It’s indisputable that the pandemic has impacted consumer behaviors in all sorts of ways, some more significant than others. The drastic shift to remote work, for example, feels like a sea change – one that has fundamentally rewritten the rules of business and our cultural norms around employment.
Many of the behavior changes were already underway. As many analysts have noted, the pandemic did not so much introduce but accelerate technology trends and technology adoption. Telemedicine, for example, was already a thing, but I can’t say I ever tried to book a telehealth appointment before the pandemic. I’m not even sure if my GP offered it as an option. She does now, and I’ve certainly gotten used to not driving across town for routine appointments. I’m not shopping for a provider, but if I would insist on the option to book a telehealth appointment.
As with many industries, banking is having to adapt to rapidly evolving consumer behaviors and expectations. Some of these changes will have lasting impacts on how banks do business, how consumers think about their banking options, and on customer expectations regarding service, access, and the value banks provide.
The accelerated technology timeline
Prior to the pandemic, banks were already working to meet consumers’ shifting demands and evolving behaviors. A rise in the popularity of various fintech apps led banks to increase investment in initiatives including mobile apps, transfer services, and new savings and financial options. As consumer behavior changed in the wake of the pandemic, these investments only became more important.
When surveyed, 43% of respondents said the way that they bank has changed due to the pandemic, with 66% stating that they are visiting physical stores far less. More and more consumers are using mobile apps for their primary banking. In April 2020 alone, the industry saw a 200% increase in new mobile banking registrations, with overall use growing 20% over a 6 month period in the same year.
With digital growth, of course, comes a decrease in the use of physical products. Surveys show a 57% decrease in cash usage among respondents, alongside a rise in payments using credit cards (7% net), debit cards (10% net), and online payment tools (14% net). At the same time, more than 250 banks across 50 markets have closed, as individuals find fewer and fewer reasons to visit physical locations.
The most exciting thing about these changes is that they’ve dramatically increased mobile adoption among the 55+ demographic, suggesting a watershed moment of adoption for a cohort that otherwise would have likely taken much longer to achieve.
Consumer expectations continue to evolve
Both in response to the new-found ease of use that digital banking provides, as well as the pandemic itself, consumer expectations continue to evolve, putting pressure on banks to do the same. Twenty-seven percent of survey respondents agreed that banks will become more flexible in the next few years, and 26% said that they expect to invest more to better prepare for the future.
What’s more, over half of respondents indicated that future purchasing decisions will be impacted by banks actively supporting their community, being transparent, and fundamentally doing good for society. Forty-four percent said their purchasing decisions will be negatively impacted where they see banks focusing on maximizing profits. Consumers have seen how their banks have responded in a crisis, and they’ve formed opinions that will drive their behaviors for years to come. During this uncertain time, PwC recommends that banks should “show empathy to [their] customers while making sound business decisions.”
Regardless of bank behavior, there’s been a widespread accelerated increase in the adoption of financial offerings outside of customers’ primary banks. Again, this is a trend that banks were already dealing with, but the pandemic brought stark fragmentation of consumers’ financial services as they sought out the best deals and options. Banks have been responding to outside pressure from new upstart services, but it’s become more typical for customers to have different services for their respective mortgage, student loans, and payments, just to name a few.
With diversification comes fragmentation
With all the change that is transpiring, banks are facing a big challenge: how to meet increasingly nuanced consumer expectations at the same time that the ecosystem of consumer services becomes more diversified and fragmented? How can banks provide the exceptional customer service and brand integrity that customers demand, while dealing with the varied array of services that customers are using in their financial journeys?
The answer is a concerted focus on the customer experience, more so than customer engagement. Your customer’s experience is no longer based on your brand alone, so every interaction your customer has with both you and your partners must be taken into consideration and strategically addressed. This is especially true as integrated ecosystems blur the lines between which engagements — and responsibilities — lie with each vendor. Strategic customer experience will only become more vital as the trends we’ve seen accelerate during the pandemic continue to evolve.
With these shifting consumer trends comes a huge opportunity. Consumers are more financially aware than they have been in decades, which provides an opportunity for banks to build meaningful, informed relationships with their customers. More than ever, banks will have a prominent role in helping customers become better prepared through savings, investments, insurance, and income-smoothing products.
We will emerge from this pandemic, but many of the changes to consumer behavior will remain with us. Banks should prioritize their strategic response to these trends, not just in order to survive in the short term but also to ensure long-term growth and success.