The economic crisis caused by COVID-19 will be comparable to the crisis after World War II, and a full recovery will belong. In recent months, many banks have had to radically change the format of work to a more digital format: to transfer employees to a remote place, to provide uninterrupted banking services. But in the coming months, banks will begin to return to a more or less familiar life, customer service, and also begin to open offices. However, much has changed during the epidemic.
Banks will continue to feel the effects of the pandemic for a long time. The base scenario for the US and Europe is a slow recovery in economic activity.
Many experts believe that it will become much more difficult for banks to work with retail customers if they do not switch to digital mode. However, demand for a mortgage (which usually gives European banks 30–40% of profits) will begin to recover in 18–24 months. Demand for consumer loans and, accordingly, the portfolio of consumer loans can increase sharply, but at the same time, the risks of such loans will also increase.
Insurance banks may be in a good position as customers are looking for ways to protect their savings. Digital banks will benefit from the situation if they can make the most of sales not in branches, but through digital channels.
What has already changed
The crisis has turned the whole world to which banks are accustomed. For example, a consumer survey conducted in mid-April showed that the behavior of many customers has changed due to the COVID-19 epidemic. Over the past month, customers paid half as much in cash, 20% said they began to use digital channels more often, 30-40% said they now need specialist advice, 40% want banking products to help them cope with the crisis.
Most respondents said they began to turn to mobile and Internet applications of banks more often. Most of all, the number of such customers in Portugal increased: 19% of respondents said that they use Internet banking more often, 16% – mobile. The share of such customers in Spain also increased significantly: by 15% and 16%, respectively.
Banks have now begun to respond more quickly to challenges, and it is important for them to maintain this momentum in the digital world. Decision-making speed has increased, banks have begun to quickly develop new services and products, such as loans for small businesses – it used to take months, now banks are creating a new product in a few weeks.
Below we have prepared 6 tips that will help you keep your benefits after the epidemic ends.
- Create new products and offers
The crisis has revealed new customer needs. Banks need to constantly analyze the market and create products for their customers. Small businesses may need financial management advice, and retail customers will be interested in investing. Going into a new segment or improving their products to banks can help start-ups that will lack funding. Banks will be able to acquire their technology and scale at home.
- Switch to digital service
In just a couple of months, banks have advanced in technological terms more than in the past few years. Some banks in the US and Europe are already striving to transfer all customers online. Thanks to this, digital channels can soon become a real sales tool.
- Review your expenses
To compensate for the growth of risks and lower incomes and at the same time to continue technological development, banks will have to radically revise their costs for the next 2 or 3 years. Costs should be reduced by 20-30%.
- Save speed and flexibility
During the epidemic, teams were able to solve serious problems in a short time: for example, transfer thousands of employees to remote work. This was made possible thanks to closer cooperation with IT departments and the use of artificial intelligence. In the future, it will be easier for banks to carry out such tasks.
- Pay more attention to risk management
Credit losses over the next year are inevitable. Early detection of distressed assets will reduce losses and restructure debt in time.
- Enhance Digital Ability to Increase User Engagement
The pandemic has become a catalyst for the use of digital banking tools and customer interaction with the bank. For example, the Chinese Ping An Bank launched the Do It Home service as part of an initiative to help clients during a pandemic. The Ping An Pocket Bank application gives users access to a set of financial services, insurance, currency exchange and personal finance management.
Also, since branches will generate fewer service transactions, banks may need to translate paperwork and marketing materials into digital channels, with instructions in the offices to transfer users to digital.
As you can see, the banking industry is gradually tuning into digital mode. Changes will be introduced gradually, as far as the capabilities of banks and countries in which they are located. Stay tuned!