The pandemic had a wide range of effects on different sectors of society. While the travel and hospitality industries were among the most affected, the health crisis also caused some changes in the banking industry.
Digital technology was already changing the banking industry with the way they delivered financial products and services. Consumer expectations were also gradually changing. But the pandemic had a significant impact on the behavior of consumers concerning the banking industry.
Here are some of the changes the health crisis made on the behavior of consumers across the country.
People’s Behaviors in Banking Changed
The shelter in place orders compelled many people to change the way they do banking. With little to no access to physical banking channels, people had to rely on digital banking. Concerns about getting infected also forced them to limit their trips outside their homes. Aside from the consumers, the pandemic also compelled many banks to close some of their branches or set access restrictions to their physical locations. While some industry watchers thought these closures were temporary, it appears that it might not be so.
More banks announced closures of some branches even a year after the pandemic started. The increasing popularity of digital banking and concerns about the coronavirus resulted in these closures. Digital banking has attracted many consumers, with around 15 percent of millennials in the US having a primary account with a digital bank at the end of last year. The number increased from around five percent at the beginning of 2020.
The situation demonstrates the increasing popularity of digital banking as more people are inclined to transact online rather than going to a bank’s physical location. Even with this, banks aiming to increase digital acceptance should still focus on promoting the technology among their customers so that they will not shift back to physical banking once the pandemic is over.
Flexibility in Investments
The pandemic shocked the financial industry as no one expected it to spread around the world. To recover from this crisis, consumers need a lot of flexibility from the credit and banking sector. This comes as many adult Americans felt the economic consequences of the pandemic made it challenging for them to reach their financial goals.
Despite this, some people may want to prepare for future “black swans” by increasing their investments to safeguard their future. This means they might need to contact an investment consultant to provide recommendations on how they can invest their money. These investments may come in the form of savings, insurance, and other passive income-generating financial instruments.
The health crisis may also encourage more people to invest in products that promote their well-being. This shows that more people are keen on acquiring products that link wealth with health.
Less Cash Use
The pandemic hastened the end in the use of cash for transactions. While this decline was noted years before, the closure of physical stores only accelerated this decline since the consumers started shopping online. Aside from the move to e-commerce, concerns about physical cash spreading the virus also reduced the use of physical coins and notes.
The situation resulted in a decrease in the use of cash and an increase in credit card use. Similarly, more people started using debit cards and online payment channels. Even in places where people continued to purchase brick-and-mortar stores, more people opted for contactless payment methods. Over 30 percent of adults under 50 years old do not use cash when they make weekly purchases.
Additionally, industry watchers expect a continued decrease in the use of cash, and more people will opt for contactless payment methods. Despite this, several cities and states banned totally cashless stores since it might alienate the less fortunate who have limited access to contactless payment methods.
Increased Focus on Responsible Banking
Since banks should support their customers during a crisis, consumers are now aware of whatever their banks are doing to show their support for them. Consumers have started to focus on checking if their banks are acting ethically.
If they act ethically, the consumers will likely stay with them and use their services. Over 50 percent of Americans consider the actions of banks when making purchasing decisions in the future. Similarly, the purchasing decisions of around 40 percent of Americans will decline if they note that their bank focuses mainly on profits during a crisis. In this situation, financial institutions should keep their reputations intact to ensure their customers will continue supporting them.
When the pandemic started last year, all sectors of society felt its impact. For the financial sector, it changed consumer behavior that compelled the banks to adjust their strategies to allow them to continue serving their customers.