst affected by the virus, such as the US, the UK, and Italy. Dissatisfaction with government handling of the pandemic in these countries is likely to see customers remain cautious about in-person interactions for longer than in countries that contained the virus more capably such as South Korea, Taiwan, and New Zealand.
As such, mobile adoption and user acquisition in countries worst affected potentially provides the most significant growth opportunity for incumbent banks, as even non-technologically adept users find themselves migrating in order to effectively shield themselves. Digital-only platforms that have seen an increase in user activity during the period are likely to also experience growth as interest in their offerings peaks.
However, it is likely to be less considerable than that of incumbents, as neo-banks primarily attract users who are already digitally savvy. As such, their growth will likely focus on disgruntled and dissatisfied customers who have not been adequately served by the digital capabilities of incumbent providers, many of which do not have such sophisticated platforms.
These changes have also led to banks re-evaluating their strategies, with a greater emphasis being placed on digital and, in many instances, an accelerated digital timeline being adopted. In the US, Citigroup president and CEO Jane Fraser said: “We believe we have the model of the future – a light branch footprint, seamless digital capabilities, and a network of partners that expand our reach to hundreds of millions of customers.” In Europe, Aris Bogdaneris, head of challengers and growth markets at ING, questioned the need for physical distribution centers and branches, asking: “When the crisis abates – are some of them still needed?”
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