Banks and financial institutions around the world are currently feeling the effects of the COVID-19 pandemic. While we do not know how long the impact will last or how widespread the effects of it are yet, it is clear the financial ecosystem is being challenged by a new playbook.
One major and clear effect is the result of millions of people being quarantined. Schools, public events, restaurants, and more are closed. Banks are an essential service, so while they remain open, they are experiencing much less foot traffic. This has highlighted the importance of digital banking and platforms. With digital banking access, customers are still able to access their money, make transactions, and manage their portfolios without ever leaving their couch.
As Todd Nagel, president and CEO of $1.4 billion-asset IncredibleBank in Wausau, Wisconsin, stated in an interview with American Banker Online: “Digital adoption is off the charts.”
In November 2019, back before the coronavirus hit the United States, the American Bankers Association released data stating that “The survey also found that nearly 8 in 10 people surveyed (77 percent) said technological improvements by banks are making it easier for them to access their financial services.” This, coupled with their 70% of consumer respondents saying that they regularly use a mobile device to manage their bank accounts, shows that digital banking is widespread and not going away.
It’s not just the digital platforms of existing brick-and-mortar banks, either. A “neobank” is the term for an online-only bank and when Finder did a Neobank Adoption Survey of over 2000 U.S. adults in 2019, they found that more than 30% of respondents said they have accounts with or are planning to open an account with an online-only bank. And this isn’t limited to younger generations, either. 12.8% of Baby Boomers surveyed “have a neobank account or plan to open one, with more than half … of these digitally savvy baby boomers saying it’s more convenient than traditional banks.”
Now with a quarantined population relying on digital banking, the need for great digital banking resources and platforms is only increasing. Jim Marous, co-publisher of The Financial Brand, wrote on March 12, 2020, “Consumers desire for digital banking services will most likely increase, forcing many traditional financial institutions to fast-track digital innovation efforts. As a result, many legacy banks and credit unions may look to fintech firms for assistance in bringing better digital banking solutions to the marketplace. This increase in demand for digital solutions could provide a lifeline to fintech firms at a time when VC funding may not be an option.”
Businesses and the economy overall may be in a downturn as a direct result of the COVID-19 pandemic, but it is during these times of uncertainty that the financial industry and our companies will be defined by those who are able to make changes and propel forward with innovation to suit the new needs of the consumers.