The unexpected COVID-19 pandemic outbreak and subsequent widespread lockdowns meant in-person bank branches were no longer an option for consumers. This drove many consumers to start relying on digital banking and digital payments services. Above all, financial institutions need to bank humanely by considering how their institutions are uniquely positioned to help customers through these times.
To dig deeper into the digital shift driven by COVID-19 and what banks should be doing to best support customers, PaymentsJournal Editor-in-Chief Ryan McEndarfer spoke with Ian Macallister, Vice President, Head of Customer Success at Early Warning Services.
COVID-19 was a catalyst for digitization
In recent years, a growing number of consumers have turned to digital channels for banking services like account opening, remote check deposits (RCP), and mobile payments. Among the earlier adopters of digital and mobile banking technology were the rising generation of digitally native young adults, who already use smartphones in all aspects of their daily lives.
Then came COVID-19, which served as the driving force behind even more widespread adoption of digital banking. After all, consumers’ need for banking services doesn’t go away simply because branches are no longer open. Many people, in fact, are experiencing a greater need for support from their banks through features like an extended credit line or waived fees.
The move to digital payments and banking after COVID-19 began was immediate and staggering. In the first six months of 2020, $133 billion (519 million transactions) was sent through the Zelle Network®, the digital payments network operated by Early Warning Services, marking a 63% jump in payment transaction volume year-over-year.
Beyond that, there was a 43% increase in 90 day users. In other words, it’s not just that more people are using Zelle; those who have it are using it more often.
Fiserv has also witnessed accelerated adoption of Zelle since the pandemic started with average transaction growth increasing by 25% and average user growth increasing by 23% from March to June. And Bank of America announced that in Q2 2020, there was a 70% increase of Zelle transfers year-over-year.
Other organizations have reported a similar acceleration of digitalization. For example, Citi Bank’s CitiDirect BE platform grew from 470,000 users in March 2019 to 584,000 in March 2020; in the same time span, digital account openings rose 300%.
“Before COVID-19, over half of new account openings were in branches,” explained Macallister. But because of the pandemic, “people had to learn how to use online or mobile banking experiences, and began shifting towards those channels,” he added.
Offering customers enhanced digital support is key
There are a number of steps banks can take to make their customers’ lives less financially stressful as the pandemic continues to impact their lives. Here are some of the efforts that have worked well so far:
- Enhanced customer support. Banks can extend their services to help consumers migrate to safe digital payments. For example, U.S. Bank is now offering customer support with screen-sharing capabilities so bank employees can walk customers through the steps they may be struggling with while using digital tools.
- Increased business limits. Increasing small businesses’ line of credit, waiving fees, and making other choices that take away some of the financial hardship people are facing can ease the financial burden of the pandemic. Recently, Bank of America raised its Zelle transaction limit for small business owners from $5,000 to $15,000.
- Education. COVID-19 has led to an influx of bad actors attempting to scam people out of their money. Educating consumers on who they should and shouldn’t send money to and how to recognize a scam can mitigate fraud losses. Education can also focus on helping underserved consumers gain a better understanding of digital banking. For example, Early Warning Services partnered with the non-profit organization Older Adults Technology Services (OATS) to educate older consumers on safe digital banking habits through free e-Learning classes.
- Updated underwriting models. Traditional ways of determining customer risk aren’t working during COVID-19. By forming a risk profile based on deposit activity, how long someone has been a customer, and other factors not traditionally considered in underwriting, banks can help more customers get access to services rather than turning them away in a time of need.
The takeaway? It’s time to bank humanely
The unexpected and abrupt nature of the coronavirus pandemic brought many challenges for banks. As a result banks have to ask themselves some key questions:
- How can we help people who are hesitant to engage in digital banking?
- How do we offer access to the money and credit they need to stay afloat?
- How should we be thinking differently?
“The social responsibility of banks is underlined in all of these scenarios,” said Macallister. “[Banks] are really just trying to do what is right for consumers in a really unprecedented time,” he concluded.