COVID-19 has dramatically changed the way consumers do banking, with store closures and social distancing mandates leading to a huge shift toward e-commerce and mobile banking services. But how much of this change will remain when the pandemic passes?
Ondot recently compiled information on COVID-19 and payments that addresses this question and delves into how financial institutions should prepare to address this unprecedented shift.
COVID-19 Sparked Rapid Adoption of Digital Payments and Banking
The COVID-19 pandemic has accelerated consumers’ adoption of digital banking and payment options at a staggering pace. Online spending is expected to account for 25% of retail spending in the near future; pre-pandemic, it accounted for just 15% of total spend. In comparison, online spending has historically grown by about 1% per year, meaning COVID-19 has caused a decade of typical e-commerce growth in mere months.
E-commerce spend isn’t the only digital realm that has seen widespread adoption due to COVID-19. 12% of banking customers have enrolled in online or mobile banking for the first time since the pandemic began, including nearly one in four consumers under 35. Those who had used mobile banking prior to the pandemic are relying on it more heavily now, with 42% of banking consumers saying they are using mobile banking more frequently.
Contactless payments have also seen rapid adoption, with 30% of consumers trying contactless for the first time since COVID-19 began. 70% of these consumers say they will continue to use contactless after the pandemic is over.
Consumer Behavior Changes are Likely Here to Stay
Even after the world emerges from COVID-19, much of this change in consumer behavior will be here to stay. Many consumers who hadn’t adopted contactless before the pandemic simply didn’t see the point in adopting contactless over using a card. With the presence of the coronavirus disease, a use case (or “point”) for contactless payments has emerged, and the old habit of paying with plastic is being replaced to accommodate the new reality.
Further, fear of the infection will make certain consumers rely heavily on digital services, as some will be reluctant to touch cash or visit bank branches in-person even after they re-open. These fears will linger, giving consumers plenty of time to solidify their new payment habits.
Digital Roadmaps Need to Address Evolving Consumer Needs
Financial institutions’ digital banking roadmaps, which were largely designed with the anticipation of slower change over the course of years, need to be modified to reflect the rapid changes in consumer behavior caused by COVID-19 and the digital services consumers expect as a result. This will ring particularly true when the economy opens and millions of Americans relocate to look for new jobs, which are the two largest drivers for new bank account openings.
There are two key focal points financial institutions need to hone in on while updating their digital roadmaps: meeting the needs of their customers and making a plan that ensures they exit the pandemic profitably. Meeting the immediate, short term, and medium term needs of customers means addressing some key issues:
- Immediate Needs: Addressing Customer Pain Points
The main immediate pain point customers are struggling with during COVID-19 is the sudden lack of access to bank branches and increase in hold times and call volumes at customer service call centers. Since most of the common reasons consumers make customer service calls can be integrated into mobile apps, such as reporting a lost or stolen card, asking about a balance or transaction, making a credit card payment, or activating a card, integrating digital capabilities into apps is a solution financial institutions must prioritize to reduce friction and frustration for their customers.
Many financial institutions already have these solutions embedded into mobile apps, but customers who typically rely on physical branches and call centers are unaware of or don’t know how to access them. Promoting these existing digital features through banner ads, social media posts, login interstitial ads, and other types of promotion, will encourage customers to adopt them. This will create a seamless interaction for consumers while reducing the burden on call centers. - Short Term Needs: Addressing Common Customer Interactions
Addressing common interactions customers have with financial institutions is another area where financial institutions can remove friction from the customer experience. Eleven of the top 12 reasons consumers make customer service calls relate to debit or credit cards, making this a key area for financial services to address in order to create a more seamless customer experience.
This means that financial institutions need to prioritize card management as a critical component of the user experience, as opposed to an add-on or differentiator. Ondot’s Card App and others are redefining modern card experiences with capabilities like self-service, spend clarity, and enhanced communication and engagement with digital consumers. - Medium Term Needs: Addressing Customer Capture and Retention After COVID-19
Under normal circumstances, consumers are unlikely to switch primary accounts. But with the massive influx of unemployment caused by COVID-19, consumers getting jobs with new employers are likely to seek new bank partners that address their needs.
This will largely be Millennials, who make up half of the current workforce and care the most about digital offerings. By offering easy onboarding processes and strong digital capabilities, financial institutions have the opportunity to capture and retain these customers during and after the pandemic.
Conclusion
The unprecedented coronavirus disease pandemic has led consumers to rapidly adopt mobile and digital banking services and shift their spending online. Even after the pandemic ends, consumer behavior changes are likely here to stay.
This makes it critical that financial institutions update their digital roadmaps accordingly to address evolving consumer needs. By doing so, they can offer digital capabilities that seamlessly meet consumer needs and ensure that their organization will come out the other side of COVID-19 profitable.