Are consumers becoming used to a bank being an app rather than a building?

In many ways, the COVID-19 pandemic has become a catalyst for change for financial institutions all over the world. It has presented banks with an opportunity to make bold changes at a dramatic pace.

The transformation for banks to switch and become digital did not just happen during the pandemic.  Digital and online banking was already on the rise in recent years, but the pandemic forced large-scale uptake and accelerated the transition to digital payments. There was a 200 per cent jump in new mobile banking registrations in April 2020, according to an analysis by Fidelity National Information Services, an international financial services firm.

According to research by RFi Group, the financial services insights provider, 71 per cent of consumers globally are now using digital banking channels weekly which is a 3 per cent year on year increase. The daily use of digital banking channels has also increased by 6 per cent in the same period.  The UK has seen a significant increase of consumers switching to digital banking channels during the pandemic with 73 per cent of British consumers now using e-banking methods. In 2020, UK banking apps have become more popular than social media apps according to research conducted by Mastercard.

Kelly Devine, Division President, UK & Ireland at Mastercard, believes the current shift and adoption to digital and online banking is here to stay with us for the future. Kelly Devine said, “We’re seeing a marked acceleration in the use of online and digital banking services in the UK, across all generations including the oldest. Adoption has really picked up amidst the COVID-19 pandemic as people adapt to new realities, and even those who traditionally might have been reluctant to engage with digital banking and payment technologies have been trying them for the first time. It’s likely that this change is here to stay too as our research shows they’re having an overwhelmingly positive experience.”

This trend is not only relevant to the British consumers, but we are also seeing a global change to physical banking. The study from Kearney suggests that as many as 40,000 branches could close across Europe in the next three years. This represents around 25 per cent of all branches in Europe today. The research also shows that European consumers are becoming more familiar with digital services thanks to the various national lockdowns, the research anticipates that this could rise from 52 percent to 65 per cent by 2025.

The 2021 Consumer Security Mindset Report conducted by McAfee Corporation revealed that British consumers will continue current digital habits for the foreseeable future. With digital adoption rising over the past year, brought on by the global pandemic, digital activities such as online banking (79 per cent), social activities (60 per cent), and online shopping (53 per cent) will remain part of the nation’s routines, even when social distancing guidelines and stay at home restrictions lift.

Kevin Martin, Chief Operating Officer, Wealth and Personal Banking at HSBC, expects the rapid rise of digital and online banking to slow down and some of the traditional ways of banking to return after the global pandemic. Kevin Martin believes the psychological needs of consumers for human interactions with their bank will resume traditional methods of banking. Kevin Martin states in the recent HSBC consumer research report that people need to feel reassured when it comes to life events like sending a child overseas for education, managing generational wealth transfers, establishing a wealth plan, bereavement or buying a home. The report adds “we can expect some return to “normal” post-COVID, and in-person branches will see a significant proportion of this type of activity”.

The NCSC (National Cyber Security Centre) annual review for 2020 shows that the statements by Kevin Martin may be true in the future. The report discovers that over half of the British public say they are worried about cyber risks when using digital banking channels, yet a quarter still do not feel confident in their ability to prevent a cyber-attack.

The EY Future Consumer Index recommends that banks should be cautious in seeing this catalyst to digital channel adoption as permanent. The index outlines that digital banking channels cannot cover all aspects of advice that we can get from human interactions at a bank branch. Jan Bellens, Global Banking Leader at EY, warns that the recent data highlighting an increase in the use of digital and online banking could be misleading for future expectations. Jan Bellens said, “We can’t assume customers won’t revert to their previous channel preferences. If you want behaviours to stick, even in the current environment, it will be necessary to invest in marketing, to build awareness of the options open to customers, to share the successful experiences of new digital customers, as well as to support vulnerable customers or those that still do not feel at ease using digital channels”.

From all the research gathered, we can see a growing trend in the use of digital banking channels, the new way of banking is overtaking the traditional ways that have been with us for decades in express speed. The way we used to bank has transformed, the way we identify a bank has revolutionised and the way we build a relationship as consumers with a bank has changed. Our local bank branch may never be the same again after the pandemic.