Perhaps the most apparent impact of the COVID-19 pandemic in financial services is its amplification of the digital channel. Credit unions have been planning and budgeting for their “digital transformation” for years, but there is nothing like a little social distancing and widespread stay-at-home orders to fast track their readiness for it.
In late March, SRM polled its credit union and bank clients to understand their early response and evolving operational strategies for combating the effects of COVID-19 in the United States. According to the survey, 82% rated their online and mobile channels as “vital” to operations during the pandemic and no respondent rated them “less than important.” Additionally, 79% of responding institutions have provided further education on the use of remote channels. The purpose of this education is to provide consumers unfamiliar or uncomfortable with digital channels a means for accessing and managing money and needed financial services during a time of high economic anxiety.
In the past several months, credit unions have shifted priorities to determine how to best serve members in the wake of this “now normal.” Even as states solidify their gradual reopening plans and things begin to settle down, credit unions will face this “now normal.” This pandemic will likely have long-lasting impacts on consumers’ banking behavior patterns, and credit unions need to plan accordingly and reevaluate their digital investments.
The question on everyone’s mind is how much reversion to old habits should we expect? Even as branches begin to open, will members visit them, or will they continue to rely on the digital banking platforms they used during the pandemic?
Certainly, there will be a segment of those who have relied on digital channels for the first time who will stay. The concern about the highly infectious nature of COVID-19 may make this a large segment. Further, those who have been venturing out tend to be younger and they are not a demographic that tends to do most of their banking in the branch. The dynamics here cannot be ignored by credit unions. It has never been more the case that an optimal digital banking experience is a top priority.
Members will expect this experience to offer every service available at the branch. The key here is not to despair any gaps that exist between a current digital offering and these expectations by members. If a credit union develops a path to that optimal experience and can deliver functionality often on its way to the goal, members likely will wait and see, rather than heading elsewhere. If there is no strategy . . . no roadmap . . . a credit union will quickly become irrelevant.
The digital use numbers during the pandemic may recede somewhat as members adjust to this “now normal”, but rest assured the battle with COVID-19 is far from over. There will be “a next normal” and a next and a next and a next. As wave after wave washes over the financial services industry, digital will become the default for an increasing number of members. The temptation to ignore these facts in a challenging economic environment must be resisted. Investing in digital will be mandatory and to pay for it one strategy might be to shut down branches.
The debate around the branch has been a red herring for the last five years. Biased and competing research, analysis and reporting has contaminated the ability to quantify trends. However, during the pandemic, anecdotal evidence has pointed to the demise of the branch. Credit unions have closed branches and are offering assistance by appointment . . . usually, these appointments concerned more “complicated” subjects.
This is the future “branch”. The model already exists in other verticals, such as healthcare. We see our doctor when we think we may be sick and/or when a regular check-up is scheduled. There is no reason this model cannot work in tandem with the digital delivery of services. In addition, the elimination of the branch as a full-service channel will free up the resources – money and people – needed to address the digital transformation that is required to remain competitive.
Quantifying the impact of the pandemic on the adoption of digital-first (or digital only) banking is not possible given the fluid situation in which we work. But, common sense is sufficient in this case. Digital delivery has never been more important in the effort to attract and retain members. For many credit unions, addressing what needs to be done to establish parity will require that senior management be willing to accept risk. Risk is a component of all decisions within a financial institution; as it should be. But, in this case, doing nothing is the greatest risk of all.