COVID-19 has radically impacted consumer behavior world-wide. Banks ask themselves which of these changes will stay once the lockdowns end. To help answer these questions, our teams turn to the recently launched EY Future Consumer Index. The Index tracks changing consumer sentiment across major developed markets*. I see four ways retail banking customers are responding to COVID-19.
The way people bank has changed, but it might not yet be permanent
Forty-three percent of respondents say the way they bank has changed due to COVID-19. This is unsurprising since the lockdowns have limited the choice of physical channels, with two-thirds of customers saying they are visiting physical stores less. Closing or restricting access to retail branches is one of the first measures banks took as the cascade of countries worldwide began lockdowns.
However, banks should be cautious in seeing this catalyst to digital channel adoption as permanent. Somewhat surprisingly, only 24% of respondents expect to bank more online in the next 12-24 months, and just 16% of respondents state that the way they bank will change over the longer term because of COVID-19.
Customers state a desire to revert to previous channel preferences. If the banks want current behaviors to stick, even in the current environment, it will be necessary to learn real-time from the customer experience, address with agility the reasons customers would be reverting back and invest in targeted, personalized communication. Often this means investing more in support to vulnerable customers, addressing security and financial well-being concerns.
The end of cash has never been closer
Use of cash has been in decline for some time, but COVID-19 has certainly hastened its fall. With many firms closing their brick and mortar channels, consumers are going online to buy essentials. Concerns have been raised about whether physical cash could spread the virus. This has contributed to a 57% fall in cash usage among respondents, alongside a rise in payments using credit cards (7% net), debit cards (10% net) and online payments (14% net). For people who are still purchasing from physical stores, contactless appears to be the preferred payment option (up 34% net). And at least the payment behavior seems to be sticky – twenty percent of respondents expect to be using less cash and more contactless payments in the future.
Responsible banking is more important than ever
For all banks, behaving ethically and doing the right thing will be important to consumers’ purchasing decisions. More than half of the respondents indicate that their future purchasing decisions will be impacted by banks actively supporting the community, being transparent in all they do, and ensuring they are doing good for society. Conversely, 44% say decisions will be negatively impacted where they perceive banks to maximize profits during this time.
Banks are on the front line, supporting their customers through the crisis, transmitting many government stimulus measures, offering forbearance and emergency funding to clients and donating to relief efforts. But banks remain acutely aware of the reputation risk they face where customers feel they don’t get the support they need. Unfortunately, only 17% of respondents say they completely trust financial service firms in the current context. It has never been more important to ensure the right processes are followed, and communication with customers and stakeholders including government and regulatory authorities are clear.
Customers will want greater flexibility and security
The current pandemic crisis is a great financial shock for many. Recovering from this crisis will require relying on extended support from banks to help customers get back on their feet; 27% expect their banks to be more flexible in the future.
At the same time, while some people may see the crisis as a once in a lifetime risk – others are likely to be more mindful of other ‘black swans’. Twenty-six percent of our respondents expect to invest more in being prepared for the future. Banks will have a role in helping customers become better prepared, through savings, investment, insurance and income smoothing products. Perhaps this crisis accelerates the adoption of subscription financial services. A quarter of individuals say they would be willing to pay a premium for a range of financial products that promote their family’s well-being.
These four points highlight that those institutions with a strong culture of customer centricity and responsible banking are likely to emerge as strong as ever.