Bringing new customers onboard through digital processes is more important than ever as social distancing measures are enacted across the US, according to a new report.
Fintech firm Kasasa studied consumer behaviour over the past few weeks and found that online account openings at community financial institutions had increased by 14.5% since social distancing was introduced in an effort to combat the spread of the COVID-19 coronavirus.
Banks and other financial services companies across the country have been reducing branch opening hours and encouraging customers to use online services instead over the past few weeks.
“While digital onboarding has increasingly been a focus of most financial institution’s digital strategy, it is proving more important now than ever,” Kasasa said in a statement announcing its research.
“From selecting an account or loan, applying, getting approved, funding and receiving follow-up communications, such as a welcome package or additional product recommendations, a digital experience must be available to consumers.”
The report also found that account closures declined by 28% during the period.
The increase in new accounts could be linked to the government’s $2 trillion stimulus package, as some elements – such as the Paycheck Protection Program – often require customers to have an existing account with a bank in order to access support.
Kasasa’s research also highlighted changes to keyword searches over the last 30 days.
Searches related to opening an account increased in volume over the past two weeks, the company reported, while inquiries directly related to opening online accounts saw a “sharp increase”.
Search volume for ‘open bank account online’ was higher than ever, Kasasa reported, citing Google Trends data.
“Even in the midst of a global pandemic, the need for financial services will never slow down, making it critical that community financial institutions continue serving their local communities in the way they need,” said Gabe Krajicek, CEO of Kasasa.
“Life will eventually go back to normal, but the current environment underscores the importance of having a strong digital account opening process to allow individuals to bank in not only the way they need to right now, but how they prefer to in the future.”
The coronavirus crisis could also change trends in the use of cash and payment cards, according to separate research articles by Reportlinker and Packaged Facts, respectively.
Reportlinker’s study of banknotes predicted that the market would reach $15 billion in size by 2024, a compound annual growth rate of 2.7% between 2019 and 2024.
However, growth was likely to be challenged by the “rapid growth of electronic payments”, the report said – a trend that has already been accelerated by measures put in place to combat the pandemic.
Packaged Facts’ report – ‘Consumer Payment Card Usage Trends in the US’ – forecast that the pandemic could have a long-lasting effect on credit and debit card usage similar to that seen in the wake of the 2008-09 financial crisis.
The global financial crisis “brought enormous financial insecurity to consumers struggling with plummeting home values and soaring unemployment rates”, the report said, with early data from the first quarter of 2020 “echoing” similar trends.
“The Great Recession changed the purchasing methods favored by consumers as individuals and households responded to their own changed circumstances and lenders' responses to the crisis,” the report stated.
“Indeed, for many credit cardholders, unsecured lines of credit were either closed after default, or largely clawed back by card issuers trying to lessen their exposure to consumer credit risk.
“Lenders also scaled back on consumer access to home equity lines of credit as home values plummeted or were foreclosed.”
The recession also reduced the proportion of home equity held by those aged under 45, while student debt has increased to $1.64 trillion.
Many consumers switched to using debit cards rather than credit cards for their daily shopping, Packaged Facts’ report said. Use of debit cards was more prevalent than use of credit cards, the report found: 78% of adults used debit cards as of 2019, compared to 68% using credit cards.