Banks and credit unions have quickly become a source of much-needed stability amid an economic storm. As unemployment skyrockets and retirement savings dwindle due to the COVID-19 pandemic, financial institutions increasingly serve as gateways of trust to small business loans, stimulus checks, and other government aid. Many are also helping customers directly by deferring mortgage payments or waiving fees on accounts.
It’s easy to panic when faced with an unprecedented crisis like a pandemic. But smart banks and credit unions are already looking at ways to help the economy rebound — and evaluating what their role in the new, transformed economy will look like.
The current recession wasn’t caused by a banking crisis, but it will transform the banking sector. With many branches limiting hours or reducing staff and call centers swamped with customer queries, banks and credit unions are strengthening digital channels in an effort to reach customers at scale. To address urgent customer needs, they’ll lean into and expand their roles as advisers, transitioning to an empathy mindset that puts assistance before sales.
Banks and credit unions that avoid panic and adjust nimbly to the new situation — and the opportunities it brings — will become leaders in the coming post-COVID economy.
The Rise of Empathetic Banking
Unlike previous economic downturns, the COVID-19 pandemic has many customers fearing for their health as well as their financial well-being. This makes it particularly important for banks and credit unions to address customer needs swiftly and sensitively in the short term. Customer segmentation can be helpful in identifying and targeting particularly vulnerable groups, including:
- Customers with presumed COVID-19 who lack insurance and may struggle to afford medical care
- Customers who have been laid off due to COVID-19 and already lack financial resources or have existing debt
- Customers who were already unemployed and struggling before the pandemic
- Elderly customers who require daily assistance and are particularly vulnerable to COVID-19
Leveraging digital channels, banks and credit unions can offer targeted assistance at scale to these vulnerable groups. For example, compared to younger customers, older customers tend to prefer to carry out banking tasks in person at a branch, but they’re also more vulnerable to the virus. Banks and credit unions could target older customers with mobile notifications when foot traffic at a nearby branch is low and in-person visits are safest.
In the short term, this type of empathy-driven digital personalization will be key for banks and credit unions to weather the crisis. By making the effort to support the most vulnerable, they’ll instill confidence in their customers and build lasting trust.
Shifting operations to digital channels also relieves the pressure on overburdened frontline staff in branches and call centers. For example, a digital onboarding program can educate new customers about mobile app features and benefits, while also reducing confused calls to customer service and increasing customer satisfaction overall. Ensuring customers fully understand their mobile banking apps raises customer satisfaction scores by 130 points on average.
Understanding COVID-19’s Economic Impact
However, after the first phase of the downturn is over, banks and credit unions will have to continue to adapt. While the pandemic has already had a dramatic impact on the economy, serious changes are still on the horizon. Take commercial real estate, for example. Shelter-in-place orders spanning almost all 50 U.S. states have made remote work the new normal for many employees. It’s likely that, even after the crisis ends, many companies will not go back completely to the old way of doing things. They may treat offices more as a space to meet up for specific collaborations rather than a place for everyday work. The corresponding drop in real estate demand will likely cause multiple commercial real estate bankruptcies.
For banks and credit unions, the long-term impact of COVID-19 will look very different. Before the pandemic, in light of tech-industry scandals like Cambridge Analytica, people were already looking for more secure and trustworthy ways to store sensitive personal information rather than simply entrusting them to large, unaccountable tech companies. Now, that search is even more urgent given how important sharing health records is to the economic recovery, and banks and credit unions have a central role to play.
These changes will enable banks and credit unions to grow their businesses and expand the financial services ecosystem for their customers. They’ll create data alliances with partners in other industries, leveraging their technology to provide personalized recommendations to customers. And most importantly, they’ll use their role as trusted data vaults to help get the economy back on its feet.
Building a Better System for Tracking Immunity
If governments had a reliable way of identifying people who have recovered from COVID-19 and sharing that information with businesses, these individuals could safely go back to work in frontline positions, like restaurants and retail shops. Getting people back to work more quickly can strengthen economic recovery, particularly in low-income communities that have been hit hardest by unemployment. Speeding recovery by even a small amount could save billions of dollars in stimulus and unemployment benefits.
However, right now a lack of testing capability is only the first hurdle to making this plan a reality. Even if we had reliable health records of those who have recovered from COVID-19, we don’t have a way to store and share that information at scale without sacrificing individuals’ control over their personal data. People don’t want their health records floating around unsecured in the cloud or mined for advertising insights by untrustworthy big tech companies. Centralized government solutions aren’t adequate, either: China has come under fire from human rights advocates for its QR-code-based system, which limits individuals’ mobility based on their presumed health status.
If banks and credit unions accelerate their transition to data vaults for all kinds of sensitive data, they could solve this problem swiftly. Customers who opt-in to the program would store their health records on the bank’s network. If they needed to apply for a frontline job, they could display an immunity certificate through their mobile banking app — without risking exposure or exploitation of their sensitive data. Banks and credit unions would protect health records as closely as they protect the financial information stored on their servers.
A Lasting Transformation of the Financial Industry
Becoming custodians of customers’ healthcare records won’t be the only way that banks’ and credit unions’ roles will expand in the aftermath of the pandemic. They’ll also increasingly manage other types of sensitive data on behalf of their customers, becoming the go-between for companies looking to personalize experiences and market to customers in apps or online. Working with data alliance partners, banks and credit unions could also use their status as gateways of trust to offer customers personalized advice and recommendations on everything from budgeting to planning vacations.
Banks’ and credit unions’ roles were evolving long before COVID-19 changed how millions of us live and work. The pandemic simply sped up the transition. Financial institutions that act quickly now will not only drive the global economic recovery, but position themselves to emerge from it stronger than ever — with a bigger bottom line and a more central role in customers’ day-to-day lives.
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