Over the past year, COVID-19’s direct impact on businesses and the economy has been painfully clear. However, its long-term effects on businesses are still unknown. Some industries have undergone major restructuring, while others have weathered the event with few changes.
At the moment, it looks like banks and credit unions will find themselves somewhere in the middle. The post-COVID financial landscape will likely force many institutions to make several decisions about the future—some easier than others. Let’s look at some of the ways the pandemic is expected to affect banks and credit unions even after it ends.
A digital leap forward post-COVID
One of the most common themes business analysts talk about is that COVID-19 didn’t create changes for businesses, it just accelerated changes that were already going to happen. This may be accurate; many of the hallmark changes of the pandemic (e.g., increased digital services, working from home, remote events) have been creeping into businesses for years.
For financial institutions, having strong digital tools has been an essential part of customer service during the pandemic. Although one survey showed that over 90% of people still plan to visit local physical branches for some banking, 37% of Millennials and 42% of Gen Z consumers reported mobile app services to be a key factor in choosing their bank/credit union.
In the coming years, the distinction between “banking” and “digital banking” will likely disappear. Financial institutions will be expected to provide a robust list of digital services that make all types of transactions, borrowing, and budgeting convenient.
Another significant post-COVID trend for banks and credit unions will likely be a decrease in staff at each branch. This change is expected to be pushed by three major factors:
Improvements in digital services are expected cover many people’s day-to-day banking needs, which means fewer tellers will be needed to work with customers/members.
Enhanced equipment—like interactive teller machines (ITMs)—and online support will likely centralize and reduce the total number of support staff for institutions with multiple locations.
The work-from-home trend will likely continue and some staff members may keep working away from the branch one or more days a week.
This change will affect each business differently, and each institution will have to determine how they plan to optimize staff for the best customer experience.
Many people think of reducing staff as a reaction to an unwanted decline in business, but it can also simply be part of a strategic change. As automation reduces the number of basic transactions, financial institutions may wish to switch to open lobbies with tellers that can handle almost all types of customer requests.
As a result of increased digitization (accelerated by COVID), a wide variety of banking services are now available to consumers through various technology companies. It’s never been easier for people to compare borrowing rates, service fees, and customer benefits between businesses.
This shift has greatly increased competition and has made it normal for people (especially younger people) to split their banking between many different companies. Traditional banks and credit unions must promote services as being simple and transparent and find new ways to add value if they cannot beat the rates of specialized, all-digital companies.
While pandemic shutdowns robbed banks and credit unions of the advantage of offering in-person banking, the financial technology trend has been growing for years. Even if consumers return to in-person banking after the pandemic, they will be more familiar with digital services and more likely to search online for competitive rates before talking to anyone at their bank or credit union.
It’s unclear when interest rates will move closer to historical norms, but The Federal Reserve is currently suggesting they will stay low for at least two more years. Coupled with the increased competition from digital services, this will likely create pressure on banking revenues.
Fortunately, a reopening economy could also mean more total borrowing by consumers for homes, autos, and new small businesses.
If this happens, financial institutions will need to focus on attracting these new borrowers while still reducing operating costs. As discussed earlier, cost-cutting could take the form of restructuring lobby services or adding self-service equipment so that a smaller staff can still handle returning foot traffic after pandemic ends.
The final major change in the post-pandemic market is likely to be increased consolidation among institutions. In one of its articles on the pandemic recovery, consultant firm West Monroe says many smaller credit unions have damaged finances and will likely need to merge with credit unions that have weathered the pandemic better.
Since most banks and credit unions have been waiting to implement any long-term strategies, it’s possible there will be a sudden pent-up surge of mergers in 2022 when planning is easier.
Equips supports banks and credit unions in the future
Whatever challenges your financial institution faces in the post-COVID landscape, Equips will be a powerful partner in dealing with the uncertainty. We work with your existing vendors and reduce the amount of time your staff spends on equipment issues; helping you to carry out business efficiently with minimal disruption.
Whether it’s cutting costs or implementing new devices, Equips equipment management services and expertise can help keep your institution efficient and flexible for a changing future. Contact us today.
Equips is revolutionizing how Banks and Credit Unions manage, maintain, and protect critical branch equipment. Leveraging a network of 500+ vendors, experts at Equips help Financial Institutions respond to equipment problems quickly in one place: Equips. Active management allows Financial Institutions of all sizes to improve operational efficiency, cut costs, and streamline equipment inventory and vendor management. Our groundbreaking solution provides clients across 45 states with better insight and transparency into their critical equipment and enables employees to do their best work. To learn more visit equips.com.