In 2020, At the height of the COVID-19 pandemic, Insight Financial Marketing held a webinar titled, Outlook for the Future: Bank Strategy During COVID-19 and Beyond. From our discussion, it was clear how big of a role technology played in economic recovery. We also saw banks receive increased deposit balances, as CARES Act-related assistance was disbursed to consumers and businesses.
This year we felt it was only fitting to share an update regarding the same topic, looking at bank strategy amidst the continuing impact of the pandemic and beyond.
In the presentation, we put a spotlight on three topics:
- The pandemic’s impact on the economy and the Financial Service Industry
- The continuous impact technology has on the Financial Service Industry
- Actions needed for Traditional Financial Institutions to survive the future business environment
COVID Impact Review
In 2020, we saw businesses close their physical offices, reopen, and for some, shut them down again. Moreover, Financial Institutions supported small businesses by rolling out PPP loans and enhanced Federal Stimulus payments quickly to help cushion these companies from the unprecedented shocks of COVID-19.
According to the Deloitte Economic Spotlight, in May 2021, there were 7.1 million fewer people in the labor force this year as opposed to February 2020. Deloitte further adds that the pandemic significantly affected employees in low-wage occupations by 5.4% compared to the higher-wage populations, which stood at 2%.
We also highlighted COVID’s impact on lending. The most notable change was the decreased rates in mortgage interests in 2020. And as of October 2021, there was a seasonal slowdown, specifically in the real estate market.
Investors Reaction to COVID-19
A review of the Nasdaq, Dow Jones, and S&P 500 indexes shows the pandemic led to a dramatic lagging of the financial market at the onset. However, in 2021, due to the multiple Federal Stimulus packages that were rolled out, the markets recovered and have increased significantly.
Outlook for the Future: How the Changing Economy Will Affect Bank Strategy and the Financial Services Industry
As for the future of retail banking, data shows that:
- There might be an uptick in interest rates in 2022/23.
- Due to the success of the economic assistance programs, there is an increase in the money supply.
- Fintech and technology firms will transform how money moves.
- As we move forward, the top 2 traditional banks will continue exerting competitive pressure.
- Outlook for the Future: How the Changing Economy Will Affect the Financial Services Industry
- We also discussed the changes occurring in the financial services industry, influenced by technological solutions.
FinTech companies continue to succeed because of their customized solutions that meet business and consumer needs. For instance, American Express recently established a digital business checking account for SMBs.
Decentralized finance is becoming more popular—owing to its ability to meet specific needs. With blockchain, traditional areas like saving and investments will in the future not require middlemen such as brokerage firms.
FinTech companies have become more ‘bank-like.’ For instance, Venmo has grown its offerings to include services like debit and credit cards, traditionally bank services.
There’s an increasing rise in neo-digital banks that indicates the dynamic nature of consumer behavior.
As for cryptocurrency, the number of coins and wallets continues to grow. Moreover, the terminology and technology continue to change.
Outlook for the Future: Actions FI’s Need To Make To Survive the Future Business Environment
To close the presentation, we discussed the practical steps FI’s needed to take to enable their future success and survival. First, FI’s will need to identify their value proposition. Traditionally the focus has been on financial products and services that meet customers’ desires.
However, with the advancement in technology, we’ve seen a shift in customer demands. For instance, people now expect instant solutions. And as a result, the traditional face-to-face approach is less favorable, especially from a COVID-19 standpoint. Additionally, more people want to perform basic transactions online, as it is more convenient.
Secondly, analyze your FI’s competitive edge. Once you’ve figured this out, work on implementing strategies to improve the customer experience further. Remember, while technology is the future, we certainly can’t ignore the power of good customer relationships.
Finally, your institution’s ability to stay updated on behavioral trends and lifestyle changes will provide the required customer insights that will increase your competitive edge. From payments to money transfers, leveraging data on consumers’ financial activities coupled with new technology is the most straightforward bank strategy that will deliver continued success and survival.
Contact us today to take advantage of our free, no-obligation evaluation offer to get a first-hand view of your consumer and business customers. To learn more, visit us on our website at www.infimark.com.
Rob Reale is an Associate Partner and National Sales Manager responsible for business development and sales at Insight Financial Marketing. Rob began working in the Mortgage Banking industry in 1990 and currently helps the financial service industry leverage unique and innovative solutions.