It’s impossible to contemplate the future of the banking industry without understanding how consumer behaviors have been impacted as a result of the COVID crisis. Before the outbreak, banks were already starting to rely more heavily on efficiencies through the use of technology but the unexpected rapid surge in digital banking channels due to lockdowns quickly inserted a “fight or flight” mentality among financial institutions.
Not only have banks been forced overnight to reprioritize certain digital capabilities, but they also are struggling to find ways to promote a culture from within that is centered around a deep understanding of customer expectations and challenges.
Everything from proactive service to personalized interactions must be considered as part of a long-term strategy. Concepts that technology alone simply cannot address. In fact, based on a recent survey, nearly 15% of consumers indicate they will likely jump ship to another bank within the next six months due to issues stemming from customer service frustrations during the pandemic.
With millions of banking relationships up for grabs, banks must take a drop everything approach to understand how the pandemic is on a path to radically change consumer habits indefinitely. In this article, we will identify 4 behaviors that have drastically changed since the pandemic and how banks must respond in order to stay relevant.
1. Declining Number of Branch Visits
Let’s start with the most obvious one. An ongoing need for social separation and less contact has created a wide variety of challenges in terms of conducting transactions and forming genuine connections. According to a recent study released by Boston Consulting Group, 24% of consumers are either planning to visit branches less often or completely all-together when conducting post COVID banking transactions. Expectedly, consumers have had to significantly change how they bank. A survey conducted by FIS revealed that 45% of consumers have started using some form of mobile or online banking application for the first time following the pandemic’s onset.
How Banks Must Respond:
There are certainly ways to bank when you can’t go to the bank that financial institutions should consider as part of a long-term strategy that is aligned with trending consumer demands. Depositing checks, paying bills and signing documents remotely must be intuitive options for consumers. Efforts to ensure transaction and interaction capabilities are scalable through various technologies must also be key considerations.
West Town Bank & Trust Strategies:
- Communication Tools – New technologies, such as Microsoft Teams, have allowed the Bank to engage in face-to-face interactions and form genuine connections with both prospective and existing clients. Since the pandemic, the Bank has opened new accounts for nearly 50 hemp-related businesses, most of which initially engaged with West Town Bank & Trust via Microsoft Teams.
- Branding Through Social Media – Creating a brand presence by sharing content on social media provides an opportunity for businesses to garner a better understanding of the Bank’s culture, differentiators and processes. Through content, consumers have access to unique perspectives of the Organization without ever speaking to a banker.
- Digital Application Software – Onboarding new customers can be a tedious process but with access to platforms that create a pleasant experience for end-users, it doesn’t have to be. Technologies available through the Bank’s strategic partners at RiskScout and Windsor Advantage (“Accel” platform) have provided opportunities for West Town Bank & Trust applicants to seamlessly submit documentation for both new deposit accounts, as well as requests for SBA 7(a) and PPP loans.
2. Increasing Desire to Save Money
Unfortunately, the pandemic has thrown financial curve balls to millions of Americans. With unemployment rates up and spending habits down, an inherent desire to save money whenever possible has surfaced. According to key findings from a NerdWallet study, nearly 70% of Americans reported that their household income has been negatively impacted due to the pandemic. In addition, the survey revealed that approximately 75% of respondents plan to either start an emergency savings fund or spend less on non-essential items following the pandemic.
How Banks Must Respond:
Finding ways to save money during a pandemic is difficult. While banks have their hands tied when it comes to controlling the vast majority of consumer saving habits, financial institutions need to remain cognizant of the comprehensive financial picture among consumers. To help ensure consumers are utilizing the most suitable financial products and services, business development representatives must have a high-level understanding of what’s available within the four walls of their organization. Knowing enough to be dangerous about certain products can lead to cross-selling opportunities that are advantageous to the financial well-being of the consumer.
West Town Bank & Trust Strategies
- Internal Product Education – Referral incentive programs have been implemented across the Organization, allowing bankers to gain insights into why mortgage interest rates are at an all-time low, how SBA 7(a) business loans offer extended maturities and what has caused Employment Practices Liability Insurance (EPLI) to enter the spotlight amid COVID. These strategies have helped create meaningful conversations with consumers around saving money on monthly mortgage payments, preserving monthly business cashflow and being better prepared for potential risk of monetary loss.
- Customer Relationship Management (CRM) Systems – Through the implementation of Salesforce, representatives of the Bank have a centralized tool for managing data and understanding consumer behaviors. With this platform as the conduit for identifying cross-sell opportunities through automated triggers, bankers are enabled to facilitate warm introductions to other lines of business that can deliver products or services that promote cost savings.
3. Increasing Desire to Safeguard
With increases in both digital transactions and the proportion of employees working from home, cybersecurity has become a major concern. For starters, increased online activity through digital channels has been met with more fraudulent activity reported. Both the FBI and Interpol have reported a major uptick in cybercriminal activity, with the FBI receiving as many as 4,000 complaints per day related to cyberattacks, a 400% increase from what was being reporting pre-COVID. This crisis has inspired more than 70% of Chief Information Security Officers to report plans for significant increases in 2021 budgets to address pandemic-era business conditions, including upgrades and features that safeguard remote employees from hackers.
