The Challenges of Social Distancing for Banks

Social distancing measures in place across the US are presenting banks with “a unique challenge” to their operating models, according to data and analysis firm Greenwich.

In a report, the company’s managing director for banking, Chris McDonnell, outlined how banks should assess the adjustments needed to facilitate the measures in place to combat the spread of the COVID-19 coronavirus.

Banks across the US have cut back on the services offered at traditional branches, with many working on an “appointment only” basis to reduce person-to-person contact. Instead, they have urged customers to use ATMs, drive-thru counters, and mobile and online banking services.

While many management and operational staff are working remotely, cashiers and other branch workers are unable to do so.

“Relationship managers are working to build (and deepen) relationships without the benefit of face-to-face meetings,” McDonnell said.

“Market preferences had already begun shifting toward digital channels, and we anticipate that COVID-19 will accelerate this trend – putting pressure on banks to digitize origination and onboarding processes.”

According to Greenwich’s work, 53% of business banking clients preferred to visit a branch or hold a face-to-face meeting with a banker to open an account. In addition, 58% said they would prefer to request a loan in a face-to-face meeting.

“The current environment of mandated social distancing is making these types of interactions less practical, which will further push clients to digital capabilities,” McDonnell said.

“Large banks are better positioned in the new environment, bolstered by innovation and technology investments that will allow for a virtually seamless transition as the marketplace moves further away from historic norms for banking interactions.

“However, for those banks where traditional ‘relationship banking’ mentalities prevail, the current environment will create a meaningful problem as clients and prospects hunker down in home offices.”

McDonnell warned that banks that have failed to invest in digital services were at an “even greater risk” of losing out on new and existing clients.

“More than ever, companies need simple, intuitive and secure means to operate their businesses in uncertain times,” he added.

Several recent analyses have suggested that the pandemic and the associated increase in online activity could be transformational for the online banking and payments sectors.

The global cards and payments market is expected to grow by more than 8% a year over the next three years, according to a report from The Business Research Company. The growth will be driven in part by measures taken to combat the spread of the COVID-19 coronavirus, it said.

The report found that the global cards and payments market reached $721.9 billion last year and was expected to grow to $999.3 billion by 2023.

Payments firm ACI Worldwide predicted in a separate study that the pandemic could act as a trigger to expand the use of digital payments dramatically over the next few years.

The report forecast a 42.1% compound annual growth rate for “real-time” payments in the US between 2020 and 2024.