The Covid-19 pandemic is not exactly over. But thanks to the worldwide rollout of the vaccine program, there is light at the end of the tunnel. Normal life is beginning to resume, but will things ever be the same as they were before the pandemic?
Of course, no one can be sure of the answer to that question. But change is not always a bad thing. Some aspects of our everyday lives have changed for the better as a result of the pandemic. For example, retailers have increased their provision of self-service checkouts. This means we can pay for our purchases and get on with the rest of our day. Pubs and restaurants have brought in app-based ordering systems. So we can put in our order, then sit back and relax until our food and drink arrives at the table.
The banking sector has felt the effects of the pandemic. Non-essential businesses had to close or reduce their opening hours, so many banks were operating on reduced hours. As a result, there has been a natural shift in customer behaviours.
The fintech industry has not escaped unscathed either. However, it is better prepared for survival. Research by Beauhurst identified just 1% of fintechs as being ‘critically affected’ by the pandemic and just 2% being ‘severely affected’. Around 17% of high-growth companies have been critically or severely affected – so the figures for fintech companies are comparatively low.
How has the pandemic affected banking trends? During 2020, individual savings pots rose. This was probably a result of ‘forced saving’, which affected around 80% of the economy. However, the other 20% have experienced ongoing financial issues and hardship.
Thanks to lockdowns and restrictions, many of us did not spend the same amount of money as we usually would. When we did spend money, it was usually through online retailers. Although savings increased, spending between July and September 2020 dropped to 90% of the expected figure in a ‘normal’ year.
So what can we expect when it comes to saving and spending habits in the next few years? We may see lower-income families relying on more short-term loans to cope with a short-fall in their finances. On the other hand, higher earners might be on the lookout for investment opportunities.
For the wider economy, that means there is a possibility of a cash-injection boom after all of the government restrictions are lifted. This would no doubt be music to the ears of struggling local retailers.
During 2020, the demand for consumer credit such as personal loans and credit cards took a dramatic dip – probably due to lockdowns and lifestyle restrictions imposed by the government. The only exception is mortgage lending, which remained high and is expected to continue growing.
Meanwhile, the demand for business lending increased. Loans have been a vital resource for struggling small and medium businesses, enabling them to remain open long term. Many have needed to take on private or government-issued loans just to stay afloat in the troubled business climate.
It is reasonable to expect a continued increase in demand for business loans following the pandemic. Lenders will need to make preparations for this possibility, ensuring they have a Covid-19 proof lending strategy. To do so, they must analyse the current risk with the current data – not just information that was applicable prior to the pandemic.
A study by Deloitte UK identified that online banking services were used more during the pandemic. By the middle of April 2020, six million people set up online banking services for the very first time. The most significant increase was in online applications for personal loans. 16% of respondents applied for a consumer loan online for the first time during the pandemic.
As expected, digital banking services became significantly more popular during the pandemic. So what will these developments mean for lenders in the future? And what does the future hold for high street banks?
Many banks have been working to streamline their face-to-face services for a while now, investing in improving their digital offering. That is great for some customers, but it brings new challenges for others – not to mention the need for additional risk management.
The study by Deloitte identified that as soon as customers have used online banking services once, it is likely they will continue to do so. Just over half of the first-time online banking users said they intended to use a combination of online and in-branch services in the future. And 14% said they would switch entirely to online banking.
All that said, the figures identify that many customers do still want personal contact and human interaction to be part of the banking experience. This provides the ideal opportunity for retail banks to shine when compared to online-only services. In fact, 35% of respondents said they wanted to use some form of non-digital banking services when possible.
Moving closer to normality is great, but it is important that lessons are learned from the crisis. Lenders must never underestimate the importance of being prepared. No-one really knows what tomorrow will bring, so we should all do everything we can to make sure we are ready for whatever life throws at us.
Lenders must consider diversifying products and services. They should also evaluate their customer service provision. Changes might include introducing new services. This will vary between lenders, depending on their existing offerings.
Digital banking services have been important during the pandemic. But we must never underestimate the power of human interaction and customer care. In a branch, from a call centre or via online messaging, the customer service offered by a business will affect customer loyalty.
In a flooded market with so many options to choose from, it is essential to make your business stand out. The best way to achieve this is by providing an efficient service and never forgetting the human touch. Look at how you can improve the customer journey. Consider investing in specialised market research to improve your marketing strategy. Inclusive lending helps to make the lending process accessible and socially responsible.
How can banks make their services accessible to all? Two words: new technology. Bespoke digital solutions make everyday transactions easier. This makes the lending process simpler and helps to automate risk management.
All of this will only be achievable through implementation of user-friendly digital products. These will need to be designed with customer expectations and needs in mind. Take time to find out what your customers want. Learn what makes them tick and what you can do to encourage their loyalty. Then use your findings to help make improvements to the UX for your business.
Not sure where to start? Get in touch today for a chat about how we can help.