How Banks Must Respond:
Fear of fraud is a post COVID banking threat financial institutions must address. With heightened concern related to cybercrime, studies suggest consumers would feel more secure if financial service providers used factors such as fingerprints, retina scans and speech patterns for personal identification. Secure file delivery methods and e-signature applications are already used widespread across the industry, but certain advanced technologies may be unrealistic at this stage in the game, especially for community financial institutions with limited budgets. That said, banks can ensure consumers are protected by simply asking the right “get to know your customer” questions and by being proactive with communicating best practices and newsworthy events relevant to their overall financial well-being.
West Town Bank & Trust Strategies:
- Comprehensive Questionnaires – Technology enabled onboarding software powered by RiskScout helps filter prospective business customers (particularly within underserved industries) based on more than 60 pre-approval questions defined by the Bank. Verifying identities, understanding transactions and assessing potential areas of risk are foundational components to protecting both the customer and the Bank, as well as limiting fraud.
- Proactive Communication – The Bank has distributed a variety of updates to customers on new angles hackers are using to breach customer sensitive information, as well as sharing red flags that may indicate suspicious activity. In addition, interim final rules and frequently asked questions related to the Paycheck Protection Program have been consistently communicated via email blasts to help clear the air for borrowers struggling to understand covered periods, eligible expenses, and most recently, the forgiveness application process and related guidance set forth by the SBA.
4. Declining Use of Cash
The end of cash has never been closer. While transactions involving cash have been on the decline for quite some time, COVID has accelerated its downturn with many companies closing brick and mortar locations. Consumers have quickly shifted to online for buying essentials. Based on responses to the Ernst & Young Future Consumer Index – a survey conducted to help business leaders see emerging post COVID banking trends – fewer in-person transactions have contributed to a 57% fall in cash usage, alongside a rise in payments using credit cards (7%), debit cards (10%) and online payment tools (14%) since the pandemic. Furthermore, the vast majority of those consumers changing the payments landscape do not plan to make any changes to how purchases are made through the end of of the year.
How Banks Must Respond:
It’s a bit of an oxymoron to expect banks, institutions in the business of holding cash, to move completely away from ATMs, teller windows and currency exchange services that involve cash. Rather, having a solutions-oriented mindset that solves for new consumer trends in payment activity might be the better option. Forming strategic partnerships with digital payment processing subject matter experts and focusing on niche verticals with a significant need for cashless payment options are ways to at least start moving with the shifting tides.
West Town Bank & Trust Stratgies:
- Subject Matter Expert Partners – The Bank recently announced its strategic partnership with a team of experienced payment processing experts to form West Town Payments, LLC. The alliance will leverage the front-end capabilities offered by West Town Payments to facilitate physical point-of-sale, online, contactless and mobile payments, with the Bank providing merchant deposit accounts and treasury management services on the back end, among a wide range of other consumer benefits.
- Pioneer Underserved Markets – The hesitation on the part of financial institutions to provide services to hemp-related businesses has led to a multi-billion industry operating largely on a cash only basis. This impedes the industry’s growth, poses a heightened threat for criminal activity and prevents the proper tracking of billions in finances across the nation. West Town Bank & Trust maintains a targeted approach to catering to underserved markets, such as hemp and CBD, to help these businesses step out from behind closed doors and flourish openly by allowing customers to make cashless payments in confidence.
Regardless of the times, it’s critical for financial institutions to understand how consumer behaviors are evolving. During these unprecedented times, it’s now more critical than ever for banks to observe drastically changing habits and implement long-term strategies that support not only speed, simplicity and intelligence through digital channels, but also personalized engagement, costs savings and consumer protection. Only supporting digital channels and capabilities without these other areas will create issues around trust and customer care.
Recovering from this crisis will require relying on extended support and flexibility from banks to help consumers get back on their feet. Banks will undoubtingly need to take a more consultative approach as consumers attempt to adapt to a post COVID banking world through access to savings, investments and insurance.
Why “Hemp Banks Here”
Most banks won’t bank hemp-related businesses. At West Town Bank & Trust and West Town Payments, LLC, we don’t just bank hemp, we embrace it. Our team has built a hemp compliance program uniquely tailored to the challenges of hemp-related businesses. We provide a full suite of commercial banking services and payment processing solutions, including point-of-sale, online, contactless and mobile, so you feel unquestionably safe and secure banking with us.
Through combined expertise in commercial banking, on-boarding due diligence, compliance monitoring and payment processing, our team is uniquely positioned to help hemp-related businesses increase sales, improve cash flow and ultimately decrease the costs of doing business. Simply put, hemp banks here because we know hemp.
About the Author: Melissa Marsal is the Chief Operating Officer of West Town Bank & Trust and has been with the Bank for over a decade. In addition to overseeing all aspects of Operations, she’s responsible for helping the Bank build a program uniquely tailored to the challenges of hemp-related businesses. Melissa and her team of Commercial Account Service specialists are dedicated to designing cash management solutions for the Bank’s business customers. To learn more about the Bank’s hemp-related banking services, visit Hemp Banks Here or call (919) 647-9575.