Swift change has been a common factor across industries since COVID-19. The financial services industry is one of many to have experienced disruption. An unprecedented government response in economic policy, changes to our very way of life, and business adaptation across all markets have all combined to make this pandemic hugely disruptive. With this in mind, how has the pandemic affected the Financial Services industry specifically? As we enter a period of global economic uncertainty, how consumers react will be particularly important. What should Financial Services organisations be aware of to support both themselves and their customers as much as possible?

The most successful businesses in this new environment will be those who have a deep level of understanding of their customers and prospects, their new habits and the likelihood of these to persist post-pandemic.

More people plan to increase savings after the crisis

The economic fallout of the pandemic has left an indelible mark on the financial behaviours of consumers.  COVID has directly impacted people.  While 50% saw their disposable income and savings remain steady, in recent Acxiom research*, more than one-quarter have seen both drop. In uncertain times, more cautious spending and conservative behaviours are observed, and 51% of people intend to save more after the crisis. Financial vulnerability has been considerably more pronounced than before the pandemic; 1 in 6 mortgages, equating to 1.9 million in total, have had their payments deferred. These changes to personal finance will affect the behaviours of people seeking financial services - many customers have begun to change their behaviour. 38% already say they are ‘saving a little more’, and businesses in the field must continue to understand their customers as they respond to the changes brought about by COVID-19.

How should financial services brands respond?

 With more conservative behaviour, and as consumers seek a safe position for their money to avoid stock market volatility, the growth area for financial services brands is in savings. In Q1 2020, the savings ratio has increased to 8.6%, from a historic low of 3.9% three years earlier. For most retail financial institutions, savings have long formed the foundation of core earning assets as key sources of coveted “primary bank” relationship status – yet this is shaping up into a highly competitive position.

Combined with a sudden drop in interest rates, financial institutions are under increasing pressure to scrutinise their strategies for growing savings. Even if the economy recovers sooner rather than later, there could be a flight of balances from retail banks. The institutions who stand out will be those who understand their audiences and who can target, attract and retain quality savings customers by tempting them to switch and earn quality returns.

Digitisation is key

The move toward digital banking too, has shifted further since COVID-19. Indeed, in a time where many shops would only accept digital payment, and with eCommerce increasing as physical stores are locked down, digitisation in payments and banking has already  increased at a rapid rate: 26% of people say that they are using digital banking more during the pandemic. Contactless payments are now ubiquitous. 90% of people in the UK now use contactless cards in general (in contrast, 64% of UK cards had contactless capabilities in 2018).

How should financial services brands respond?

Providing quality digital services and experiences for customers has been an increasing need for financial institutions over the past decade – the pandemic has accelerated the movement of commerce to online platforms. Leaders will recognise what consumers need and provide a seamless, personalised experience on digital and offline interfaces.

Develop customer understanding with data for financial success 

From transforming customer experiences to plotting the next best brand action, data will play a pivotal role in informing how Financial Services brands and their customers navigate the post-Covid-19 landscape. When data is used transparently, it is viewed positively by consumers: over three-quarters of people agree that data managed properly can be used to greatly benefit people. Overall, a clear majority approve the use of data for a variety of purposes in the pandemic—contact tracing, health and shopping notifications, identification of at-risk populations and, service planning for businesses.

For Financial Services, using data to help people plan, whatever their level of vulnerability, and to provide great experiences across every channel will continue to be critical. To navigate this changed landscape, financial services must activate the available data in ethical and intelligent ways.

*Acxiom survey, May 2020, 5,000 UK adults, aged 18+