Consumer Banking must accept the digital shift as a result of COVID-19

Businesses and Organizations across the world are struggling to cope as the world economy continues to go downhill due to the Covid-19 outbreak. While an indefinite period of uncertainty looms large over normalcy to return, it is critical for businesses to keep their operations up and running. With new challenges and changing customer behaviours, consumer banking also needs to change their approach in the way customers are served. Leading banks who had already started their digital transformation initiatives prior to the pandemic are today better placed compared to their peers who are struggling to adapt now.

Digital Shift in customer behaviour as a result of COVID-19

“A study by J.D. Power suggests that only 46% of consumers will follow the usual ways to do banking.”

Home confinement has become a regular norm for most of us due to COVID-19. As a result, most consumers are likely to change their buying habits together with other financial activities. To some extent in countries like Korea, Japan consumers have already been changing the way they approach their finances. As customer satisfaction remains the top priority for banks and financial institutions, adapting to the shift in behaviour is more important. Retail bank outlets are experiencing a significant dip in stride with a dramatic increase in mobile banking and online banking.
Below are the major shifts identified by the J. D. Power study that will most likely change the face of retail banking:
  • One-third of the retail banking consumers will adapt the digital methods such as online banking and mobile banking once COVID-19 subsides
  • The younger generation will augment their use of digital banking
  • Branch-only consumers will start using mobile services
  • Well-established financial institutions having a strong digital presence will reap larger benefits than regional or midsize banks
  • Key digital banking services such as mobile check deposit and P2P payments will be affected
The points mentioned above indicate that the post COVID-19 environment will be much different from traditional banking habits. Hence, banks must be fully prepared to embrace this behavioural shift as it will remain for the long-term. A radical simplification in the service offerings is the necessity of now. As more and more customers are needed to be served at the comfort of their homes.

Key considerations for promoting remote banking

To roll out effective digital banking solutions, banks need to optimize their legacy core banking platforms to provide cohesive and personalized digital banking services. An idea would be to provide customers a singular platform which can have a multiple value added services. The seamless integration of such services (for example, insurance, mortgage application approval, or price comparison) can help customers. Perhaps a detailed evaluation is necessary to provide smarter and more intuitive customer experiences on digital platforms.
The need for revitalizing digital initiatives is driving banks to strengthen their online presence. An IBM study shows how banks can venture on the path of holistic digital reinvention:
  • Value chain digitization: 66% of global banking executives said “as traditional value chains are being replaced, it is important to digitize processes and adapt products and services to take its advantage”
  • Enhanced customer experience: They must interact with consumers through modern-age mechanisms such as chatbots, personalization, etc.
  • Transparency and trustworthiness: These are the core principles that banks should have in their mission, culture, values, and compliance
  • Responsiveness: Assisting customers in real-time is possible through emerging digital technologies to win customer’s trust

Enabling customers to go digital

It is important to note that the COVID-19 pandemic has forced the most sceptic investor to become a digital-only customer. A McKinsey study reveals that in the US, the most satisfied banking customers use digital services multiple times a week. The second-most satisfied customers do not use it at all. Hence, as many customers are still adopting digital tools, the banks must extend their support in transforming the customer journey together with them.
Some of the ways they can enable their customers are….
  • Clear communication
  • Investing on Easy-to-use tools
  • Segmentation of marketing campaigns
  • Remote coaching
  • Complete guidance for each tool
China Merchants Bank, for example, enhanced its app to become a one-stop shop for life and financial services. With that said they put up online portals to explain the available services and the actions they are undertaking in the wake of COVID-19. The most ideal online solutions provide video servicing and sales capabilities and have informational videos to aid investors during this time.
Another example is Singapore’s DBS Bank which has pushed ‘contact-free’ digital banking to its business clients. After one of their employees tested positive for the virus, they had to shut down the operations and direct customers to their robust digital banking system
Some of the things JD power encourage the Banks to adapt on are:
  • Proactive digital communication: During the lockdown, consumers are spending more time on digital media. Financial institutions can level up their communication with consumers via email. These emails can have valuable content such as articles, videos, info about new tools, etc.
  • High-quality financial services: Strengthen customer relationships by providing actionable insights into borrowing and saving
  • Provide services for free: Motivate consumers to go digital by waiving off fees and giving refunds to use the services on digital platforms
  • Promote self-service options: Handing out effective digital tools to solve problems independently could enhance the digital engagement

Winning the confidence of banking consumers

By answering simple FAQs can save consumer banking
While many customers may have previously used digital banking, they did not completely rely on it. However, banks are coming up with extensive digital services to solve customer problems. To engage their customers through digital media, it is essential to gain their trust.
Banks should be ready with the answers to some frequently asked questions such as:
  • What type of transactions can customers perform online?
  • How to transfer funds to/from other institutions?
  • How to activate remote banking services?
  • How to do a wire transfer?
Again, banks can win the consumer confidence by following the steps below:
  • Providing step-by-step instructions to enroll in remote banking such as online banking, mobile banking, mobile deposit, bill payment, etc.
  • Providing access to their tax information
  • Providing real-time customer assistance
  • Providing screenshots, guided tutorials, and video demonstrations to essential banking services on digital platforms
As consumers are maintaining social distance and limiting face-to-face interactions, the responsibility is on banks to fulfill the customer requirements remotely.

Promoting mobile banking

“The J.D. Power study shows that 35% of consumers who use online banking still did not use mobile options before the COVID-19 crisis hit.”
digital shift in consumer banking
The numbers show how big the potential is for financial institutions to improve engagement on mobiles. As consumers are looking for convenient options to stay on top of their finances, mobile banking is the most effective way to achieve that.
Mobile devices can be used to push consumers towards payment methods that require less physical interaction. The fear of contacting the virus through physical touch will make the banking industry shift towards cashless and frictionless payments. Mobile wallets can be used as one of the payment methods that will encourage consumers to move towards mobile banking.
It is important to note that the COVID-19 pandemic has forced the most sceptic investor to become a digital-only customer. A McKinsey study reveals that in the US, the most satisfied banking customers use digital services multiple times a week. The second-most satisfied customers do not use it at all. Hence, as many customers are still adopting digital tools, the banks must extend their support in transforming the customer journey together with them.
digital shift in consumer banking

Opportunities to convert online banking users to mobile options

Banks must proactively inform customers about the benefits of mobile banking to promote its usage. Although the younger generation use mobile devices to stay connected with their banks, it is important to bring other segments of consumers into it as well. Awareness campaign to older generation about the availability of such digital  services such be there in place.

Post-pandemic outlook in consumer banking

The digitization of the banking services is imperative as a result of the COVID-19 pandemic. Banks need to draw a roadmap to win the trust of their consumers during these challenging times using the route of digitization. It is also necessary for them to uphold the ethics, principles, and values of the organization as they are the ones who need to provide support during this period of financial distress. A lot will change after the coronavirus subsides, with people exploring ways to limit human contact until a cure is available.
Digital banking is the way ahead as the virus pushes the world to reinvent how we live and work. Banks are at the forefront during this crisis as they must address their customers’ financial challenges during these unprecedented times.

Conclusion

The sooner banking organizations realize the importance of digitization, the better it is for them to stay connected with their customers. As we continue to fight this global health crisis, it is important that all major industries embrace digital methods to not only survive but thrive.
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