The globe is being disrupted due to the rapid transmission of the COVID-19 pandemic. In response, retailers and financial institutions have initiated social distancing strategies to minimize the spread of the virus. These initiatives include marking safe distances within waiting queues, limiting the number of customers in the store, adding plexiglass screens to separate staff from customers in supermarkets and the use of hand sanitizers, gloves and surgical masks. Looking at the daily number of new cases around the world and the likelihood that the pandemic will continue to affect us for months, we must ask ourselves how this will impact customer banking behaviors.
We are fortunate to live in an era where we have access to a wide range of digital banking platforms. Luckily the banking industry evolved to develop strong omni-channel systems, making access to funds one less anxiety-inducing factor. However, the COVID-19 pandemic will only accelerate the current trajectory of branch closings as financial institutions explore mitigating strategies to conserve cash and drive greater efficiencies.
Potential Near Future Scenarios
The future is very much uncertain and irrespective of what experts are saying, the reality is nobody truly knows how the pandemic will impact society and business. To help frame the various strategies financial brands may be considering, we explored a number of plausible scenarios, and have identified two that we consider to be most relevant here. The important fact remains, these scenarios will have either a short term or longer term behavioral imprint on banking customers. These scenarios take into consideration that different age segments have different levels of fear about COVID-19, as evidenced by teen beach parties or social media posts defying social distancing. As such, some of our recommended strategies will have far greater importance pending the age segments.
Optimism: Three month regionalized disruption after which we see a trend towards business as usual
This scenario follows the example of what occurred in China where the pandemic started in December, began strict quarantine in January and factories started full production by the end of March to early April. In this scenario, the growth of the virus is managed through the discovery of new drugs and treatments that rapidly flatten the virus’ growth curve. Due to business disruptions, there is a minor recession with governments investing heavily to reignite the economy. Governments also put great effort into instilling consumer confidence about the reduced risk of the virus to drive economic growth. In this scenario, the need for social distancing will slowly wane, and moving back to pre-virus shopping behaviors will take about a year to normalize. The fear of the virus and its financial and social impact will recede over time as consumers yearn for a return to “normal life.”
Potential strategies to consider
In order to ensure retail banking channels remain relevant, we have identified a series of strategies worth further review. In this scenario consumers would have visited 24 hour ATMs in addition to essential branch visits during the outbreak and after. In this scenario there are opportunities to shift the customer’s behavior towards greater automation while overcoming their anxiety regarding contagion.
- Leverage branch visits to drive greater migration to online and mobile banking to achieve a high absorption level. Target those customers who have a low usage rate of online and mobile banking.
- Ensure your website clearly identifies your new operating procedures during and after the virus has peaked.
- For those tellers who do not have security glass separating them from customers, launch a partial plexiglass panel for in-person transactions in addition to making hand sanitizer available and having staff wear surgical masks (assuming supplies for medical use are adequate – should medical teams be experiencing a shortage, banks should provide masks that are clearly not impinging on the medical supply, such as cloth masks).
- Remove the queuing stanchions and replace with a mobile-friendly check-in system supported by in-branch digital signage.
- Move to branch visits by appointment only to manage the number of customers in the branch at one time. This will also allow for better staff management, taking into consideration banks during this period will move to fewer hours of operation.
- Identify new cleaning practices clearly in the lobby.
- Reconfigure your waiting area to allow for social distancing, removing any communal tables or non single-seat sofas.
Considerable Impact: Six month major disruption leaving a social imprint moving customers towards a new reality
This scenario is not the most extreme we explored: remaining optimistic, humankind as we know it today will indeed survive. However, a prolonged pandemic and the resulting higher number of deaths will leave a lasting social imprint on consumer behavior not dissimilar to those fostered by world wars or the Great Depression. These global disruptors led to new social behaviors such as frugal spending and minimal consumption in response to the fear of poverty, rationing or national attitudes to put all production towards war efforts. The social imprint of a prolonged pandemic will reflect these greater disruptors, lasting for decades and influencing consumers’ attitudes and behaviors in more meaningful and lasting ways.
Potential strategies to consider
In this scenario, the impact of the pandemic has resulted in a major shift away from frequent branch visits in reaction to a heightened level of fear and anxiety in contracting the virus in public spaces. Once the pandemic subsides, the fear of contagion and new distancing behaviors will become the norm in social gatherings.
- Reconfiguration of the bank’s branch network: In this scenario, branch channel strategies are accelerated with the closure of poor performing locations and the opening of new locations leveraging digital first customer experiences. These new branches will incorporate many of the strategies mentioned in the following points in addition to being smaller and more flexible to adapt to given market needs. In an effort to reignite small businesses who have been decimated during the prolonged shut down, banks will work with local and federal governments in launching small business ecosystems to help accelerate employment.
- Mobile branch touch-free connection: Much of the attention in current digital banking strategy is given to allowing consumers to bank anywhere through their mobile devices. However, very little attention has been given to the role mobile plays within the branch as an effective education and communication tool. Banks will overcome their reluctance to geo-fence information to their customers as the evolution of this platform provides greater convenience and hygiene during branch visits. Through benefits such as queuing through their mobile device, selecting the banker of their choice, seamlessly interacting with ATMs and removing many of the tedious on-boarding banking processes, use of mobile in the branch will increase.
- Biometric security: The whole concept of interacting with a pin or key pad will become irrelevant through the use of facial recognition technologies. Facial recognition will provide a stronger engagement and recognition platform for staff to better understand customers in a shorter time than it would take them to authenticate through a counter pin pad. Biometric security will remove any future need for customers to clean their hands after touching keypads.
- New social distancing branch layouts: Banks will need to review and reconfigure their branch layouts to factor in social distancing. In Scenario #1 the strategy around social distancing was to remove existing furniture. In this scenario it starts with viewing the branch experience through the anxious eyes of customers who have been through several rounds of enforced social isolation and a higher death toll as a result of the prolonged pandemic. If the past decade was focused on better customer engagement through more intimate settings, this new era will reflect quite the opposite where customers are looking for safe boundaries for their engagements with branch staff.
- A new staffing engagement model: Part of the branch experience is to ensure customer-facing employees are aligned to the new reality with new engagement models and protocols. The new reality will include leveraging the latest in virtual meetings and tablet-based sales processes. Customers will have become accustomed to the virtual service world having leveraged video conferencing platforms from home, making the transition to virtual experts less of a barrier. In addition, technology will further drive virtual banking features on websites allowing customers to seamlessly link their banker with additional experts from the financial institution’s network.
Irrespective of which scenario we emerge from, the current pandemic will have a significant behavioral imprint on customers and their relationship with financial institutions and their channels. We would like to conclude with a company quote reflecting many of the opportunities facing companies today, namely: “True leadership is seeing the opportunity in the challenge versus the challenge in the opportunity.” Banks need to view the disruption occurring in the marketplace as an opportunity to strengthen their relationship with customers who are currently filled with a high level of anxiety.