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Covid-19 pandemic has widely impacted consumer behavior. It has caused a change in the way consumers do their banking and make their payments. Many consumers have stepped into the digital landscape, which they were earlier reluctant to do. In this article, we look at this change in the banking preferences of consumers effected by COVID-19.
Until the contagious coronavirus made its presence known, the move to digital banking was steady but subdued. Now, we see a clear shift in the payment behavior of consumers. Many people now buy products online than visiting a store, and there has been a tremendous increase in the use of digital payment options, thereby reduced POS, cash, and check use.
With the social distancing norms being followed and due to the lockdown, many consumers have shifted to digital banking where they can access their bank accounts from the comfort of their homes and without breaking the social distancing norms. More consumers have started using mobile wallets for making transactions. It has indicated where the banking preferences of consumers are headed.
Financial institutions have also realized the fact that even when the scare of covid-19 subsides or when the lockdown is lifted entirely still people would not be comfortable visiting bank branches as there would still be some apprehensions, thus causing them to continue with digital banking.
In a survey conducted by FIS in April of more than 1000 American consumers, the findings project that Covid-19 has accelerated the digital transformation of banking and payments. This indicates the changing consumer behavior and which can be long-lasting as well.
As per the survey, the following facts were revealed about banking preferences of consumers:
The usage of cash was reduced due to growing initiatives of cashless economy and digital India campaigns etc. but the pandemic has hastened its fall. There have been some serious apprehensions about using cash due to the allegations raised on it saying physical cash spreads this virus. Although scientific evidence does not support the claims of coronavirus transmission through banknotes or coins, consumer anxiety about its usage has raised the trend towards touchless payments.
It may be immature to comment on whether it’s the end of the cash usage, but evidently, the end has never looked much closer than this. Only time will tell us whether the end of the cash has already begun or if it is here to stay.
The closing down of bank branches during lockdown also caused many users to change the way they conduct banking. Some have increased the use of their bank’s call centre whereas some have increased the use of online and mobile banking. If these digital behaviors are to become habitual in the long term, then the financial institutions must commit to digital transformation.
It means there must be a more simplified process of digital account opening and digital engagement for customers. There must be a redesign of online and mobile applications with a greater emphasis on providing a great user experience.
There must be an increase in marketing the benefits of digital banking alternatives in order to engage more customers. Consumers expect their financial institutions to personalize banking experience, thereby improving the user experience.
The financial institutions can consider the following points going forward:
The financial institutions must be a positive force considering the impact of Covid-19 on lower-income and minority households. Investment in a broad focus of local, sustainable finance is not only good for consumers that are served, but it also makes positive business sense.
As per a survey, many consumers stated that their purchasing patterns and financial institution loyalty would be impacted by financial institutions supporting the community.
If banks behave ethically and do the right thing, the future purchasing decisions of consumers will be positively impacted. Customers want to see their banks supporting them through the crisis, transmitting government stimulus measures, providing emergency funding to clients, and donating to relief efforts. It is time when responsible banking must be facilitated, and the right processes are followed, and communication with customers is clear.
The pandemic has impacted many industries, and many of them have embraced the digital form of personal and professional interaction. Consumers have also realized that businesses need more time to operate in a way that they used to; therefore, new ways of doing business are adopted and embraced.
In this situation, financial institutions should consider reducing physical branch networks and increase their investments in digital banking. They should leverage new technologies, encourage digital payments, and collaborate with fintech firms that can facilitate the change.
Read our article:Covid-19 Impact on Digital Banking in India