This year’s global pandemic has changed markets all over the world, and the financial sector has definitely not been immune to those changes. From rapid cycles in stock prices to seismic shifts in consumer behavior around accessing banking services, there have been a lot of changes very rapidly. It’s worth talking about three of the biggest, to help you make sure your institution is adapting as smoothly as possible to the realities of managing money in an age of social distancing.
1. Rapid Income Changes Have Disrupted Investment Patterns
Between temporary business closures and bankruptcies due to the prolonged shutdowns during spring, record numbers of people have lost their incomes in the recent months. Many, but not all, qualified for relief through expanded unemployment coverage as well as the federal stimulus money that went out. While that’s helping many people make their basic bills, it has disrupted investment patterns and led many to temporarily suspend saving and investment. Dealing with that means being on top of your customer outreach for investment banks. For neighborhood banks, it might mean a rise in demand for liquid money market accounts or even basic savings plans as people keep more money within easy reach but still seek returns.
2. Increased Demand for Remote Banking Services
Consumer banking has moved largely online, in many areas because face to face banking services have been suspended. While many of those regions have kept drive-through and ATM options open, customers have been showing preference for online services for years. This has just accelerated its rise to the dominant form of daily banking. Even investment banks have seen an increase in demand for online service, although nothing like the rate at which neighborhood banks and credit unions have experienced a rise in online traffic through their individual core banking system platforms.
3. Sharp Increases in the Use of Online Payment Methods
Shopping online has become the only safe way to get non-essential goods for a lot of people, and contact-free shopping in person still favors payment methods that don’t involve handing a lot of cashback and forth. As a result, all forms of electronic payment are seeing an increase in demand. From NFC chips to cards to ACH transfers, consumers and businesses are both leaning into electronic payment options to minimize cash handling and access goods they can’t shop for in person. This has a few implications for banks:
- Increased exposure to vectors of risk like stolen card numbers or electronic transfer fraud
- Increased demand for and traffic through services like merchant accounts
- Rising demand for cash advances based on growing merchant accounts
- Increased consumer use of existing electronic payment programs and rising numbers of new opt-ins to those programs
Now might be the time to promote your institution’s credit cards to consumers and merchant services to local businesses, especially if you have recently upgraded your core system software to include increased security or new features.
Adjusting To a New Normal
No one knows how long the current pandemic will affect consumer choices. Even if it ends relatively quickly, the impact of such an immense global threat to human health will likely lead to many people changing long-term risk management habits in response. Some might even anticipate more pandemics of this kind in the near future and adjust lifestyle choices to suit. Whether the anticipation is justified or not, there is historical evidence that similar cultural changes affected the population for years in the wake of the 1918 pandemic. That means businesses that serve the public in various essential functions will need to be sure they adjust their policies and service offerings to suit the needs of their communities. That starts with responding to changes as they happen.